§ Order for Second Reading read.
§ 3.49 p.m.
§ The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)
I beg to move, "That the Bill be now read a Second time."
This Bill embodies, and is based on, the 27 Budget Resolutions which the House passed through the Committee and Report stages last month without a Division. With its 33 Clauses and two Schedules, it is physically a conspicuously less bulky article than its predecessor of last year, which began its career with 65 Clauses and 13 Schedules. It does, however, contain, apart from the matters which raise major issues of policy which were discussed during the Budget debate, a number of other provisions of serious importance, some of them, I am sorry to say, of some complexity, which, in the nature of things, could not be discussed during the Budget debates.
I think, therefore, that it would be for the convenience of the House if, apart from one or two matters on which I may touch, and on which I can hardly expect the whole-hearted agreement of right hon. Gentlemen opposite, I should, in the main, concentrate the greater part of what I have to say this afternoon on an attempt to elucidate certain aspects of these proposals without, of course, trespassing on that detailed analysis which is the normal function of the Committee stage.
As my right hon. Friend made clear in the course of the Budget debate, a major purpose of the financial and economic policy which these proposals embody is the fitting of the industrial and commercial system of this country for the struggle which lies ahead. It is with a view to serving this purpose, by encouraging the re-equipment and modernisation of British industry, that my right hon. Friend, as he explained in the Budget speech, has decided on the restoration of the system of initial allowances. I will say a word or two upon how this system will operate.
As the House will recall, under the Finance Act, 1951, for which, of course, the right hon. Member for Leeds, South 579 (Mr. Gaitskell) was responsible, these allowances were suspended in respect of expenditure incurred after 5th April, 1952. Clause 14 of the Bill provides that expenditure incurred on or after 15th April, 1953, will rank for these allowances at the rate of 10 per cent. in the case of industrial buildings and structures, 20 per cent. in the case of machinery and plant, and 40 per cent. in the case of new mining works.
The term "new mining works" includes pit shafts, oil wells and surface roads, but not mining machinery. This special rate is, of course, a recognition of the very considerable value of the extractive industries and especially of new mining developments to the economy, and compares with 10 per cent. which was the rate appropriate to this sort of expenditure under the previous system.
The 20 per cent. rate for plant and machinery is the same as the 1945 rate which, as hon. Members will recall, was raised to 40 per cent. in 1949. My right hon. Friend considered whether it might not be possible to restore the 40 per cent. rate, but hon. Members will appreciate that this is in the long run a very costly concession. The allowances as they are proposed at the rates in the Bill will cost £76 million in a full year in respect of plant and machinery, £2 million in respect of mining works and £6 million in respect of buildings. The cost, of course, will be negligible in the current year, £50 million in the next year 1954-55, and at the full rate of £84 million thereafter.
I know that the shipping industry is particularly interested in these allowances, and it may interest the House to observe how they operate in respect of shipping. When the allowances were withdrawn, in the 1951 Budget, it was provided that they should still continue to be given in the case of ships on which work had been started or a contract for ships or engines placed prior to Budget day 1951. I think, if my recollection is right, that that provision was inserted as a result either of an Amendment moved or of representations made by my right hon. Friend the Member for Renfrew, West (Mr. Maclay).
Clause 14 (5) of the Bill provides that these allowances shall be given in respect of a ship if it is delivered on or after 15th April, 1953, or if any part of the 580 purchase price is payable after that day. At the same time, the somewhat complicated wording in the first part of Clause 14 (5) deals with the situation which could arise if a ship were, on the face of it, entitled to allowances under both rates, the 20 per cent. new rate and the old 40 per cent. rate.
The effect of these provisions is that no ship which would have been entitled to the 40 per cent. rate shall lose it as a result of this Bill, that is to say, the 20 per cent. new rate shall not apply to those ships which are entitled to the 40 per cent. rate. None will be worse off, those I have described will get the benefit of the provision, and, in practice, when due allowance is made for the time taken in the construction of ships, particularly large ships, this should be a help to constructions which began quite some considerable time ago.
This treatment of the peculiar problems of the shipping industry arises from the rather special arrangements for payment, construction and delivery which apply to ships, and is equally, I am sure, justified in the public interest by the vital importance of this great industry to our economy and by the difficulties which it has to face as the result of the high cost of replacement of existing tonnage.
While on the initial allowances, I might, perhaps, be allowed to invite the attention of hon. Members to the provision in Clause 15 which, following on the recommendations of the Tucker Committee, extends the industrial buildings allowance both to the fishing industry and to overseas pastoral companies.
The other provision of this kind with which we are concerned is the intention which my right hon. Friend announced in his Budget speech to bring the period of charge to the Excess Profits Levy to an end at the end of this year. Clause 25 does this and makes one or two necessary terminal adjustments, but, as hon. Members will have seen, although we have not thought fit in the circumstances to propose any other alterations in a tax which is due to come to an end so soon, two Amendments to the tax itself are proposed in subsection (2) of Clause 25. They are inserted to carry out undertakings given during last year's debates.
The first, that in subsection (2, a) arises from the long debate which some hon. 581 Members may recall we had in Committee last year on the position of investment trusts and franked investment income. The House will recall that in the event relief was given in what is now Section 52 of the Finance Act, 1952, in respect of such income in the case of investment trusts only and in the case of a group of companies only where they all consisted of investment trusts.
During last year's Committee stage debates, my hon. Friend the Member for Langstone (Mr. Stevens) questioned whether anomalies might not arise in the case of a group of companies where the overwhelming majority of the interests concerned was that of investment trust, but where some small trading company was also a member of the group. In resisting that Amendment, I gave an undertaking that we would watch the point when the tax came into operation and indicated that if difficulties arose my right hon. Friend would be prepared to consider legislation having retrospective effect.
It is the case that one or two cases have come to light in which difficulty has arisen where a group of companies have consisted almost entirely of investment trusts, but where the existence of a small subsidiary trading company has deprived them of this relief. One particular case —I will not give the name of the trust for obvious reasons—involves a big investment trust with a share capital of about £2 million which has a very small subsidiary trading company attached to it with a capital of only £5,000 and which, as a result of the Clause, loses this relief. Consequently, this Amendment provides, and provides retrospectively, that the relief shall apply in cases where, if all the functions of the group of companies were combined in the functions of a single company, substantially the whole of the functions of that company would consist in the holding of investments. The effect of this is to prevent a comparatively small trading company depriving a larger group of investment trusts of the relief to which otherwise they would be entitled.
The other Amendment in subsection (2, b) enables the special allowance now made for metals, oil and asbestos, the increased output of which is in the national interest, to be applied in the case of any mineral in respect of which the Treasury 582 give the necessary certificate. The Chancellor of the Exchequer, during last year's Budget debates undertook to review the question of including a wide variety of these articles. The solution we now propose is to extend the power to certify to all minerals, and it will be for the producers concerned, if they have not already done so, to apply and to make their case to the Treasury for the necessary certificate. We think that the best way to handle this rather difficult question is to allow each industry to make its case on its merits, rather than to prepare an arbitrary and not necessarily very comprehensive list. There was one stage last year when the Order Paper had begun to look like the catalogue of a geological museum.
I will now deal with a number of small but not unimportant points of the Bill. I believe that Clause 28 will be welcomed in all quarters of the House, because it enables the National Land Fund, which can already be used to enable houses and land to be accepted in payment of Estate Duties, also to be used to cover chattels which would ordinarily be kept in any building which has been so accepted. This would enable us in appropriate cases to keep together as a whole historic houses and their contents. I am sure that this will be in accordance with the wishes of hon. Gentlemen.
Clause 2 deals with the subject of beer. It enables payment of duty in respect of high strength or lager beers to be postponed up to 12 months. The reason is that these beers, I am advised, require to be kept to mature for a certain length of time after brewing. There are no facilities for storing beer for home consumption in bond, and there is thus a certain discouragement against the production of beers which require longer storage, if the duty is payable, as at present, within a few weeks. The Clause enables the period to be extended to 12 months in the case of these beers only, and as they are beers which compete with imported beers from the Continent it is desirable that this adjustment should be made.
Clause 4 makes a small reduction in the small duty payable where sidecars are attached to lower or medium-sized motor bicycles. That is a small contribution to road safety. I understand that it is safer to travel on a sidecar than on a pillion.
Clause 21, which, I am sorry to say, looks rather formidable, is designed to 583 deal with a difficulty which faces farmers who have had their herds slaughtered as part of the measures taken to combat foot-and-mouth disease. It also covers other animals in respect of which the position is the same, notably poultry, which may have to be slaughtered as the result of the Minister of Agriculture's measures to deal with fowl pest.
Under the present law a farmer who wished to have his herd treated for tax purposes on the herd basis had, in general, to elect to be so treated before 6th April, 1948. If he has not so elected, when the animals are slaughtered and compensation is paid, the animals have to be treated under the existing law as trading stock and the compensation as an ordinary trading receipt, and so, of course, it falls under tax. As the result, a large sum of so-called profit may arise with a consequential heavy liability to Income Tax and possibly Surtax for a farmer who has just had the misfortune to have his herd slaughtered. A further consequence may be that it will be much more difficult for him in the circumstances to replace his herd.
Where, under the right of election to which I have referred and which lasted until 5th April, 1948, a farmer elected to be on a herd basis, the animals of the herd do not attract the same tax consequences because they are treated as capital assets for tax purposes, and when compensation is paid on slaughter it has not been necessary to bring the compensation into account as a trading receipt. The Clause abolishes in cases of compulsory slaughter the principle and practice of a once-for-all election by 5th April, 1948, and gives farmers whose stock has to be slaughtered a further opportunity to go on to the herd basis.
Under subsection (2) of the Clause this can be done at any time up to 12 months after the end of the financial year in which the compensation payment in question is made. We have thought it also desirable to cover the fact that in 1951–52, as hon. Members will recall, there was a very serious outbreak of foot-and-mouth disease. The time limit in subsection (2) would not now cover that outbreak. Consequently, in subsection (6), we provide that this election may be exercised back to the financial year 1951–52, and that a farmer whose stock 584 was slaughtered shall have a chance to go on to the herd basis for that year at any time up to the end of the present financial year. The result is that a considerable number of farmers who suffered from the epidemic of 1951–52 will be able to avail themselves of this advantage.
Clause 31 is designed to put beyond doubt the legal position where, in Customs and Excise cases, proceedings are taken for pecuniary penalties. For well over a century it has been accepted law, even though the only penalty was pecuniary and not imprisonment, that these proceedings were treated as criminal proceedings. In a recent case in the High Court there has been a decision to the effect that proceedings of this sort should not be in criminal form, but should be treated as relating to. a civil debt due to the Crown.
This Clause is to put the matter beyond doubt. It is very much in the interest of a person charged that he should be treated under the law as it has for long been understood to be, that is to say, that these proceedings are of a criminal nature, since the court can mitigate the penalty in a criminal, but not in a civil, case. If further questions arise on this during the Committee stage I hope that one of my hon. and learned Friends the Law Officers will be able to deal with them.
I should now like to deal with a question in connection with the duty on hydrocarbon oils. I have recently received representations from a number of deputations representing bodies and firms concerned in the production of oil from home or indigenous sources, including the Scottish Shale Oil industry, the Low Temperature Carbonisation Industry and others. They have all urged that, as a result chiefly of a rise in their costs unaccompanied by a corresponding increase in their prices, they have been put into a difficult position and, in some cases, had made a positive trading loss. My right hon. Friend has, therefore, been urged to help them by increasing the margin of protection which they already enjoy as compared with imported oils, by increasing the deduction made from the Customs Duty in calculating the Excise Duty which they pay. This margin of protection is at present 9d. per gallon.
585 The Government have given very careful consideration to these requests, especially by Members representing a certain number of Scottish constituencies. My right hon. Friend is fully alive to the importance of these industries, but before my right hon. Friend feels able to reach a decision he thinks that it would be only right to provide an opportunity for those who have an interest in the question, either for or against, to make whatever representations to him they wish. We shall be glad if those concerned will make such representations as they desire to make as early as possible, so that the delay in reaching a decision will not be of a very serious character. The cost would in any event be comparatively small.
Clause 27 has, not unnaturally, aroused an unusual interest in the Isles of Scilly. Perhaps I ought to explain the background. These islands are already, and always have been, within the scope of the general charge to Income and Profits Tax. In fact, residents in the islands receiving income from the mainland from which tax is deducted at source—the obvious example is that of United Kingdom company dividends—have always paid tax on that income and are doing so at present. It is also the fact that where a resident in those islands draws income both from such sources and from island sources and he has made a claim for the various tax allowances, he has not been allowed repayment on the tax paid on the United Kingdom source to a greater extent than would be possible if the islands income, plus the mainland income, had been taken into account.
Equally, certain public employees, like local postmen and policemen, have always had tax deducted from their pay, as it comes from United Kingdom sources. Therefore, the main point really at issue on this Clause is the tax exemption enjoyed by residents on the islands on income arising within the islands. That income has not been taxed in the past, not because of any statutory provision but simply by reason of a defect in the machinery of taxation which goes back to the land tax of 1798.
No land tax commissioners were then appointed for the islands, and when Income Tax was re-introduced in 1803, and re-introduced again in 1842, dis- 586 tricts for the General Commissioners of Income Tax were settled on the basis of the land tax districts. Consequently, the islands were not included. There was no body of General Commissioners of Income Tax with jurisdiction in the islands and no machinery for the assessment and collection of tax on income arising in the islands to the islanders.
On merits, perhaps, it is a little difficult to defend a situation which does not involve, as has been supposed by some people outside this House, a blanket exemption but an exemption on a certain kind of income enjoyed by residents in the islands. But we appreciate the concern which very naturally has been caused in these islands, no doubt particularly in view of the residents' very vivid impression of the ferocity of United Kingdom taxation.
It may reassure many of the people with smaller incomes concerned to be reminded that thanks mainly to other changes introduced in my right hon. Friend's Budget a married man with two children who earns £500 a year will pay only £1 2s. 2d. tax. Fears of a sudden and unexpected imposition of tax will be reassured when it is appreciated that, under the provisions of the Bill, tax under Schedule E, covering P.A.Y.E. taxation, will only come into effect on or after 6th April, 1954, while the first tax under Schedules A and D will not become payable until 1st January, 1955. Owing to the delay in its incidence no Surtax will be payable until 1st January, 1956. This will in no degree affect the position of those islanders who already enjoy the benefits of liability to United Kingdom taxation.
Clauses 5, 6 and 7 embody the changes we propose this year in the Entertainments Duty. The most important of these, to which my right hon. Friend made some reference in his Budget speech, is the decision to exempt altogether from duty amateur sports. The House will remember that during last year's debate on the Finance Bill my right hon. Friend indicated some sympathy with the position of amateur sports and indicated that were it possible for him to devise an appropriate means of exemption he would be sympathetic to such a possibility.
Very careful thought has been given to the difficult question of how best to arrive 587 at a definition. This is now embodied in Clause 5 and begins by relating the exemption primarily to the status not of the individual players but of the body responsible for the game or entertainment, and then making an additional condition of non-paymeat of the players. The effect of that will be to exempt Rugby Union matches right up to and including international matches at Twickenham, athletic meetings under A.A. auspices, boxing under A.B.A. auspices, and so on. Many lawn tennis tournaments will, similarly, have exemption. It will also cover amateur football and so meet the point made in the letter from the Secretary to the Football Association which my hon. Friend the Member for St. Marylebone (Sir W. Wakefield) quoted in last year's debate.
We are satisfied that this amateur definition will provide a workable test. It is certainly a great pleasure to my right hon. Friend to be able to exempt from Entertainments Duty the playing of games for their own sake by a very large number of our fellow-countrymen. I am sure that this would raise a cardiac echo in the censorious bosom of the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) were he here. But the amateur test will not work in the case of cricket because, there, amateurs and professionals are inextricably mixed up. Amateurs and professionals play together in the first-class county sides, including the really efficient and well worth watching ones, like Surrey County Cricket Club. Equally, there are wholly amateur sides such as that of Oxford University which play in first-class games; and I am advised that there is another university team, whose name for the moment escapes me, which has similar pretentions.
The solution has been to exempt cricket altogether, a decision which I am sure will be appreciated by the eight hon. Members opposite, led by the hon. Member for Westhoughton (Mr. J. T. Price), who put a Motion on the Order Paper in February directing my right hon. Friend's attention to the precarious position of first-class cricket as a national institution. The cost is only about £80,000 a year, and in view of the fact that in no other way was it practicable to arrive at an amateur concession to cricket this seemed the common sense way.
§ Captain J. A. L. Duncan (South Angus)
May I call the attention of my hon. Friend to the fact that cricket is also a Scottish game and, therefore, is not purely a national but an international game?
§ Mr. Boyd-Carpenter
I would certainly hesitate to deny proficiency to my hon. and gallant Friend's fellow-countrymen in this game, though I doubt whether they are wholly up to the Surrey standards.
In Clause 5 we apply the same principle of amateur exemption to the amateur dramatic societies. That is to say, like amateur athletics, they will receive the benefit of this concession even though they employ professionals to produce for them or to instruct them. The test will be whether a paid professional participates in the actual performance. This does not give all for which the societies have asked, but it is an advance towards their point of view which I hope will be of help to them.
Clause 7 is more complicated. It is designed to make adjustments where lump sums are paid for season tickets. The substance of the matter is that if the tax is computed on the total cost of the season ticket, then, as the tax is progressive, the charge is very much heavier than if the season ticket were looked at as a number of separate tickets, the total price of which amounted to the total cost of the season ticket. Means were found to avoid this disadvantage by using rather complicated provisions. This Clause gives the benefit of that to all the clubs, whether or not they happen to use that particular technique, and I hope that it will be of advantage to them.
The main provision of the Bill in respect of Purchase Tax is the provision for the reduction of the three main rates by 25 per cent. During the Budget debate some criticism was directed by right hon. Gentlemen opposite at the decision to reduce the 100 per cent. rate to 75 per cent. and the 66⅔ rate to 50 per cent. The right hon. Member for Leeds, South and the right hon. Member for Bishop Auckland had something to say on that subject.
The term "luxury goods" was used by a number of hon. and right hon. Members as a term of abuse—certainly carrying with it the implication that such goods 589 did not deserve a tax reduction. What is or is not a luxury is an extraordinarily difficult problem, which sometimes raises philosophical concepts of some complexity. A motor car is essential to a country doctor, a village midwife or a commercial traveller. For other people it may well be a luxury but, in any event, no product of any industry is regarded as an unnecessary luxury by the people who work in it and who earn their daily bread by producing it.
It is equally true that many of the goods in this category involve the use of ancient crafts and skills, of which silverware is perhaps the most conspicuous example. It is also a fact that many of these industries produce goods which are highly acceptable exports, but whose export markets from time to time need a certain support from the domestic market.
All these considerations rightly affected my right hon. Friend's decision to reduce what are very high rates of tax, which were undoubtedly having some effect on the well-being of the industries concerned, diminishing their power to maintain competitive exports and drying up recruits to the ancient crafts and skills which they employ. Hon. Members on both sides of the House have made representations to my right hon. Friend and myself, urging a reduction of this tax, very much on the lines I have been giving to the House. I therefore submit that my right hon. Friend was fully justified, in the broadest national interest, in affecting these reductions.
While I am on the subject of Purchase Tax I would invite the attention of hon. Members to the provisions contained in Clause 9 (2), which deals with an aspect of the mechanics of the tax. As hon. Members are well aware, the Finance Act, 1948, re-enacted the Treasury's statutory power to make adjustments in the field of Purchase Tax by Statutory Instrument, in the sense of bringing individual articles into, or removing them from, liability to tax or to a tax at any of the then known rates.
This is a useful piece of minor machinery which, under successive Governments, has operated to enable anomalies to be cleared up between Budgets. Parliamentary control has been retained by the provision under which Orders involving an increase in the tax have 590 been subject to an affirmative Resolution while those reducing it have been subject to the negative Resolution procedure. I suppose that is a system of incentives to the Government to reduce rather than to increase the tax. It is desirable to supplement this machinery in one respect by adding further power to move an article downwards—and downwards only —not to an existing rate but to a new rate. This additional authority will give us an extra margin of flexibility in adapting the administration of the tax to such needs as may arise.
I have inflicted upon the House a good deal of detail and it is only out of regard for the fact that some hon. Members may feel that I have already taxed their endurance that I shall not also refer to some very interesting provisions—some of the recommendations of the Radcliffe and Tucker Committees which we have been able to adopt—which I have no doubt will be explored during later stages of this debate and this Bill.
I hope that the inevitable detail which is to be found in any Finance Bill—even though this is physically a somewhat slimmer production than its immediate predecessors—has not blurred what is the main theme of the Bill and the provisions which it embodies. The main theme, to which my right hon. Friend referred, is that of an incentive Budget—a theme of trying to do everything possible to give assistance to the millions of people in all ranks of our society upon whose combined efforts the security, solvency and stability of this country will depend in the years ahead. That is the overriding theme of these proposals. I submit that it is embodied in this Bill and it is in that spirit that I commend it to the House.
§ 4.25 p.m.
§ Mr. Douglas Jay (Battersea, North)
The Financial Secretary described this as a physically slim Bill. That is true, compared with the Bills of recent years. But why is it that we have this comparatively slim Bill this year? In our view it is because the Government have left undone so many things which they ought to have done. Our complaint is even more strongly against what the Bill does not do than what it does, and we shall do our best to correct these deficiencies in what I am sure will be a very careful 591 and searching examination during the Committee and Report stages.
Looked at as a whole, so far as it goes, this Bill is a lost opportunity. The Financial Secretary said that its purpose was to fit us for the industrial struggle that lies ahead. He made almost no attempt, however, to argue that the provisions of the Bill would achieve that end. This year, for the first time for many years, a Chancellor had the chance to give reliefs by way of increased social benefits or reduced taxation. Let us be clear why he was in a position to give those reliefs. He has tried to propagate the idea that it was because our industrial situation is better than it was a year ago. In fact it is just the reverse; it was because of the signs of depression and rising unemployment in our home industry. We now have this on the authority of the Economic Secretary to the Treasury, who is rather more candid in these matters than his two Treasury colleagues.
Only last week, in the debate on industrial output, speaking on the need for more purchasing power at the present time he said:… that is the whole theory that underlies my right hon. Friend's Budget. The time has come with a certain slack in the economy, deliberately to increase purchasing power."— [OFFICIAL REPORT, 29th April. 1953; Vol. 514, c. 2227.]It is that slack in the economy—or, put less politely, unemployment—which gave the Chancellor his opportunity to grant reliefs this year. In that reasoning we entirely agree with the Economic Secretary.
The Chancellor had the opportunity to do two things. First, and probably most important of all, he could have given a real stimulus to productive investment throughout the economy, which I believe is now vitally necessary for our whole future. We must abandon the expedient—which was inevitable in 1947, 1949 and 1951—of damping down investment in order to correct balance of payments deficits. Second, he could have given a real incentive to productive effort throughout the whole community by manifestly observing the principles of social justice in distributing his various reliefs.
The Financial Secretary said that this was an incentive Budget. But how 592 limited those incentives were. It seems to us that in both of its main aims this Bill fails to live up to its opportunities. I was struck by one remark of the Chancellor when he replied to the Budget debate. He said he disagreed in particular with the speech of my right hon. Friend the Member for Smethwick (Mr. Gordon Walker), who said that the best incentive to the whole community was a conviction that the rewards of industry were fairly distributed. The Chancellor told us that he especially disagreed with that speech. That indeed might explain why he has so notably failed, in Clauses 10 to 13 of this Bill, to spread the incentives universally and fairly.
The Chancellor was very indignant when we first argued that this arrangement of the Income Tax reliefs was exceedingly unfair as between rich and poor. Since the Budget debate, however, he has given us figures, in answers to Questions put by my hon. Friends, which really prove our contention up to the hilt. First, he has told us that there are about 10 million earners who get no relief at all by way of Income Tax, and, with their families, that means probably rather more than 20 million people.
It is no answer to say that 30 million people, which I think is a slight overestimate, do directly or indirectly get relief. The question is this: why should the relief and the incentive not be extended over the whole community? Why should the 20 million poorer people in the community be deprived of that relief and incentive? That is the question which the Chancellor has not yet answered. Secondly, the Chancellor has given figures which show us how remarkably inequitable the relief is per head. The actual total reduction going to all Surtax payers, at £22 million, is exactly the same as the total going to all those with incomes of under £500 a year. Yet there are 270,000 Surtax payers, and there are 9 million taxpayers with incomes under £500 a year.
Those on the highest rate of income at over £20,000 a year—and the Chancellor will agree that some of them exist—get an average of £850 a year while those with under £500 get 2s. 9d. a year each. The only defence we have had so far of that very distorted result—and the Financial Secretary really attempted none this afternoon—is the argument that by 593 this crude form of relief the Government were, as it were, simply returning to people part of their incomes which was their own by right. That is the argument we have had.
But that is to assume that the income structure thrown up by the commercial struggle, and incidentally by the accidents of inheritance, is somehow a just, ideal and desirable one. That is precisely what we contest and deny. I should like the Chancellor to answer this question tonight: Do the Tory Party accept, or do they not, the principle of progressive taxation and social services, as a deliberate instrument for redressing the structure of incomes thrown up by blind economic forces? I think he ought to answer that.
We have still had no explanation from any of the Treasury spokesmen why the tax reliefs are so framed as to favour the small family as against the large one. There must surely be some reason for this. I begin to suspect that the Chancellor did this by mistake; and if so, I appeal to him in all seriousness to accept the Amendment which we shall move later on to enlarge the children's allowance. It seems to me—and this is one reason why we ourselves raised the children's allowance in the 1951 Budget— that one of the worst blemishes on our Income Tax structure is the discrimination against the large family.
I think most people genuinely do not realise how great this unfairness is, until they work out the net income per head of a family after payment of tax. It is, after all, the net income per head which determines the actual standard of living. Let me take one case of the £700 per year man, with income all earned. For the inequality in the middle-class incomes is as great as, if not greater than, it is amongst the lower incomes. The £700 a year man, if he is single, has a net income of £576 a year. If he is married with three children, the net income per head of the family is £137. That is to say, on that basis a single man has an income nearly four and a half times as great as the family man. That is before this Budget. By this Bill that single man gets another £11 and the man with the family gets only £2.
The Chancellor of the Exchequer (Mr. R. A, Butler)
For the sake of clarity and not for the sake of argument, I assume that the figures given by the right hon. Gentleman are per head of the family?
§ Mr. Jay
Per head in each case. This is precisely the point that I am making. It is a good thing for the Chancellor to look at the figures per head of the family, because that is what determines the actual standard of living of those in the family. Unless the Chancellor is one of those who want to ease our economic problems by reducing the population, I can hardly believe that he really meant to produce the effect he has done.
Even more inexplicable in this Budget, which the Financial Secretary has today defended as an incentive Budget, is the decision to give a bigger relief to unearned than to earned income. I should have thought that one of the things upon which we could have agreed on both sides of the House is the need these days to encourage the active worker throughout the whole community, rather than those living on inherited incomes. Indeed, to do credit to hon. Members opposite, I believe that if the Chancellor had done that a great many of them would have applauded his action.
Is it not supposed to be the creed of modern Tories that active effort and enterprise should be rewarded? I seem to remember that the present Minister of Works, before his lips were sealed on these matters, held up as his hero the "active creator of wealth." But in terms of the actual arithmetic of this Budget, the Chancellor's hero turns out to be the passive inheritor of property. That, I think, is a very surprising result.
The only answer we have had—we have had none from the Financial Secretary today on this point—to this criticism is that all this is the inevitable mathematical effect of taking 6d. off the Income Tax. That seems to me to be one of the weakest arguments I have ever heard. It is about as good a defence as if a man charged with dangerous driving were to say "Well, if you put your foot on the accelerator you naturally expect 595 the car to go forward." The Chancellor described taxation as a blunt instrument, and it is indeed a blunt instrument if it is used in this clumsy fashion. The standard rate of Income Tax is, of course, the bluntest instrument of all.
As the Financial Secretary told us again today that the main theme of this Bill was incentive to work, I should like to ask the Government three questions. If that is so, first of all, why the discrimination in favour of unearned income? Why did not the Chancellor at lease raise the earned income allowance at the same time as he was reducing the standard rate? He said last year that he would have liked to increase it further from two-ninths to one-quarter, and that is what we think he might well have done this time.
Second, if incentives should be given to all, why is there nothing for the 10 million earners below the Income Tax level? That, of course, could have been done by methods other than that of the Income Tax. For instance, Purchase Tax could have been removed from some of the real household necessities on which it is still paid, such as cutlery, soap and things of that kind, and, of course, the tax on clothes, boots and shoes and all textiles could have been reduced.
The Financial Secretary, the day after Budget day, was rash enough to maintain that the Purchase Tax cuts the Government were making werea contribution to a steady reduction in prices, which must be a peculiar and special benefit to those whose incomes are lowest."—[OFFICIAL REPORT, 15th April, 1953; Vol. 514, c. 256.]That particular argument was exploded by the most praiseworthy candour of the Economic Secretary, who said—indeed had to say—in answer to a Question:The effect of the reductions in Purchase Tax on the retail prices index is likely to be equivalent to only a fraction of one index point."—[OFFICIAL REPORT, 23rd April, 1953; Vol. 514, c. 1380.]in the cost of living index.
Since some of the reductions have not been passed on by the producers, largely because the Government have chosen at this moment more or less finally to abandon price control, the effect may be even less than the hon. Gentleman supposed. The result is that any relief by way of Purchase Tax will be more 596 than swamped by the rises in prices of food that are still going on; and the incentive to the poorer class of the population will, again as a result of the Budget, turn out to be actually negative.
Third, if the Chancellor really believes in his argument that these reliefs will somehow miraculously stimulate production, why does he ignore all the lessons of practical experience? After all, this was given as the main argument for last year's Budget, and in last year's Budget the right hon. Gentleman at least increased the earned income allowance. I remember that during the Committee stage of the Finance Bill of last year, I asked the Chancellor whether he saw any signs of production rising as a result, and he replied that the changes had not at that moment come into effect. They came into effect at the beginning of June, and, strangely enough, it was at that moment that production fell more heavily than at any time since the war.
The Chancellor's first great incentive Budget in fact ushered in a year of what the Economic Secretary calls a "slack in the economy" and what the Chancellor calls "flexibility." How readily indeed do these fluffy euphemisms of the Chancellor conceal the nakedness of his argument. I sometimes imagine him, as the subject of a political cartoonist marching about the corridors of the Treasury, in a state of flexibility, tightening his belt, casting off burdens, getting out of slack water, and—of course— "making room for exports." I am not saying that the fall in production was the effect of the tax reliefs. Of course it was not. This was just another lesson showing the very slender connection between the level of taxation and the volume of production.
The truth is that deflation—a less polite word for what the right hon. Gentleman calls "flexibility"—is a much worse damper on incentive than taxation. The real incentive to the manager in industry is to know that he can sell his goods; and to the worker to feel secure in his job and confident that the rewards of industry are fairly distributed over the whole community. By the extraordinary arrangement of reliefs in this Budget the Chancellor, so far from strengthening that confidence, has gone a long way to undermine it; and it is not really very surprising that people below the Income Tax level, whether in 597 the engineering industry or elsewhere, should say to themselves, "If others better off than I are getting some incentive by way of tax relief, why should not I have some by way of wage increases?"
For that reason, I believe that one of our main purposes in reconstructing the Income Tax should be to take the main bulk of wage earners out of it altogether. Why should we not set those people free from Income Tax? That would spread the incentive effect, such as it is, much more widely in relation to the loss of revenue. It is really grotesque that we should go on raising no more than about £30 million from four million or five million people in tiny amounts through a vast bureaucratic procedure for very little result. That is where I believe the Chancellor should have made a start; and it is in that direction that we shall seek to amend this Bill later on, amongst other ways, I can assure the Chancellor.
We think that another opportunity has been missed in the matter of the initial allowance, on which the Financial Secretary rightly spent quite a lot of lime today. The great merit of the initial allowance is that the revenue conceded by the Treasury goes only to the firm if and when it actually engages in real physical investment. Therefore, in our view, the Chancellor should have restored a more substantial initial allowance right away and given less relief on profits through the standard rate of Income Tax.
The Financial Secretary said today that the reason for not going beyond the 20 per cent. was that it would have been very costly. Of course, that cost could have been offset if the straight and unconditional reduction of tax on profits had been postponed. As it is, the far greater part of the tax relief on profits will come irrespective of whether investment takes place or not, and a great deal of it, beyond question, will be used to increase dividends in the coming months.
Nor, according to my information, will the 20 per cent. initial allowance be regarded in present circumstances as a very great stimulus to investment by industry generally. I think some hon. Members opposite will agree with me in this. Indeed, many people have asked, when trying to estimate the effect of this, "Why does the Chancellor simultaneously try to stimulate investment by restoring the initial allowance, and to damp it down by 598 maintaining the present high Bank rate?'' Now that he is restoring the initial allowances, the time has surely come when the Chancellor might have been a little more flexible himself, and considered lowering the Bank rate in the present circumstances.
We are using the initial allowance as an instrument of policy in this Budget. The Chancellor has conceded the principle of a selective allowance by placing a higher figure on mines and oil wells. Is it not time that he extended that principle further? Is there not a case, for instance, for fuel-saving equipment? I believe that the hon. Member for Kidderminster (Mr. Nabarro) is interested in that. I ask the Chancellor, too, whether he has considered the possibility of excluding business motor cars from relief by way of initial allowances. It seems to me that under the previous initial allowance there was some danger of that relief being abused, and I think that the point is, at any rate, worthy of consideration.
In talking about Purchase Tax, the Financial Secretary fell back on the argument, if one can call it an argument, maintaining that it was very difficult to define a luxury. That is no doubt true. But I do not think that, because that may be difficult, we have to base our policy on the assumption that there is no distinction between luxuries and necessities at all. It is a strange feature of this Budget that while the Chancellor is so grudging in encouraging investment, he is at the same time stimulating consumption, provided it is consumption of the more expensive goods. It would be harder to imagine a blunter instrument than a flat rate cut in all rates of Purchase Tax.
Jewellery, furs, television sets, motor cars, all get a reduction; and only boots and shoes, clothes and furniture are excluded. It is no answer to the argument for social justice to say that the rates on textiles were reduced last year. At the same time last year, by the D scheme, the Chancellor imposed a tax on a whole range of textiles which had been completely free under the Labour Government. That tax now remains on those necessities; and, at the same time, the tax on television sets, fur coats and so on comes down. Indeed, quite apart from the social argument, the Chancellor, by this particular clumsy and rustic stroke, as I feel inclined to call it, has really 599 abandoned the use of Purchase Tax as an economic instrument also.
What he is really doing is to accept the advice of those who, for very natural reasons of administrative convenience, want to get all the rates down to a much lower level and have fewer complications to administer. This is very understandable. The Chancellor, however, ought really to perform his Ministerial function of looking at this matter from the human and the economic, as well as from the administrative point of view.
To take one example, which may appeal to the hon. Member for Kidderminster (Mr. Nabarro): why reduce the tax on electric fires at this time—
§ Mr. Nabarro
I am grateful to the right hon. Gentleman for giving way. Of course he has selected the one case, and it is a single isolated case, of a completely non-luxury article that for economic and capital investment reasons was put in the 100 per cent. bracket. Either the right hon. Member for Leeds, South (Mr. Gaitskell) or the right hon. Member for Bishop Auckland (Mr. Dalton), I have forgotten which, did it for precisely that reason. That is entirely irrelevant to the present argument.
§ Mr. Jay
My right hon. Friend the Member for Bishop Auckland did it for very good reasons, and that is precisely, in my view, why the Chancellor is making a mistake in undoing it today.
The Financial Secretary defended some of these Purchase Tax changes on the perfectly reasonable ground that we have to look at the point of view of the producer as well as of the consumer. If that is so, why help everything on the 100 per cent. rate, and do nothing at all for the even more important textile industries? The producer's position in the textile industries surely deserves attention also. I suppose that the Chan- 600 cellor has read the very formidable memorandum sent to him by Sir Raymond Street before the Budget on behalf of 17 textile associations. That memorandum shows that the D scheme has now brought about just the effects of which we warned the Chancellor a year ago. We then argued that if the D level were placed too low—and we thought that the Government were placing it too low—there would be injurious effects both on exports and on quality in these industries.
Sir Raymond Street, in his memorandum, now says this, and I quote his words:The D scheme and the small reduction in the rate itself have done little to lessen the ill-effects of the tax, and the D scheme has indeed created new troubles of a serious character.He goes on to say:Injury to the export trade is arising from distortion of the pattern of production at home by the D scheme. Not a single firm interviewed is unaffected. The retailer's dislike of taxed goods is very general. In consequence clothes selling above the D line are being debased or discontinued.He also says, and this too deserves our attention:Manufacturers and traders alike are minimising their possible losses by keeping below the D level.All these changes, we were told last year, were reasonable risks because the Government claimed that what was called the "blind spot," as hon. Members will remember, was going to be eliminated. Now Sir Raymond Street says:An ever larger 'blind spot' than existed before has therefore been created.That seems to me to be very powerful evidence from the accredited spokesman of a great national industry, and we think it regrettable that the Chancellor has simply passed the whole thing by in this Bill. We shall, therefore, do what we can within the extremely narrow limits of the Government's Resolution affecting Purchase Tax—which incidentally seems to us narrower than the last one we introduced—to assist the textile industry by further Purchase Tax relief.
In spite of what the Financial Secretary said about cricket, I am afraid that, although we all welcome that relief, we are not altogether satisfied with the Chancellor's selective benevolence towards sport. No doubt the Parliamentary 601 Private Secretary pleaded the case of cricket very well in the months before the Budget. Last week-end the cricket season opened. But where was the Parliamentary Private Secretary on Saturday? He was at Wembley, so he informed me.
§ Mr. Jay
I wonder whether the Parliamentary Private Secretary asked himself, as many others must have in this very enjoyable week-end of sport, why cricket alone should get this much-needed relief. That is a question we shall ask again. I am able to announce at once that my hon. Friend the Member for Liverpool, Exchange (Mrs. Braddock) will move an Amendment to reduce the tax on boxing. Indeed, she is already in training for this important event, and it is only fair for me to warn the Chancellor that if he attempts any resistance, he will do so at his own risk.
§ Mr. Jay
I am not able to say whether she will act as a second or not.
The Bill contains only one item of expenditure, the interest on the National Debt, which appears in Clause 32. We think that it is too high. I must here and now correct the Chancellor's rather misleading effort in his Budget speech, to suggest that the increased expenditure on the Debt, due to his high interest policy, was no more than the £42 million by which the outturn in the year 1952–53 exceeded his own estimate for that year. That figure does not measure the effect at all of an increase in expenditure due to a change in policy made in November, 1951. The real comparison is between the estimate made—and I take the estimate because it includes the figure for the American debt interest—of £515 million on the low interest rate policy for 1951–52, and the new estimate now made for the year 1953–54 of £580 million. The true figure, therefore, is £65 million, and not the £42 million given by the Chancellor.
Finally, we are, of course, very glad to welcome something in this rather puny and ill-proportioned Bill. At least the Excess Profits Levy disappears, and reduction in food subsidies this year is far less than the right hon. Gentleman's sup- 602 porters wanted. Indeed, as it seems to us, the best things in the Chancellor's financial policy this spring are either the things that he does not do, or the cases where he has undone what he did last year.
But the things he does do in the Budget and this Bill, in our view, fail most woefully to measure up to our national needs and opportunities. They give inadequate stimulus to real investment. They reverse, instead of advancing, the march of social justice. They affront, instead of encouraging, millions of active productive workers. They give no help at all to the great textile industry. And they do almost nothing to prepare us for any worsening of the economic weather, against which— whether it comes or not—any prudent man or Government ought surely to be forearming themselves at the present time.
§ 5.1 p.m.
§ Mr. F. J. Erroll (Altrincham and Sale)
I enjoyed the flyweight effort of the right hon. Member for Battersea, North (Mr. Jay). I felt he must have had to delve very deeply into his postbag to find enough circular letters from people and groups complaining that their pet reliefs and concessions had not been granted in order to compose his speech. He has even sought in aid Sir Raymond Street's very intemperate letter about the Purchase Tax levied on textiles. The textile industry received very substantial benefits in last year's Budget, and received an automatic benefit subsequently through the general fall in the level of textile prices, while the D-level has remained fixed at a relatively high rate, thus enabling an even greater range of textiles to escape taxation altogether.
I was interested to hear the right hon. Gentleman on the subject of Income Tax. He spoke of it as a necessary element of Socialist policy to redress the structure of incomes thrown up by blind economic forces. That may be a legitimate aim of political policy, but I wish he had explained more thoroughly just what he meant. Are all incomes to be subject to this remedial process, and if not, at what level does an income become such that it must be redressed by those who believe that it has merely been thrown up by blind economic forces? Are all incomes to be so treated?
§ Mr. Erroll
Even if both are included, are all incomes to be subject to this review by politicians who happen to be in power, and if not, at what level is the review to take place? If all incomes are liable to this review, what guarantee has anybody who is working that his income will be retainable and not taken away from him, not by blind economic forces but by elements of party jealousy who happen to be in power at the moment?
The right hon. Gentleman was extremely ingenious in showing how a straightforward reduction in the standard rate of Income Tax was unfair in that it benefited some more than others. He went so far towards convincing me that I began to believe that he and his colleagues are against any reduction in the standard rate of Income Tax and that, if they had their way, we should have a standard rate of 9s. 6d. in the pound for evermore. Every time there is a reduction there must be anomalies of the sort he suggested. As he is so much against any of these anomalies, he is presumably also against a reduction in the standard rate, probably feeling that it is much easier to keep it at the same rate and thus avoid the difficulties which he has enumerated.
I need hardly say how my hon. Friends and I welcome the appearance of the Bill. It is a slim Bill but one which will do a very great deal. Its three main features are the reduction in Purchase Tax, the reduction in the standard rate of Income Tax and the termination of the Excess Profits Levy, and to us these are substantial benefits and considerable measures of change. It is also satisfactory to have such a slim Bill, and we hope that its passage through the House will be quicker than was last year's Bill, which was an extremely bulky and ponderous one.
I had hoped that in Part I, which deals with Customs and Excise, we might have had some reference to the duty levied on light hydrocarbon oils. I believe that the general rate of duty is far too high. This is a far more serious tax than Purchase Tax, though it does not, of course, attract anything like the same amount of publicity. The Hutton Committee Report, referring to percentages of tax as a percentage of retail prices, shows that on 604 the average Purchase Tax is only 43 per cent. of the retailer's cost price but the duty on light hydrocarbon oils represents no less than 173 per cent. of the retailer's cost price. This is a very serious imposition. If the duty must still be levied on hydrocarbon oils used for transport—and I believe it to be harmfully high—there is certainly no case for continuing to levy the duty at such a high rate on oils which are used for industrial purposes.
Successive Governments have resisted all representations made to them. However, if nothing can be done during the Committee stage of the Finance Bill towards reducing the rate of duty for industrial users, I hope that at least a committee may be appointed to investigate the traditional reason for doing nothing-administrative difficulty. The interests affected have always sought to demonstrate that it is a straightforward matter to grant relief so far as administration is concerned, and if the Treasury are unwilling to accept their representations. I suggest the whole matter should be submitted to a committee whose findings could perhaps be accepted as final.
I would mention in passing that there has been no difficulty about giving a measure of relief to farmers in this matter, trusting them to make the necessary returns to enable the reliefs to be granted. If they operate diesel-powered tractors they get the relief on the fuel, but if the same diesel fuel is poured into a diesel lorry owned by the same farmer, tax must be borne at the ordinary rate. Complications of administration have been overcome in the case of farmers; surely they could be equally overcome in the case of industrial users.
Turning to Part II, I am sure that all my hon. Friends are agreed that the general reductions in Purchase Tax are excellent. Comprehensive in scope and generous in nature, they constitute a very real measure of benefit to the public, whether rich or poor. This is in addition to the benefits which were given last year, particularly to the textile industry. I am glad to see that the wholesale reduction in rates means that Purchase Tax, as long as it must remain with us, will be used more and more as a fiscal instrument rather than as a planning instrument. It is surely common ground that, as a planning instrument, Purchase Tax failed in its purpose. It certainly failed in the 605 matter of electric fires. It never stopped the sale of any electric fires. It merely made them a little more expensive and added to the general inflationary tendency at the time.
§ Mr. Erroll
I doubt if they would have been any higher. It was the limitation of raw materials which restricted the output and sale of electric fires, and there was also the difficulty of getting the current to run them.
§ Sir Richard Acland (Gravesend)
If there had not been any planning of the distribution of the raw materials, I suppose the manufacturers would have got more of the materials by bidding higher prices for them?
§ Mr. Erroll
That is another issue. I was referring to Purchase Tax as such being ineffective as a planning instrument. Furthermore, it was the rapid variations by the planners in the rate of Purchase Tax, as brought out in the Hutton Report, which constituted one of the chief criticisms by traders against Purchase Tax, and which caused them the greatest amount of loss. So all the good that was possibly done by it as a planning instrument is far outweighed by the disadvantages.
Good though these reductions in the Purchase Tax are for the general public, it must be remembered that the retailers in this country have suffered very severe losses, which they originally estimated at about £25 million. I think that now they have had more time to work out the details the loss is more of the order of from £13 million to £15 million. It may be said that the retailers could take that in their stride, but we cannot feel that it is a good thing that any one section of the community should have to bear this very substantial loss in order that the rest of the community should benefit.
Nevertheless, I feel, having read the Hutton Report carefully, that it is extraordinarily difficult to suggest any practical way of preventing these losses from occurring. I hope that manufacturers will, where they can, take full advantage 606 of arrangements which I believe the Customs and Excise are going to encourage for increasing the type of transactions known as sale and return and split delivery, thereby helping to minimise the losses of retailers.
Retailers should remember that, as a result of Purchase Tax reductions, there will be some increase in trade, and they will at least sell more of their articles now bearing the lower rate of Purchase Tax. There are, of course, quite a wide range of articles which attract Purchase Tax and which nevertheless are govererned by resale price maintenance agreements. It is significant to notice that those articles have not had their prices reduced overnight, as has been the case with the larger and more expensive articles such as radio sets and refrigerators.
It is at once the strength of resale price maintenance or one of its evils, according to the way in which we look at it, that the public should not get the benefit of the tax reductions straight away. Equally, on the other hand, the retailer is saved the loss and I hope retailers, in making their representations to us, will not exaggerate their case by over-emphasising their losses and hardships, but that they will at least give credit for the consequential advantages which they may expect to have as a result of the increased turnover on goods bought.
Turning now to Part III, I should like to make some passing reference to the taxation of profits. There are some omissions from this Finance Bill which I think are unfortunate. The Millard Tucker Committee made many recommendations when it reported, and we understood that last year its recommendations could not be included in the Finance Bill because it was already a long Bill. We, therefore, hoped that these recommendations could be included in this year's Bill. Yet there are hardly any references to those recommendations.
Furthermore, in regard to Profits Tax, the heavy distribution tax still applies to distributions of preference shares; this distorts the capital structure of companies and makes this form of issue virtually impossible. I should like to refer too to the definition of taxes which are going to be allowed for double taxation reliefs. As I understand the Clauses as they stand at the moment, only overseas income tax 607 will be allowed, but in certain countries, of course, there are taxes levied in lieu of Income Tax and Profits Tax but which are of substantially the same character. I hope that those taxes will be allowed to qualify for double taxation relief.
We all welcome the restoration of the initial allowances on the basis shown in his year's Finance Bill. These are certainly a benefit so far as they go, but I think we should be quite clear in this House that the initial allowances are nothing more than a tax-free short-term loan. Industry is not gaining anything in the long run. It is merely getting some of its tax relief a little earlier, and that can be a very dangerous thing for certain companies if, in fact, they are trading on substantial overdrafts, because by such means they may be tempted to convert part of their overdraft into bricks and mortar or plant and machinery, and they may find themselves very short indeed of liquid assets in later years. Let us be thankful for what we are receiving but not imagine that it is really more than it actually is.
The right hon. Member for Battersea, North referred to the change of principle this year in according a special allowance in respect of mining. He went on to suggest that perhaps that type of special benefit might be extended to other industries and to other interests. That is a risk which a Chancellor must always run if he introduces a new principle for a particular industry, for he must recognise that there will naturally be other claimants.
I am going to suggest that to begin with my right hon. Friend should resist these other claimants because I think mining is in a very special category of its own. I do not think it is perhaps generally realised how much British mining interests have suffered since the war through taxation. One example may suffice. About £180 million of fresh capital has been raised in Britain between 1946 and 1951 for mining, but of that less than £10 million has been for mines controlled and registered in the United Kingdom. All the rest has gone to undertakings not controlled from this country or registered in it.
There has been plenty of capital raised for overseas mining, but it has not been 608 raised for mines controlled by Britain. That is the plight of our industry today; and this concession is certainly long overdue. A concession of this sort having been received, it would perhaps appear greedy to ask for more or for any extension, but I should like to suggest that if the concession could be extended to cover not just the civil works, that is the shaft and the mine, but all the equipment and plant which dies with the mine, it would be a substantial benefit. Many mines are far from centres of civilisation, and when a mine is exhausted the plant and machinery, whether on the surface or underground, cannot be sold second-hand or transferred to any other site. It may not be suitable, quite apart from its being worn out. That equipment should qualify for relief in the same way as the shaft and other civil works.
There were one or two other matters mentioned in last year's Finance Bill which I had hoped might have been rectified in this year's. One of those was the question of the transfer of control of subsidiaries, about which we on this side of the House complained bitterly during the 1951 Finance Bill debates, and which still remains in existence. I am told that that control does not operate harshly because nearly all applications are granted. In that case we should abandon this control because, while our applications may be granted, we do not know how many foreign companies are deterred from coming to this country by reason of the existence of this control.
While I am on the same theme, I would say that there is a further control which I think is even more serious, although it has not received so much publicity. It is the requirement of the Inland Revenue that all transactions between the parent company in this country and its overseas subsidiary must be conducted at arm's length prices. That is going to cause a great deal of trouble and difficulty to the companies concerned, as well as causing unnecessary payments to be made overseas when plant and machinery have to bear ad valorem import duties on entering the country to which they are transferred.
For many years now, especially last year, we referred to the way in which Estate Duty is levied on family businesses. An incontrovertible case has been made out for some measure of relief here. 609 It is no good saying that one can make arrangements during the lifetime of the owner and that these matters are dealt with satisfactorily today, because those arrangements, in many cases, necessitate the breaking up of the existing structure of the company and the cessation of its essentially family nature. Surely we cannot wish to see that continue? I should have liked to see some step taken towards ameliorating that position.
In conclusion I want to refer to a matter which affects many millions of people and to which no reference had been made in the Bill. I refer to postwar credits. There are two aspects of the repayment of post-war credits which concern us all because we hear about them so frequently from our constituents. The first is that repayment cannot be made at present on grounds of hardship; the second is the uncertainty of the date of repayment should the holder of the credit die before the date on which repayment would normally be made.
In regard to hardship cases, machinery ought to be devised to make repayment possible. Constituents have come to see me saying that they are in need and must go to the National Assistance Board. They are reluctant to do that, not only because of pride but because they have their post-war credit, and they would like to cash that instead of having to go to the local office of the National Assistance Board. Surely it is possible to devise a method whereby persons who would qualify for cash payments from the National Assistance Board could get instead—or in addition, or half and half— their post-war credit repaid? It seems silly to pay money through the National Assistance Board out of the taxpayers' pocket and to deny the person concerned his post-war credit. If this could be done a sense of injustice would be removed, and the Exchequer would not suffer.
The other aspect of the matter is the uncertainty of repayment. Can we not devise a system whereby all the certificates could be handed in in turn for a definite date of repayment to be stamped on them, namely, the date at which the holder reaches the age of 60 or 65 and then, if he dies in the meantime, repayment could be made on the same date as it would have been made had he survived. That would not cost a great deal and it would remove the element of uncertainty which is causing so much trouble.
610 I have concluded on that note because I believe that this Finance Bill is essentially a human Bill, and is welcomed as such throughout the country.
§ 5.24 p.m.
§ Mr. Roy Mason (Barnsley)
I rise with some trepidation, having been a Member of this House for a very short time, to make my first speech. I ask for the indulgence of the House on this occasion and shall do my utmost to observe the custom and practice that has developed in this House, firstly of being brief and, secondly, of being non-controversial. The first may prove easy, but the second may prove more difficult.
On the passing of the Bill—as I see it as a Member representing an industrial constituency with the feelings of his constituents at heart, and not as an economist —we shall witness once more the redistribution of wealth from those who are least able to afford it to those who least require it. I can foresee that after this Budget, as I saw after the last one, we shall witness once more the cleavage between the poor and the rich made more distinct. We shall see the wealthy made more wealthy and we shall see members of the lower income groups made relatively worse off.
During our term of office we distributed the wealth of the nation substantially and effectively in a more equitable manner, but with each succeeding Tory Budget we shall see the restoration back to the previous level of the wage incomes prior to 1939 when we had successive Tory Governments. For instance, fairly recently we have seen two different types of bread produced. Because the Government realise that there are two distinct classes, we are producing one type of bread for the worse off and another for those who can afford a higher quality. We witnessed that in the case of margarine and butter prior to 1939, when the relatively worse off could not afford to buy the best butter available for those with large purses.
The Chancellor said this was an incentive Budget, an incentive to produce more this coming year. I ask the Chancellor this question: Is it an incentive to my constituents since my constituency is predominantly coalmining? Is it an incentive to the surface workers, to the underground on-cost workers who are below the Income Tax level and cannot 611 benefit by the Income Tax reductions? Is it not also noticeable to these lower paid workers that the percentage reduction of Purchase Tax is less on the commodities that come within the orbit of the working-class purse? Quite respectfully, I say that the Budget has been no incentive whatever to those people to work harder and to produce more.
Have we not seen also that with the introduction of this Budget the trade union leaders have been placed in an invidious position? They recognise the need for increased production, but they also realise the needs of their members for increased wages if they are not to be relatively worse off under this Budget. Already this week we have read that one and a quarter million shop assistants are pressing for wage increases. This morning we have read that the Amalgamated Engineering Union has put forward a claim for a wage increase. We have also read this morning that the Shipbuilding and Engineering Union is considering pressing a claim which, in total, will mean that four and a quarter million people in the near future will be pressing for wage increases.
Are we, then, going to witness the industrial upsurge which followed last year's Budget? I am sure that we ought to have seen more incentives to the workers in the lower income groups, but we ought also to have seen—I say this very feelingly—some incentive to the old age pensioners, especially having in mind that they should be able to look forward happily to their remaining years on this earth. Yet with each Conservative Government the old age pensioners are suffering.
We ought also to have seen strong action being taken to remove unemployment. That would have gone a long way towards creating the necessary atmosphere for increased production because that atmosphere must be created before we can get an increase in industrial production. When we were in office we removed the fear of unemployment. Of course it took a long time because of the bitter memories of Tory Governments prior to 1939. Yet we got rid of that persistent and uneasy feeling, and the result was a marked increase in output plus better industrial relations.
If this Bill is approved, we shall once more see the least desirable instincts of 612 mankind exploited and satisfied to please the sectional interests of this nation. Those instincts are greed and fear. We are seeing that the capitalist is being provided with the opportunity of satisfying his greed for profit. That is the satisfaction of the instinct of greed. On the other hand, we see the fear of unemployment instilled into workers and the fear of unemployment is used as a weapon to prize more production from individual workers. Those two working in harmony —the exploitation of the greed of the capitalist for profit plus the exploitation of the fear of unemployment instilled into the worker—is the method used in this Budget to try to get increased output per worker.
This, I suggest, can only result in men working beyond human capacity, a higher accident and fatality rate and a lower expectancy of life. This may seem a rather hypothetical and gloomy picture, but it could be the picture of grim reality if the unemployment trend continues. So far my constituents have not been greatly affected but, speaking in advance, I am also issuing the warning. I should say that the Chancellor has been rather biased in his release of amateur sport from Entertainments Duty. Surely he could have thought of my constituency's football team, who are rather badly in need of help in this respect.
If we have Budgets of this nature throughout the years of Conservative Government, we shall not only see the clock being put back but shall see it deprived of the hands of time.
§ 5.32 p.m.
§ Lieut.-Colonel Sir Thomas Moore (Ayr)
I am naturally happy, Mr. Deputy-Speaker, that you have been good enough to call me, if only to give me the felicity of conveying the congratulations of the House—all sections—to the hon. Member for Barnsley (Mr. Mason). He obviously feels very deeply about the matters of which he spoke, and I think he showed a complete knowledge of the subjects he discussed. I am glad that he reminded us that a maiden speech has to be non-controversial. I only hope we shall all be spared to hear his next speech, which will be controversial. In justice to hon. Members on this side of the House, I should like to warn him that, while we listened to him with sympathy 613 for his ordeal and admiration for his lucidity and fluidity, he will not get quite such an easy run next time he speaks, much as we shall look forward to hearing him.
The criticism of the Budget, and of this Finance Bill into which it has been translated, have varied but have followed the same general pattern, which has little to do with the Budget itself but is mostly a harking back to the 1952 forecasts and a general rehash of the Economic Survey. The right hon. Member for Battersea, North (Mr. Jay), dealt with nothing but what was outside the Bill; he rarely touched on the Bill at all. I am glad that the right hon. Member for Bishop Auckland (Mr. Dalton) is here, as I think he should make his mind up about things. He cannot always go on trying to have it both ways. In a speech on the Budget he complained first about the reduction of Purchase Tax on behalf of traders and, almost in the same breath—before we had had time even to absorb his charge—he advocated the complete abolition of Purchase Tax. He cannot have it both ways—
§ Mr. Hugh Dalton (Bishop Auckland)
If I may be allowed to intervene, what I proposed was the complete abolition of Purchase Tax on a relatively short list of near necessaries, leaving luxuries entirely as they were before the Budget, on the higher rate of Purchase Tax.
§ Sir T. Moore
It is such an easy phrase, "the near necessaries." We had a reference to it just now. What do we mean by a motor car used for business purposes? When a Member of Parliament uses a motor car, is it for business or pleasure? We can never define the difference between luxury and necessity. The right hon. Member also said that Purchase Tax would not help export. There, of course, speaks the theorist from the London School of Economics, not knowing, I suppose, that a successful export trade must rest on a healthy home market.
When the Chancellor sat down after his exhilarating and stimulating speech in presenting the Budget, I heard some howls from the Opposition about "A rich man's Budget." I presumed at that moment that they came from thoughtless Members of Parliament who could not think of any other criticism. But I have 614 since come to the conclusion that they were really due to sheer, inarticulate, anger that the Budget for which they had hoped during six years of frustration had been given to them by Tories.
Although much analysis of the broad principles and effect of the Budget and the Finance Bill has been made in the House and in the Press, I should like to examine some of the more significant features of this rich man's budget and see just how far the title is justified. I take these features in a sequence chosen by myself and, therefore, first refer to Clauses 5 and 6. Those are the Clauses dealing with the abolition of Entertainments Duty on amateur sports, and on cricket matches. I wonder how many who throng the Oval or linger in the evening sun on a village green, or who watch young runners in a cross country championship with little but stout hearts and a stout pair of shoes as their equipment would be readily recognised as rich men? Possibly some right hon. Members opposite might give us a clue on that.
Then we come to Clauses 8 and 9 which cover the general reduction of Purchase Tax by 25 per cent. According to some hon. Members opposite, all those gallant women, wives of miners, clerks and workers of various kinds, gas fitters and so on, who, in their council and pre-fabricated houses have been making such gallant efforts to keep their homes tidy, clean and efficient, have been sailing under false colours. They are really luxury loving, idle rich in disguise. How clever of them!
Of course, according to the Opposition, Clause 8 shows how we have been deluded, for we now know that the owner-driver of that poor old wheezing, protesting taxi waiting for hopeless years under Socialism to replace his cab and who can now do so, is really the owner of several Bentleys in which he disports himself at Maidenhead, or on the Riviera, at his luxurious weekends. These are the rich men. I am trying to describe the rich men to which hon. Members opposite appear to object.
Possibly I should go further. Is it the limbless ex-Service man, living on his 100 per cent. disability pension, who finds that the one method of getting in touch with friends or carrying on his part-time job is the mechanically propelled tricycle? 615 Is he the idle rich to whom the Opposition take exception?
Let us consider direct Income Tax and also the reliefs given under Clauses 10 and 11. Direct Income Tax, of course, affects us all—except those who do not have to pay it—so there is no discrimination. As the Chancellor said, it is rather difficult to reduce a tax that is not paid. Regarding those upon whom the full tax is levied, a mere reference to the assistance given to people with old or dependent relatives shows up the mockery of the charge made by the Opposition.
I would especially deal with one point and ask my Scottish colleagues to note it. Clause 20 sets out the relief granted to authors in respect of their copyright royalties. I wonder how many of the critics recall that Burns, the ploughman's son, among many others similarly born, had he lived today, would be a beneficiary under this rich man's Budget. From the "Daily Herald"—
§ Mr. Emrys Hughes (South Ayrshire)
I would like the hon. and gallant Member to give his views on what Burns would have thought of the Budget.
§ Sir T. Moore
I leave that to the hon. Member if he is lucky enough to catch the eye of Mr. Speaker. I have enough on my plate already.
The "Daily Herald," I gather, chooses as its chief plank of despairing criticism the various allowances made to industry in Clauses 14, 15 and 16. Of course, the "Daily Herald" and its lacrymose supporters, who must have had their combined tongue in their combined cheek, know perfectly well that these allowances are designed for one purpose; to make it possible, or partly possible to maintain full employment, to increase and expand production and to draw to this island the trade and profits which will renew our strength and enable us at last to stand upon our own feet.
As to the Excess Profits Levy, which has been referred to and which is dealt with in Clause 25, every one who knows anything knows that it was and is a menace to every form of industrial development. But for the integrity, patriotism and determination of the average manufacturer, it would have thwarted every form of industrial and commercial development.
616 I have selected only a few of these many welcome features in the Bill to prove my case. I am sorry the Chancellor is not in the Chamber at this time, because I must confess that I find it difficult to understand his implied regret when, in his Budget statement, he said that his reduction of the Purchase Tax also applied to cosmetics. Surely my right hon. Friend must appreciate that cosmetics, the powder and lipstick which they used, were one of the great factors which enabled our harassed women to endure the grim and dreary period of six years of Socialism—
§ Sir T. Moore
Cosmetics boosted up their morale, and all women, I am confident, will welcome this concession even though it may have been reluctant. But I expect my right hon. Friend has received domestic views on that statement which probably has changed his opinion by now.
I hope what I have said will show up the utter nonsense and, indeed, the hypocrisy of those who term this a rich man's Budget. I will not seek to analyse their reasons, but I imagine it is partly due to jealousy and partly to envy; but mainly to resentment against their own leaders for lacking the initiative and courage to do what a Tory Chancellor has now done. Their anger is naturally increased as they recall that the Socialist Government received dollars by the million from the United States and Canada to bolster up their economy.
I have a conviction, which I believe is shared by all hon. Gentlemen opposite who have a mind to think—and I am not including every one—that we have a duty and a privilege to congratulate my right hon. Friend for the initiative and great courage he has shown and for the magnificent job he has done. I said that he has shown great courage. He has also taken a great risk. He has banked on the quality of our people; that they will rise to the opportunity which he has provided for them and by so doing make our Britain great again. It seems to me that it is up to all of us to justify that trust. But while I join with every one else in congratulating the Chancellor on his achievement, I think also we may congratulate our own country on producing 617 a man of his quality and capacity at the Treasury at this vital cross-roads in our existence.
As a postscript, I must say with reluctance that I regret my right hon. Friend was not, on this occasion at any rate, able to deal with two matters which I consider of paramount importance; one is the tax on petrol and the other postwar credits. In my constituency there is a comparatively small bus company, which, by the mercy of Providence, escaped the clutches of nationalisation. Owing to the high incidence of the tax on petrol this company is losing just over £50 a year on each vehicle. They cannot go on in that way and are obviously facing bankruptcy, unless, of course, the Chancellor, during the Committee stage of the Finance Bill, can find some way to ease their burden.
Regarding post-war credits, I admit that at the moment it is an enormous and insoluble problem. I wonder if, instead of repayment at 60 years of age or 65, it would be possible to repay these credits in the cases of proved need only. There are many people receiving these payments who are not in dire need, and many others who are in dire need who are not receiving them. Without much change in the structure of the Finance Bill, a method might be found by which those who needed it could receive the money which is theirs. Alternatively, I believe there might be some funding arrangement made in respect of the whole vast sum. I do not know.
I hope the Chancellor will try to solve these two problems. If he succeeds I am certain he will deserve and will receive the increased gratitude of so many of our fellow citizens who already owe him so much.
§ 5.48 p.m.
§ Miss Elaine Burton (Coventry, South)
I hope that the hon. and gallant Member for Ayr (Sir T. Moore) will forgive me if I do not follow him in great detail, but I wish to speak about the Purchase Tax from a rather different angle.
On Budget day and dealing specifically with the reduction which he intended making in Purchase Tax, the Chancellor of the Exchequer took us through the three different grades of the tax When 618 he spoke on the reduction of 100 per cent. Purchase Tax to 75 per cent. the Chancellor gave us some examples of trades which obviously would benefit from that reduction. He mentioned jewellery, silverware and then, as the hon. and gallant Member for Ayr said, he went on to cosmetics. I wish to ask the Financial Secretary if he can tell me whether he thinks that the old age pensioners in the constituencies of Kingston-upon-Thames, or Saffron Walden or Barnet—he will know why I have chosen those three—any more than anywhere else, are likely to benefit from this reduction in the Purchase Tax on jewellery, silverware or cosmetics.
In Coventry—I imagine it is the same elsewhere—the old people are not buying jewellery and silverware and to the best of my knowledge they do not use cosmetics. I appreciate that the Financial Secretary might say that I have chosen these three examples to suit my argument. As a matter of fact, they are the examples put forward by the Chancellor. I wonder if the Financial Secretary can tell us where the old-age pensioner will be helped by the reduction of the Purchase Tax from 100 per cent. to 75 per cent. in any categories. I will gladly sit down and give him the opportunity of listing them if he wishes to do so.
§ Mr. Boyd-Carpenter
I could say a good deal to the hon. Lady on many topics, not least that she is as well aware as are other hon. Members that, although all this is very entertaining, it has no relevance whatever to the serious issues affecting the industries concerned, industries in respect of which reductions in Purchase Tax have been urged upon my right hon. Friend by hon. Members in all parts of the House.
§ Miss Burton
I thought the hon. Gentleman would not like this any more than hon. Members opposite like it.
§ Miss Burton
I am glad the hon. Member thinks it entertaining. I am going to continue with the entertainment.
§ Mr. Boyd-Carpenter
They will no doubt recall that they enjoyed the very considerable increases in allowances which my right hon. Friend announced last year.
§ Miss Burton
I shall be coming to that. The Financial Secretary has lost that round because he could not give me any examples. To come to the second category, that in respect of which Purchase Tax was reduced from 66⅔ to 50 per cent., the Chancellor mentioned motor cars, radio and television sets, refrigerators, vacuum cleaners and washing machines. As we are getting lower down the scale perhaps the problem will become a little easier. Can the Financial Secretary tell me of any articles in that category in respect of which a reduction in Purchase Tax will help the old-age pensioner?
§ Mr. Boyd-Carpenter
Is the hon. Lady, as the Member of Parliament for one of the Coventry constituencies, objecting to a reduction in Purchase Tax on motor cars?
§ Miss Burton
The hon. Member for Kidderminster (Mr. Nabarro) is very noisy, but I can easily shout above him. I used to think that the Financial Secretary was very skilled in debate, but that was a very poor reply and I know he has no other.
§ Miss Burton
At all events, I cannot get an answer. As a representative of one of the Coventry divisions, I welcome the reduction in the Purchase Tax on motor cars because it will help my constituency, but my point is that the reduction will not help the old age pensioners. I do not know whether this will also amuse the Financial Secretary, but when I have talked recently with trade unionists in my constituency who might be expected to benefit from the reduction in the Purchase Tax on motor cars they have told me that they would much rather have seen the benefit going to the old people who are not in a position to fight for themselves. If I am not to get 620 any answer to my inquiry, it must mean that the Financial Secretary has no answer to it.
In the third category, in which the 33⅓ per cent. rate of Purchase Tax is reduced to 25 per cent., the Chancellor told us in column 53 that the items, including many in daily household use, were carpets—
§ Miss Burton
I am sure the Chancellor will be pleased to have the hon. Gentleman's support. He also cited linoleum, hardware, cutlery, bicycles and so on. Has the Financial Secretary yet thought of anything in that group in respect of which the reduction in Purchase Tax will help the old age pensioner?
§ Mr. Nabarro
I have a constituency interest in carpets. The hon. Lady must be aware that the Carpet Weavers' Union, representing thousands of carpet weavers and other workers in the industry in Kidderminster, together with the whole of the manufacturing organisation, welcome and applaud my right hon. Friend's reduction in the rate of Purchase Tax upon carpets. Furthermore, they have stated that they had not really expected it. So they are doubly delighted.
§ Miss Burton
Of course they are delighted, for everybody is, but I have always noticed that whenever hon. Members cannot answer a question they bring up something else, and I have not as yet had from the Government Benches even one example from these groups where a reduction in Purchase Tax will have benefited the old-age pensioners.
§ Mr. Raymond Gower (Barry)
Will not the hon. Lady agree that the old age pensioners have had more benefit from these reductions than they had from the continuous increases in tax under the Labour Government?
§ Miss Burton
That is not so, because the old age pensioners cannot afford any of these things.
The Financial Secretary raised my hopes on 15th April. In column 252 he said:I should like to go a little more into the sphere of reality."—[OFFICIAL REPORT. 15th April, 1953; Vol. 514, c. 252.]621 I hope the Financial Secretary will tell me if I am wrong, but I read his speech several times with great care and nowhere in it did I find any mention of the old age pensioners, whom I would describe as the forgotten 4½ million.
On 16th April the Economic Secretary to the Treasury spoke. I went through his speech very carefully. There were 16 columns of it. I am sorry that I did not count the number of columns occupied by the Financial Secretary's speech. There was no mention of old age pensioners in the Economic Secretary's speech.
On 20th April we had the Chancellor's statement, and in column 763 he gave considerable prominence to the old age pensioners. He said that three out of four old age pensioners either had resources or were doing part-time work. In my constituency last week an old age pensioner said that he did part-time work and that he still had to go to work because he could not exist on his pension. He was 81. Will the Financial Secretary agree that many old age pensioners have to continue working because they cannot manage otherwise?
There was something else in the Chancellor's speech which I thought ought to be raised tonight if I had the opportunity to do so. In column 764 the Chancellor said that the Index of Retail Prices had remained stable for the past nine months, that presumably being from June up to the Budget. We may query that among ourselves, but I wish to draw the Financial Secretary's attention to "Illustrated" of last week in which was a report of an inquiry into the effects of Purchase Tax and the cost of living upon a family of four. The man, Mr. Alderson, had his Income Tax cut by 6s. by the 1952 Budget. He then received an extra 3s. a week allowance for his child, which started in September, making 9s. a week altogether. This man said that the rise in prices last year up to the time of the Budget not only cancelled out his tax reduction of 6s., but that he had had to add a further 6s. to the housekeeping bill, so that his expenses have gone up by 12s. a week.
I do not know if the Financial Secretary would like to say—perhaps he does not know—where the Chancellor does his 622 shopping, but I am quite sure that every housewife in the country would like to know where the Chancellor does his shopping if he believes that prices have remained stable. I am wondering if the Financial Secretary has any comment to make on the fact that this man, with a wife and two children, finds that his housekeeping bill has gone up by 12s. a week since the Budget last year, and whether he would like to say that it was not correct. I am wondering whether he is prepared to answer that statement.
§ Hon. Members: Get on.
§ Miss Burton
I shall get on in my own time, and hon. Members opposite can get on in theirs, if they are called. I am still wondering if the Financial Secretary can reply to that question. Well, he is not going to do so.
Returning to the question of Purchase Tax, in this article there was a list of 38 items on which the family paid Purchase Tax over the past 12 months, and it gives the old rates of tax and the new. On that list of 38 items, £2 was saved over the whole year—10s. per person. I do not know whether the Financial Secretary thinks that that is a good saving or not, but I should have thought that it was hardly worth doing.
I come back to where I started on this matter of the old age pensioners. We have heard from the Government benches that this reduction in Purchase Tax was going to help all sections of the community. I wonder if the Financial Secretary would agree on this particular matter. Ever since this Budget in April, I have had to see old age pensioners in this House from different parts of the country, and those in my own constituency. We on this side of the House differ from the Government on whether the Cost of Living Index has remained steady. But would the Financial Secretary agree that the cost of living to an old' age pensioner is very different from the cost of living of people who are not as old as they.
An old age pensioner needs primarily three things—food, light and heat. I think that most of us in this House, no matter for which constituency we sit, must have had old people to see us time and time 623 again about these three items. And here I am making a very special plea to the Government. I do not believe that the Financial Secretary, the Economic Secretary or the Chancellor himself would be prepared to get up now and tell us that the cost of food, light and heat has not risen over the past 12 months. Would the Financial Secretary say now whether he believes that, in these three particular items, the cost has remained stable? I can only assume that the hon. Gentleman is not prepared to say that. He knows full well—I am quite serious; I am not trying to be funny—that it is not so. I cannot conceive that anybody in any part of the House can sit here and believe that these old people can have the food, light and heat which they need.
The reason I have raised this is that the only item in this Budget which could be said to benefit these people who do not pay Income Tax is the reduction in Purchase Tax. I claim tonight, in default of any answer from the Financial Secretary, that I have shown that there are no items in these groups where reductions will benefit the old age pensioner. I gave the Financial Secretary every chance to answer, and he has not scored a single point.
§ Mr. Boyd-Carpenter
The hon. Lady has sufficient experience of this House to know that, although that Socratic method of interrogation is a perfectly legitimate practice here, nobody pays the slightest attention to it either here or outside, but that fully argued answers are given from this Box in debates, as they will be in this debate.
§ Miss Burton
I am most grateful to the hon. Gentleman, because all I want is an answer.
May I sum up and ask the Financial Secretary, or whoever will reply to the debate, three questions? First, what particular items in the reduction of the Purchase Tax are likely to benefit old age pensioners? Second, are the Government of the opinion that the cost of food, light and fuel has remained stable over the past 12 months? Third and last, if it has not remained stable, and as the old people have had no help at all, how are they 624 to get their food, light and heat, because they are not eligible for grants from the National Assistance Board?
In conclusion, I would ask the Financial Secretary if, in view of this very serious position of the old people, the Government will consider on the Committee stage of the Bill inserting a new Clause to give some relief to the old age pensioners.
§ 6.6 p.m.
§ Sir Waldron Smithers (Orpington)
I hope the hon. Lady the Member for Coventry, South (Miss Burton) will forgive me if I do not answer her questions, but she has been very well answered by the Financial Secretary from the Front Bench.
I want to refer to the last few sentences of the speech of the Financial Secretary to the Treasury, and I hope I am quoting him correctly. He said something like this: "The main theme of the Bill is incentive, security, solvency and stability of the country, on which the welfare of us all depends." These things—incentive, security, solvency and stability—were mentioned by the Financial Secretary as part of the Finance Bill, yet we cannot value these things in terms of pounds, shillings and pence, though they are basic to our economic and financial recovery and prosperity. This Bill affects the whole economy and finance of all of us. I want to avoid too much detail and to try to get to the root of the matter and of the difficulties with which our country is faced.
The seriousness of our position as a nation, and it is still serious, which this Bill tackles so well, is not generally realised by the majority of our people, who are mostly financially and economically uninstructed. The problems which the Chancellor had to face in drafting this Bill and last year's Finance Bill are the result partly of the war and partly of rearmament, but mainly they are due to six years of Socialist philosophy in action, which not only made recovery after the war impossible, but, in fact, made our position much worse. It brought us to the edge of the precipice of disaster. The promises of a materialistic Utopia in 1945 have inevitably proved false.
625 If I may misquote one word in some verses of Kipling, they are as follows:In the '45 Election, we were promised abundance for all.By robbing selected Peter to pay for collective Paul;And, although there was plenty of money, there was nothing our money could buy,And the Gods of the Copybook. Headings said 'If you don't work, you will die.'Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew.And the hearts of the meanest were humbled, and began to believe it was true,That all is not gold that glitters, and that two plus two make four,And the Gods of the Copybook Headings limped up to explain once more.That is a concise description of the state in which the Socialist Government left us. But this Bill and the Budget have revived men's spirits and restored confidence and hope.
The Socialists ruined our credit. That was proved by the fact that Sir Stafford Cripps had to devalue the £ from 4.03 dollars to 2.80 dollars. Credit is the life blood of Britain, which is the one country in the world which is not and cannot become self-supporting. The Socialists made no attempt to economise in the years 1945–51. The national debt rose from £21,365 million at 31st March, 1945, to £25,921 million at 31st March, 1951, and the generous American and Canadian aid was poured down the Socialist drain.
The crisis with which we are faced today is a repetition on a much larger scale of the crisis of 1931 after two years of Socialist mis-government. As a result of long negotiations—in which I had the honour to take some part—and consultations with the Bank of England, then a free agent, the leaders of the three parties met and formed the National Government to restore confidence in credit. The Prime Minister of that Government, a member of the Socialist Party, speaking at Kilmarnock on 22nd September, 1933. said:The working class of this country are not having their interests served by the Labour section of the Opposition"—I ask the House to remark those words—Two years' ago the problem we had to face was not merely the question of the distribution of wealth: it was the question of the existence of the wealth itself.That was true then, and it is true today.
626 Later, Mr. Snowden, afterwards Viscount Snowden, fearlessly told the people the truth. Those two men threw over their Socialist principles because they knew that the carrying out of the Socialist programme would lead to disaster, bankruptcy and the starvation of our people. That was true then, and is even more true today. One more quotation. One of our finest Englishmen, Lord Grey of Falloden, writing to "The Times" on 3rd October, 1931, said:My own belief is that the policy of the present Socialist Opposition would lead to national ruin and consequent distress and suffering, such as this country has never yet seen, and the severity of which is immeasurable.Twice in my lifetime Socialist policy in action has ruined our credit and brought us to the edge of the precipice of disaster. Another dose would be fatal. That is why the Government must boldly cut out the cancer of Socialism from the body politic, however painful that process may be. After all, Communism is only Socialism with its coat off. They must stop bulk purchase and not send one man out into the world to buy on behalf of 50 million people, because prices are of course, put up against him. The only hope is to restore healthy competition by buying through experienced traders.
The Government must stop State trading at home and must take off all controls as soon as possible and allow the law of supply and demand to operate freely as the only reliable barometer. Then, as now, the Socialists ruined our credit, and what the Chancellor has had to do is to try to restore the credit of this country. He is doing that steadily. To support my contentions, if hon. Members do not believe me, I will quote from the "Economic Survey" of this year, which says:A year ago, at the beginning of 1952, this country's most urgent problem was how to stem the drain of its reserves of gold and dollars. We were losing gold at a rate which, if continued, would have entailed the complete exhaustion of the reserves by the end of last summer. Long before the reserves had been exhausted the value of sterling as an international currency would have been undermined, and we would have found ourselves unable to import the food and raw materials we need to keep ourselves fed and clothed and to keep the wheels of industry turning, it was the main purpose of economic policy in 1952 to prevent this impending catastrophe, to restore confidence in sterling and to reach a position of stability from which the United Kingdom and the sterling area as a whole 627 could advance towards greater strength and prosperity.But the crisis is not over. The Conservative Party Weekly News Letter for 11th April had this warning:Not out of the wood yet. But nobody should assume that we are out of our difficulties and that from now on it is plain sailing in calm waters.But under this Budget and under this Bill we take a new direction, stepping out from the confines of restriction to the almost forgotten and beckoning human endeavour. If we are to survive, there must be a willing response to the Government's policy. It will take time. Now, as in 1931, we have still to eradicate the consequences of past folly and the delayed action bombs left behind by the Socialist Government.
The Chancellor referred in a recent speech to the first half of the century. Broadly speaking, the housekeeping accounts of this country are the Civil Estimates. There is no real difference in principle between the housekeeping accounts of the humblest home and those of the country. If one spends more than one's income, then the day of reckoning must come.
In 1900—I ask hon. Members to note these figures—the Civil Estimates were £69 million. This year they are £2.400 million. In 1900 the National Debt was £689 million. This year it is £25,000 million. As a consequence, the purchasing power of the £, taking 1900 as 20s., is now only about 6s. 3d. I say to the Government, in all seriousness, that expenditure by Government and by local authorities must be further reduced if we are to survive. We must cut our coat according to our cloth.
§ Sir W. Smithers
I am coming to that in a minute. If we are to survive, then at all costs inflation must be stopped. Almost daily there are demands for higher wages from every section of the community. Since 1948, wages have risen by about £860 million a year. If the present round of wage increases were granted it would cost another £500 million to £600 million a year. These increases do no good to the country or to the recipients. They, can only be paid 628 by printing more and more pieces of paper which are going down in purchasing power every day and which one can neither eat nor wear.
To increase wages without increased production is suicidal. I have had reports lately from Germany and Belgium. There they are working very hard. I understand that civil servants in those countries at the end of their day's work go out and work four hours on house building. Yet only yesterday we had the Amalgamated Engineering Union asking for higher wages and shorter hours. Let them remember that in this country, which is not and cannot become self-supporting, we must produce goods and services at competitive world prices or face starvation. How can we successfully compete in the markets of the world when we are asking for shorter hours and other countries are working harder and harder?
I would recall what was said by somebody whom I was proud to call a friend of mine, although he was a Member of the Labour Party. He was the late Mr. Ernest Bevin. Speaking in London in 1944, he said:I, as an old trade union official, do not want £10 a week if I can buy only £2 of stuff with it. I would rather have £5, with which I could buy £5 of stuff.I hope that the trade union leaders will tell their members that.
One of the principal causes of the present state of affairs is nationalisation of many of our basic industries, bulk purchase and State trading. Healthy competition has been destroyed, and the cost to the consumer of the goods and services provided by the nationalised industries has risen. That has created a demand for higher wages and this in turn increases the cost of living. So we go up and up the vicious spiral. A big effort is still required to maintain and consolidate the recently won surplus in our balance of payments. The current level of essential public expenditure is a source of acute concern to all of us.
A moment ago I was asked what I would cut. I would cut the social services by an amount sufficient to reduce Income Tax by 1s.
§ Sir W. Smithers
I do not know the figure. What I am proposing would benefit the poorest of our people much more than extending the Welfare State. The main obstacle to the recovery of this country is the comprehensive Welfare State. I repeat "comprehensive." In a Christian community, those who fall by the wayside in the battle of life through no fault of their own must be rescued and helped, but the materialistic idea of the Welfare State for all and sundry kills initiative, which is the spark by which we live and prosper. The comprehensive Welfare State is ruining the character and the homes of our people, and instead of being a lifebuoy will be a millstone round our necks. The other day I heard it called the "Farewell State."
I heard also of a typical man who was offered a job at a weekly wage and who refused, and said: "lam better off doing nothing. I am getting £7 4s. a week." A man who knew what he was talking about when he spoke of the Welfare State was the late Commissioner Lamb of the Salvation Army. He spoke with great authority about the poor. He said:The country has during the last decade spent over £1,000 million on the relief of able bodied men and women and has got nothing for it but a heritage of demoralisation.
§ Sir W. Smithers
Hon. Gentlemen opposite do not like the truth, and they shall get it. This country is not and cannot become self-supporting. The first social service must be food. All increases in wages and in Government and local government expenditure must increase our costs of production and impede or destroy our ability to compete in the markets of the world. What is the good 630 of having teachers and pupils in schools and doctors, nurses and patients in hospitals if they have nothing to eat?
To tell 50 million people that the State is a fairy godmother with a bottomless purse who, whether they work hard or not at all, will keep them from the cradle to the grave is criminal folly. Her Majesty's Government and the Chancellor must have the courage to tell the people the truth, "Reduce Government expenditure." If they can do this, the people of Britain will never let them down. The Chancellor said, I believe, in his Budget speech:We must be in deadly earnest in this, struggle for overseas markets.He proclaimed the policy "Trade, not aid." If we are to have that policy we must remove the barriers to trade. I ask hon. Members to read the very interesting article on that subject in "The Times" this morning.
In all our economic and financial thinking we must never forget that Britain is the one country in the world which is not and cannot become self-supporting. We must import roughly half our food and raw materials. To get them, now that Marshall Aid and the sellers' market are over, and now that we have to face ever-increasing competition from all parts of the world, we must, at whatever sacrifice, export goods and services at prices the world will pay, or we starve. If we restrict imports, we restrict exports. We must stop bulk purchase and state trading, and let our experienced merchants and bankers be free to earn invisible exports in free markets, working with a £ which is freely convertible. The policy of the Government should be, as soon as possible—
§ Sir W. Smithers
I would ask hon. Gentlemen to give me a chance. I am trying my best to make a serious contribution to the debate. The Government's policy must be: free enterprise, free trade, a sound and free currency, no coercion, and peace through strength. These are not only sound economic principles but are the biggest contribution we can make to world peace. We have been told, "If goods cannot cross international frontiers, armies will."
631 In his Budget broadcast, the Chancellor said:The success of the policy I advocate will depend on the extent to which industry and the people respond to my call.Our very existence depends on a free and willing response to sound and well-tried economic and financial principles. The Chancellor was right. Governments can give a lead, but the less they interfere with industry and with the liberty of the individual the better.
I want to make one more quotation. It is from a speech made by a great friend of mine whom I loved dearly. I hope hon. Gentlemen will listen to this carefully, because what he said applies to today. It was said by Mr. Stanley Baldwin, who was afterwards Earl Baldwin:The assertion of a people's rights has never yet provided that people with bread. The performance of their duties, and that alone, can lead to the successful issue of those experiments in Government which we have carried further than any other people in this world. Democracy can rise to great heights; it can also sink to great depths. It is for us so to conduct ourselves, and so to educate our own people, that we may achieve the heights and avoid the depths.I do not fear the atom bomb or the hydrogen bomb which kill the body, so much as I fear the Socialist concept of using the law to relieve individuals of the responsibility of their own welfare and to deprive them of their freedom of choice, which kills the soul. Recovery in this country can only come if individuals stand or fall by their own risks and decisions. If we are to survive, strikes and threats of strikes for higher wages and shorter hours must cease, and the Communist element must be rooted out of the trade unions. No one can compel a man to work, or to work hard, or to work at all. Man is free because he is man. Experience abroad shows that you can put him in a concentration camp, torture him, or shoot him, but you cannot make him work. Governments can do little or nothing. Recovery and success depend upon each individual putting, of his own free will, his duty to God and his neighbour—in that order— first, and his own so-called rights a bad third.
I would say this to the trade union leaders: let there by all means be con- 632 sultation with the trade unions, but let it be on the basis that recognises that a captain of a ship does not call a committee meeting of the crew before giving an order that may save the ship from disaster. Discipline in a common and honourable cause is an honourable thing. We heard something today about cricket. A cricket or football eleven cannot hope to win matches unless there is discipline and a quick response to the captain's order.
If all the 23 million of Britain's working population—many of whom are financially and economically uninstructed— would face facts realistically, and produce, as they could, another 5 per cent, to 10 per cent. of goods and services, without higher rates of wages and without putting up overheads, our economic disintegration could, and would, be averted. If they will not listen to reason, they and the country will have to learn by very bitter experience.
Some workers in some firms, and a few trades union leaders—all credit to them—have realised this, and preach it, especially Mr. Arthur Deakin and the hon. Member for Nottingham, North-West (Mr. O'Brien) the chairman of the T.U.C. But the timidity in general in face of these inescapable economic facts is pitiable. We must make up our minds who is to rule the country—Her Majesty's Government or the trade unions. St. Paul knew it. He said:And when we were with you we told you that if any among you would not work neither should he eat.Our greatest asset is coal. I want to quote some figures which are a little complicated, but which I hope hon. Members will study in the OFFICIAL REPORT tomorrow. In 1913, 8½ per cent. of colliery output was mechanically cut and less than 10 per cent. mechanically conveyed, compared with 74 per cent. and 73 per cent., respectively, in 1946 and 81 per cent. and 87 per cent., respectively, in 1951. Colliery output in the three years was 287 million tons, 181 million tons and 212 million tons, respectively. Exports and bunkers were 94 million tons, 9 million tons and 11½ million tons, respectively. On top of this, from 1945 to 1951, we actually imported 2,300,000 tons of coal.
I know the difficulties of coal mining; I have been down a pit. But whatever 633 our difficulties may be, we must produce and export more coal at world competitive prices. That applies also to all our industrial production. But there is something wrong somewhere, and the nationalisation of the coal industry has made things worse. Saleable coal in 1945 was 38s. 2d. per ton. It is £6 per ton today. The price of coal affects all our industries, and therefore our ability to export at world competitive prices.
In conclusion, I have something to say which will require all my courage, and I ask hon. Members to be good enough to listen to it. The economic and financial recovery of Britain is vital, not only to the recovery of our own country but to the salvation of mankind. The whole world still looks to the British Empire for leadership. This Coronation year proves that. The crisis, and it is a world crisis, is fundamentally neither economic nor financial. It is a spiritual and moral crisis and must be won in the hearts of men.
The freedom-loving peoples of Britain, the Empire and the United States of America, by their united efforts overcame the dictatorships of the Kaiser and Hitler. They must again be true to their principles and unite in defeating the dictatorship of Communism. We fought two wars for freedom; we are threatened with another. Thousands died and were wounded in that cause, made sacred 2,000 years ago when He died for the freedom and dignity of the individual man and woman. Let us, in our generation, be worthy of these sacrifices made for us. Let us keep the torch of freedom burning so that our children may say of us, "In the hour of danger and trial our forefathers played the game."
The Chancellor ended his broadcast with these most important words:With God's help we shall succeed.I should like to quote a few lines which sum up the whole of what I have tried to say and which are the only foundation for economic progress and prosperity. The words were spoken by our late beloved King George VI in one of his broadcasts. He said:I desire solemnly to call my people to prayer and dedication. We are not unmindful of our own short-comings, past and present. We shall ask not that God may do our will, but that we may be enabled to do the will of 634 God; and we dare to believe that God has used our nation and Empire as an instrument for fulfilling His high purpose.
§ 6.38 p.m.
§ Mr. David J. Pryde (Midlothian and Peebles)
I feel that someone far better equipped than I am would be required to answer the hon. Member for Orpington (Sir W. Smithers). He brought me very much in mind of a great figure in this House of Commons many, many years ago. I have read the speeches of Edmund Burke, and while Edmund Burke was credited with emptying the House I notice that the hon. Member for Orpington has collected quite a good audience. There is, of course, little in the hon. Member's speech with which I could agree. He mentioned a friend of mine, a colleague in the days beyond recall and he quoted from one of his speeches.
I would recommend to the hon. Member that he should read the OFFICIAL REPORT of another place in which he will find that Lord Snowden said in that place that this country had been betrayed and that he had been betrayed. He added that it did not matter for him, but that the National Government would be weighed in the balance and found wanting. The present Government will be weighed in the balance and found wanting, as I shall demonstrate. The hon. Member for Orpington spoke about coal production. The wages of Scottish miners in 1900 were based on 4s. per day. The hon. Member talked about the importation of coal into this country. I ask him how much was imported in 1926 when the present Prime Minister led the campaign to drive 500,000 of us from the pits and assassinated the coal industry.
I leave the hon. Member for Orpington there and turn to answering the question by the hon. Member for Ayr (Sir T. Moore), who asked what Burns would have said today about the Budget. [An HON. MEMBER: "Burn it."] I think that Burns would have pointed to the words of the poet who said,… of all words of tongue and pen, The saddest are, ' It might have been '.That disposes of the argument of the hon. Member for Ayr.
I want to pay a tribute to the Financial Secretary to the Treasury for the easy facility with which he stated his case. 635 But I agree with my right hon. Friend the Member for Battersea, North (Mr. Jay) when he said that we are concerned both with what the Budget has done and what it has not done. In comparing it with previous Budgets I am reminded very forcibly of what an Irish friend of mine said last week. He said, "There is just this difference. The right hon. Member for Bishop Auckland (Mr. Dalton) was a broth of a boy. He was like Brannan on the moor. He took it from the rich and he gave it to the poor." Succeeding Labour Chancellors did the same thing. My friend then went on, "The right hon. Gentleman we have for a Chancellor now does the opposite thing. He takes it off the bottom and he sticks it on the top." I think that everyone will agree that that is the trend of the present Budget.
My right hon. Friend the Member for Battersea, North asks what is the difference between last year and this year. There is more unemployment. There are 400,000 unemployed. More short-time is being worked than ever before. In my own constituency, the nine paper mills on the River Esk, the Water of Leith and the River Almond are still working only four days a week. Last year the Chancellor said that his Budget would allow the people to work overtime. The paper makers of Midlothian are asking today, "How is the Chancellor to get us working a full week, far less overtime?"
Questions have also been asked about the cost of living. Hon. and right hon. Gentlemen opposite deny that there has been any increase in the cost of living, but that increase has been proceeding so insidiously that no one has noticed it. I should like to give an example. Out comes a notice in the Press, "There will be an increase of a penny per 1b. on flour." When one thinks in terms of a penny a lb. one is not perturbed in the slightest, but when the miller says to the baker, "This is an increase of 23s. 4d. on a 20-stone bag" the baker sits up and takes notice. People naturally ask if bread is going up in price. Brown bread is the staple diet of the diabetics and many other people who are not so robust as they might be. They find that brown bread is going up in price, and it means a further drain on their purchasing power.
636 Some people say, "Off with controls." Is wheat going to be placed at the mercy of one buyer or of two buyers on behalf of the nation? Is there to be a corner in wheat so that the price of the food of the people is dictated at any time by private enterprise? It should be remembered that in regard to supplies of paper the slogan of hon. Members opposite and of the Conservative national newspapers was, "Off with controls," but from the day that controls were lifted in the paper industry the bottom fell out of the market.
This Budget is a class Budget. If the Chancellor denies that, I am sure he will agree that he has a certain amount of prejudice. Let us see what he has done about sport. Amateur sport will be free of tax but other sport will not be. I have no objection to certain of the rich clubs paying something, although, being a follower of the great and mighty Rangers, I believe they are just as entitled to be free of tax as any of the cricket clubs of England.
With regard to other games, I want to draw the Chancellor's attention to the very weak position in which some athletic clubs are left because of the operation of this tax. I represent a large constituency. At one end there is an amateur athletic association which receives a great deal of money in the shape of public subscriptions, as well it should, because it is a very fine organisation. Fifty miles to the south is an organisation which runs the famous St. Ronan's Athletic Games. In a small place like Innerleithen they have not a great deal of drawing power, but because they are not an amateur athletic association they will be subject to tax.
What of the other Scottish games? What about Aboyne, Braemar, Callender, Cowal, Thornton, Saughton and many other places? They always have a great struggle. They will receive no relief from the Budget. I appeal to the Chancellor to reconsider his decision.
Then there is the position of the small cinemas. They are in a very peculiar position in Scotland because they cater for populations in our isolated rural areas. The position of cinemas in the towns is not so bad. One can go to Leicester Square on any night and find a ready-made audience paying 5s. and 637 7s. 6d. per seat, but in small places like Innerleithen and Peebles, if one examines the accounts of the cinemas one finds that many of them are running at a loss. If unemployment strikes in these districts it can be taken for granted that a very serious situation will arise. Representations have been made and adequate evidence has been submitted to the Treasury in support of a relaxation for the small cinema. I am not appealing on behalf of large cinemas but there is an unanswerable case for the small ones.
My hon. Friend the Member for Coventry, South (Miss Burton) has raised the question of the old people. I had intended to raise that subject, but she has said sufficient to make it unnecessary for me to add anything in that connection. I know that the Chancellor will take note of what she has said.
One other point to which I want to draw the attention of the Chancellor— the Financial Secretary to the Treasury mentioned it in his opening statement— is the question of oil. I mentioned the subject last year. This industry represents a very important unit of the Scottish economy. It is a subsidiary of the Anglo-Iranian Oil Company. The shale oil industry today has certainly diminished, due to the importation of foreign oil, but the by-products side is a very valuable adjunct, and has great potentialities.
This Scottish shale mining industry may yet be the saving grace of this country. I can go no further into that because it means projecting our minds into the future. Today, however, it occupies a very precarious position. At any time the economy of this industry could be overturned and more than 4,000 people, with their wives and families would be flung on the scrap heap. Some people might say that these men would be absorbed in the neighbouring minefields of Alloa, Fife and Midlothian.
I want to impress on the House, however, that it is not so easy to transfer shale miners to the coalfields because shale mining is a very different type of work from coalmining. It might take years to accustom a shale miner to the— to him—new conditions in a coalmine; some, I regret to say, are never able to adjust themselves to conditions in the coalmining industry. I would rather see 638 the shale mining industry enlarged, for it is quite capable of enlargement. These shale oil measures, possibly richer than those in any other part of the world, stretch from the Fife coast through the Firth of Forth down into the south of Midlothian, so far as a geological survey has been made; but Scotland has never been thoroughly surveyed geologically, and it is time it was.
There are many other aspects of the Budget with which I should have liked to deal, especially the grants to Scotland. Some of our counties get no equalisation grant. The county of Peebles is one, and Bute, in the west, is another. Peebles and Bute are two striking illustrations. I warn the Treasury that unless adequate provision is made in the very near future for a readjustment of Scottish finances we shall have to face a very serious position in Scotland. Already the local authorities are pointing out that the Chancellor's financial policy will prevent them building any more houses, even space-saving houses. I appeal to the Treasury to take time by the forelock because the local authorities in Scotland are on the move, and I do not like to see trouble if it can be prevented.
In many of the counties in Scotland the local authorities find it impossible to deal with the unclassified roads, and as agriculture is our staple industry I appeal to the Treasury to make available more money to such rural counties as the Highlands and the Islands and the southern portion of Scotland. Twenty-five miles from the centre of the city of Edinburgh, to the south, we find the same characteristics as obtain in the Highlands of Scotland. In Peeblesshire the rural roads are practically impassable for heavy traffic, and with the cutting down of the railway system, thus disconnecting Peeblesshire from the great city of Edinburgh and the city of Glasgow, we are finding that transport in the south-east of Scotland is a problem indeed. I would emphasise that we have expanding industries in South-East Scotland.
Lastly I want the Treasury to impress upon the Board of Trade that it is absolutely necesary for us to get alternative industries into Midlothian and Peeblesshire. In Midlothian we are transporting redundant miners from Lanarkshire. But every member of a family does not work 639 in the pits; the women do not. We require light industries to employ our womenfolk from the west of Scotland. I think I have said sufficient to compliment the Financial Secretary on his able presentation of the case, but I think that I have also said enough to prove that the Chancellor is more generous to his own sphere of society than to the great mass of the workers.
§ 6.54 p.m.
§ Captain L. P. S. Orr (Down, South)
It would be presumptuous of me to join issue with the hon. Member for Midlothian and Peebles (Mr. Pryde) on the aspects of the Finance Bill relating to Scotland to which he has devoted some time. I think, however, that he will not find himself entirely out of sympathy with some of what I am going to say, particularly with regard to light industries.
I am speaking on this occasion not only for myself but also on behalf of my hon. Friends who represent Northern Ireland constituencies. Lest what I have to say may appear to the Chancellor to be devoted more to what is not in this Finance Bill than to what is, and lest it may appear to be too critical, let me say that whatever Burns might have said about the Budget, we in Ulster, at all events, welcome it and say nice things about the Chancellor.
When we look back upon the circumstances in which this Government and the Chancellor took office a little over a year ago, when we recall the very lifeblood of our nation ebbing away and our gold and dollar reserves fast running out, what has happened since seems to us nothing short of miraculous. I can assure the Chancellor that his Budget and his Bill have already been widely welcomed in Northern Ireland, and I hope that he will not consider what I am about to say as an indication of ingratitude.
There is, however, a strong feeling, which is probably shared by hon. Members who represent other Development Areas, that while we all share in the advantages of the Chancellor's policy—the restoration of the gold and dollar reserves and the stability of sterling that flows from that—while we share in the benefits under the Finance Bill—namely the re-introduction of the initial allowances, the reduction of the standard rate of Income 640 Tax and so on—and while we regard that as likely to be an incentive to industry, nevertheless we have a feeling that there are certain things which the Chancellor might well have done for Northern Ireland and the Development Areas without damaging the essential structure of his Budget.
I should like to describe something of the economic position of Northern Ireland by way of illustration. Northern Ireland has a population of just under one and a half million. Our economy is partly agricultural and partly industrial. It is a badly balanced economy. Compared with the Irish Republic, our neighbours, we are perhaps comparatively well developed, but, judged by British standards, we are considerably underdeveloped. At the moment we are far too dependent upon certain old-established basic industries for the employment of our people.
Although vigorous action has been taken by the Government of Northern Ireland, though we have been aided considerably by the treatment which we have had not only from this Government but from their predecessors—I acknowledge both—and although we have been rightly accorded Development Area treatment, nevertheless the situation is still exceedingly grave. We have not succeeded in attracting sufficient new industries, in spite of the efforts that have been made to balance our economy. We have attracted sufficient new industries to the area to employ about 27,000 people who would otherwise be out of work, but unemployment has been running for the last year at an average rate of 10 per cent. of our insured population.
We have heard complaints in this debate about unemployment here and there in the United Kingdom, but the national average for Great Britain is under 2 per cent., while in Northern Ireland 10 per cent. of our workpeople have been unemployed: the figure is down a little this month. Last month, out of a total insured population of 466,000, 41,918 were unemployed. That is 8.9 per cent. Whatever one may think that Governments might do or might not do, that is a situation which we cannot allow to continue while there is anything which either this Government or our Government in Northern Ireland can 641 possibly do to alleviate it. It is a situation which we cannot possibly view with equanimity.
I am fully prepared to concede that Government action alone cannot cure unemployment, and that our industrialists, and indeed all our people, must make great efforts to improve and increase their markets and to improve our prosperity. They must bend every sinew to that task. Nevertheless, we should examine this partial failure of our policy to attract new industries. Why has it not succeeded?
One of the reasons is this: when industrialists are contemplating setting up a factory in Northern Ireland they first take into account the various advantages which we offer, namely, a reserve of excellent and highly adaptable labour, and an atmosphere largely free of industrial strife and largely free of restrictive practices. They look also at the generous assistance they get from both Government and local government authorities. Nevertheless, many of them are intimidated by the high cost of freight carriage of their raw materials entering Northern Ireland and of their finished products going out. Looking at the Budget from this standpoint I should have thought that the Chancellor might have seen his way to have reduced the duty on hydro-carbon oils, that is the petrol tax, rather than the Purchase Tax on motor cars. I see that the hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond) nods his head. I have no doubt that this argument commands sympathy in other remote areas.
The effects of that would, of course, have been long-term. But from the short-term point of view there is something that the Chancellor might have done which would have had a considerable and a very quickly beneficial effect on our situation. We are dependent for the employment and prosperity of our people, as I say, upon certain old major, basic industries. One of those is textiles. The number of our people registered as employed in textiles at the moment is about 107,000. That is about 23 per cent. —almost one-quarter of all our workers in Northern Ireland. The number of unemployed in that industry in March was 7,724. Any action therefore to assist the textile industry or any part of it will also assist considerably in solving 642 our unemployment problem, and should not be neglected.
I come to our famous Irish linen industry—linen, the queen of all textiles. Of those normally employed in linen 8 per cent, are unemployed. That is not the figure at the height, or depth, of the recession a year ago. That is the figure for last month. Though it may be true to say linen has made a quite remarkable recovery from the recession it has not made the same recovery that the cotton industry has done. The recovery is not complete and the situation is by no means satisfactory.
The ideal solution for the linen industry would, of course, be to abolish Purchase Tax on all non-woollen textiles altogether, and I hope that the Chancellor has that in mind as his ultimate aim. The whole of the Purchase Tax is bad. It is full of anomalies and causes countless difficulties. We have committees sitting on this or that aspect of it. It is time it was done away with. To remove Purchase Tax from all non-woollen textiles at the moment would, I understand, cost about £25 million, so we do not expect the Chancellor to do this at once, but I would ask him to keep that aim before him. Perhaps, however, he would consider its particular effect on the linen industry.
I find myself in substantial agreement with what the right hon. Member for Battersea, North (Mr. Jay) said about the D Scheme, for its effect on linen has been definitely harmful when compared with the old Purchase Tax. Formerly there was reasonable flexibility. Only the most expensive linen products were subject to Purchase Tax. Now, although to a certain extent the "blind spot" has been removed, nevertheless a vast number of linen articles which would not have borne Purchase Tax now do so.
Not only from the point of view of employment in Northern Ireland but also from the national point of view, this linen problem is important, because it ought not to be forgotten that the exports of linen in 1951 amounted to no less than £25½ million in value, and the vast bulk of that was in dollars. In 1952, the value of those exports fell to £22¼ million, a drop of some £3£¼ million. Apart from the heavy canvas goods, the bulk of those exports were from Ulster. I am not trying 643 to advance the argument that this fall in exports was entirely due to the D Scheme or Purchase Tax on linen. Nevertheless, the linen trade are of the opinion that the D Scheme is having a bad effect on exports, exactly the effect referred to by the right hon. Member for Battersea. North. How is this?
Home market deliveries in linen from April to December, 1952, fell in value, from those of the comparable period in 1951, by 27 per cent. That is serious in itself for the industry. I have here a very interesting table of figures from which I could quote at some length, and to avoid doing so I am prepared to send it to the Chancellor. It shows that the fall in trade was less in those sections in which the goods are cheap enough not to attract Purchase Tax. Therefore, it is fair to argue that while Purchase Tax has not been entirely responsible for the fall in home demand it has played a very considerable part in the fall in home demand.
The reasons are obvious. Retailers do not want to stock up with goods consumers do not want because they bear Purchase Tax, or with goods the tax on which may be lightened or removed, on which they may make a loss. The Chancellor argued that because of the recession last year he gave his reductions in tax on textiles a year in advance. Those reductions given last year were of very little benefit to the linen industry. That is the opinion of the industry itself.
An effect of the Purchase Tax and this fall in home demand has been the gradual debasement of standards. That may seem a somewhat facile argument, but I can assure the Chancellor that there is considerable substance in it. There has been a considerable debasement of standards. I have been into this aspect of the matter fairly closely, and I could give example after example. I will give one. There was formerly a very charming export, a coloured-border linen tablecloth. I remember those cloths very well. Under the D Scheme those tablecloths, which had not formerly borne tax, bear tax of 7s. 10d. per cloth. Rayon cloths which are somewhat similar can be sold at 7s. 10d. without the tax and, therefore, people in the industry have turned over to making cloths in rayon, which cannot be exported because of the duty, and so that export is completely lost.
644 The same thing is beginning to happen in the case of linen handkerchiefs, and in the case of damask there has been a tendency to use more and more cotton as against linen. Damask, which was formerly 60 per cent. linen and 40 per cent. cotton, now contains these constituents in reverse proportions, and consequently is not so attractive as an export. Of course, this is having an effect on the ancient craft of damask weaving, and there is the possibility of a deterioration in standard there, and unemployment in flax spinning factories.
I should also mention one other aspect of this matter, that is, the raw material aspect. Linen uses, as its raw material, flax, which does not require dollars to buy. One-quarter of our raw materials come from home sources and are home grown. I should think that is an argument which should appeal to the Chancellor. I beg the Chancellor to consider the case which the linen industry has put to him and to see if he cannot do something to meet it. He may not be able to do anything to help us in this Finance Bill, because there is nothing which can be altered which would help us, apart from the general question of Purchase Tax, but I understand that he is empowered to make an alteration to the "D" levels by Order in Council, and I hope that he will see his way towards meeting the case already put up to him by the linen industry through us. If he could do so, it would be a tremendous advantage, I believe, to exports from this country and be a step towards helping us in Northern Ireland in grappling with this very human problem of unemployment there.
§ 7.12 p.m.
§ Mr. Frederick Mulley (Sheffield, Park)
I think that the House will feel indebted to the hon. and gallant Member for Down, South (Captain Orr) for the very clear and detailed picture of the grave situation in Northern Ireland which we have had from him. I would not presume to comment in detail on the various points which he has made concerning the economy of Northern Ireland, but I shall later make a few remarks about Purchase Tax. I think that we may find ourselves much in agreement on that point.
I would, however, make a general observation, that the hon. and gallant Gentleman should not have expressed 645 himself in the opening sentences of his speech so enthusiastically about the Budget, because the Budget is really designed to produce some of the effects in Northern Ireland about which he has complained. I am sure that his hon. Friend the Economic Secretary will agree that we cannot expect to have investment in new industries and an increase in employment and in exports while we are continuing to pursue the deflationary policy which has been the policy of Her Majesty's Government.
I do not propose to attempt to illustrate that in the context of Northern Ireland, but I think that as the national picture of the United Kingdom as a whole shows a fall in production of 3 per cent. and a fall in the level of exports of 6 per cent. it is not surprising, since the Development Areas are always the most prone to unemployment, that there is the very considerable and serious figure of 10 per cent. in Northern Ireland. I hope that the hon. and gallant Gentleman will support the measures which we shall be putting forward on the Committee stage and which we think will do something towards the improvement of the general employment and production situation in this country.
As one who, before the Budget, made representations to the Chancellor of the Exchequer and to the Financial Secretary privately and in debate about Purchase Tax, I should like to make some observations as to the effect of the changes which have been introduced as a result of the Budget. If I may say so, without wishing to appear offensive to the Chancellor, I think that he was guilty of certain political sharp practice in suggesting in his Budget statement that one of the purposes of the reductions in Purchase Tax was to reduce the cost of living and to make some concession to those not able to benefit from the reduction in Income Tax.
He made no reference in his speech to the effect of Purchase Tax reductions on the cost of living. But it was discovered by Question and answer in the House that the total of such reductions amounted to less than one point in the Index of Retail Prices—I am corrected by an hon. Friend who says that it was only a fraction of one point—which must be set against the 10 points by which the cost-of-living index has risen since the right hon. Gentleman took office. Where- 646 as we do not complain that sometimes the price of things go up, because we appreciate that there are world factors over which Her Majesty's Government may have no control, we do complain that this Government should have been elected on the slogan that they would reduce the cost of living and should then have put the cost of living up, not as a result of world economic forces, but as a deliberate act of Government policy.
§ Mr. Mulley
It has risen by 10 points since October, 1951, and it is about that that I am complaining. This Budget does nothing to reduce that and, indeed, it seems likely to continue to rise. If the hon. Member for Barry (Mr. Gower) will consult the figures produced by the United Nations and other economic international reports, he will see the surprising thing, if they are looked at in the context of the world situation, is that the cost of living has gone up in this country and in no other country; in fact, in most countries it has gone down. I do not think that the Chancellor would deny that it is deliberate Conservative policy which has caused the cost of living to rise.
§ Mr. Mulley
I cannot be expected to give a lecture on figures which can be readily found in the Monthly Digest of Statistics. The figures, I speak from memory, are from 126 to 137. If the hon. Gentleman is good at arithmetic perhaps he can tell me what is the percentage.
§ Mr. Mulley
My hon. Friend is, as usual, very quick on figures. While we welcome the reduction in Purchase Tax, there is a surprising lack of courage on the part of the Chancellor to select the items and the industries which are deserving of reduction in the tax. The general overall reduction of 25 per cent. is not directed to either the fiscal or economic needs of the country.
The motor car industry should never have been allowed to get away with their case for a reduction of tax. The hon. 647 and gallant Gentleman the Member for Down, South suggested and, I think, others will agree, that if motorists were to be assisted it would have been better to have done so by a reduction in petrol tax which would have brought down the cost of living and the cost of public and private transport. We read in the "News Chronicle" yesterday that few motorists will get a new car—I think the phrase was "from a baby car to a Bentley"—before August. There is no suggestion at all that the reduction in Purchase Tax was a stimulus to the motor car industry. I was told by members in the trade some weeks before the Budget that if the Chancellor would merely say categorically that there would be no reduction in Purchase Tax there would again be a large waiting list, and so it proved to be.
§ Mr. Nabarro
Has the hon. Gentleman troubled to consult those of his hon. Friends who represent Birmingham constituencies who went to my right hon. Friend two weeks before his Budget pleading urgently for a reduction in Purchase Tax on motor cars?
§ Mr. Mulley
I consulted one of my hon. Friends who represents a motor industry constituency, and he said that if the Chancellor had done something about the Purchase Tax last December it would have been intelligent but at the moment it is stupid.
§ Mr. Mulley
Another matter is television. What is the point of reducing the Purchase Tax on television sets today? If the argument is that the Government want to expand the demand for motor cars and television sets, they could have done it at no cost to the Treasury simply by altering the hire-purchase regulations. Anyone in either of those industries will say that the factor which stands in the way of increased sales in many cases is the very large deposit which is at present required. Why should all this extra money be lost to the Treasury when other industries badly need a reduction in Purchase Tax in order to exist?
My general point is that, whether it is for Parliamentary reasons or in the interests of simplifying administration, the 648 Chancellor has refused to regard Purchase Tax as an economic instrument and has regarded it simply as a fiscal instrument. That is a bad approach. The one thing in the Finance Bill which I welcome is the suggestion that, under new powers to be taken, Purchase Tax may be reviewed frequently during the financial year. I hope that will be the case and that the Chancellor will not take too seriously the recommendations of the Hutton Committee that Purchase Tax should be reviewed only once a year. If an industry finds itself in difficulties it is outrageous that it should have to wait until the next Budget before consideration can be given to its case.
I now want to make special reference to the industries in Sheffield which are affected by Purchase Tax, namely the silverware and cutlery industries. We take it as a compliment to Sheffield, and also to Birmingham, that in each of his speeches, including his radio speech, the Chancellor has mentioned silverware by name. That is a great compliment, but, unfortunately, the concessions which have been made in respect of silverware will do very little to help the industry in its very considerable difficulties.
I should like to give the House the views of the Sheffield Chamber of Commerce on the position of the cutlery and silverware industries after the change in taxation. The quotation is a little long but it puts the matter very concisely. It is as follows:The new rate of 75 per cent. in place of 100 per cent. makes very little difference to the selling prices which still remain too high to effect the stimulus which is so urgently needed if the crafts and skills are to be maintained and the training of new entrants encouraged.It may be that the reduction was restrained in order to prevent the retailers from losing too heavily. The fact is, however, that retail stocks of silverware and best cutlery subject to the higher rate of Purchase Tax are extremely low. They will remain low until a really sensible reduction is made or complete abolition decided upon. This, we contend, could be done now because the yield from the recent 100 per cent. rate has been so low as to be hardly worth the cost of collection, and it will be even less at the 75 per cent. rate, because the reduction is insufficient to revive confident buying.In connection with the rate of 33⅓ per cent. now reduced to 25 per cent. on cutlery generally, the principle is again heartily welcomed, but we still contend that cutlery should be regarded as being as essential as pottery on the table, and therefore exempted altogether.649We feel sure that the stimulus which would be given to these industries by abolishing Purchase Tax would resolve the present unemployment, which is increasing still, and that consequent increased business activity would soon replenish the coffers of the Treasury through the other methods of taxation in force.I urge the Chancellor again to look at the silverware industry to ascertain whether further consideration would produce a better result in terms of the rate of Purchase Tax. I urge that silverware should be brought down from the top rate and put into the middle group at 50 per cent. If the Chancellor cannot do that over the whole range of the silverware industry, will he consider treating the more essential items, such as sterling silver, table hollow-ware, teapots, and things of that sort, in the same way as E.P.N.S.? This would also be of great assistance to the hotel industry, which, if it were not for Purchase Tax, would be replenishing its supplies of silverware in order to put on a good show for the overseas visitors which it will be entertaining this year, and, I hope, in future years.
From the point of view of the cutlery industry, there is no case at all for retaining in the top category cutlery which is there only because it consists in part of ivory or mother-of-pearl. As I have previously explained at great length in the House, small pieces of ivory and mother-of-pearl are used on the handles of knives and so on, and if they are not used in this way they are simply scrapped. There is no justification for putting this cutlery into the 75 per cent. category instead of the 25 per cent. one merely because of that small addition of ivory or mother-of-pearl. The high skills in cutting mother-of-pearl and ivory will disappear unless some special consideration is given to the matter. The amount of revenue involved is insignificant, but this means a lot to those whose livelihood is in these trades. By doing this the Chancellor might gain, because there would be increased turnover as a result of such a sensible reduction.
I now turn to the taxation of industry. There was a lot of trouble last year because of the Excess Profits Levy. There is an impression in the country that we have a paradox in that a Conservative Government is taxing industry more fiercely than the Labour Government did. Some hon. Members opposite feed fuel 650 to this fire by their speeches. But the fact is that in the next financial year, according to the Financial Statement, it is expected that, taking Profits Tax and E.P.L. together, there will be a yield of £315 million against £379 million produced in the year 1952–53, a fall of £64 million in the revenue taken from industry.
In addition, the reduction in the standard rate of Income Tax gives industry another £45 million. That figure is interesting because it is almost exactly the amount which would be required to give old-age pensioners another 5s. a week each. There is perhaps some significance in the choice which was made of the means of disposing of that amount of the Budget surplus.
We should make it clear that we do not regard it as satisfactory that the contributions of industry to our Revenue should diminish at this rapid rate. In particular, it is significant that there has been no mention yet of what additional profits taxation is to be proposed when the Excess Profits Levy is terminated at the end of the year.
§ Mr. Mulley
The hon. Gentleman is at least frank. He clearly believes, and has the courage to say that he so believes, that the rich should become richer and the poor poorer, because that is the significance of the financial policy which he advocates.
§ Mr. Nabarro
No, it is not. All I am advocating is that sufficient funds should be available to British industry to modernise and re-equip itself in a harshly competitive world.
§ Mr. Mulley
I am glad the hon. Gentleman made that intervention. I was beginning to address myself to exactly that point, the way in which industry can be assisted to equip itself. When we discussed the food subsidies there was much criticism to the effect that they were a very blunt way of redistributing wealth because they went to people who did not need them as well as to people who did need them. But the Chancellor's policy for assisting industry is based on that blunt, unsatisfactory method. There is not a justification as there was in the case 651 of the food subsidies, that those who got the food subsidies without needing them paid very much more in taxation to make it possible for those who needed cheaper food to have it.
§ Mr. Gower rose—
§ Mr. Mulley
I cannot give way again to the hon. Gentleman because I want to develop this particular argument. The Chancellor in the standard rate of Income Tax reduction and all these other global contributions to industry, which are going to the football pool proprietors and to firms that are not making any essential contribution to the economy, is giving the same reliefs to others as he is giving to engineering and to other firms with an important export potential.
I also want to suggest that the initial allowances should again be selective. I will not repeat the very clear case of this point that was put in the Budget debate by my hon. Friend the Member for Gloucestershire. South (Mr. Crosland), and again today by my right hon. Friend. I think a strong case was made out for preferential treatment for fuel economy appliances, firms with important export potential, the brickyards and, indeed, any industry which needs to re-equip and which is making a real contribution to our economy. It is my belief they should have bigger initial allowances than should be given to any company which only wants to buy a new car for a director. That is probably one of the reasons why the waiting lists for cars is mounting again, because the initial allowances will be used for inessential purposes. I ask the Chancellor to give serious consideration to the points made by my hon. Friends this afternoon on this subject.
The final point I want to make is to try and give a much clearer picture in a few minutes of the state of our economy and the actual situation as it was in 1952 than the very distorted picture of our real economic prospects the Chancellor gave in his Budget speech. Hon. Members opposite say that the criteria of prosperity and efficiency is the profit motive, and I ask them how can they claim that, by their own standards, we are much more prosperous now when gross profits have fallen by £179 million in 1952 as compared with 1951.
652 We are all extremely glad that the balance of payments position has improved, but I ask hon. Members to realise how that improvement was brought about. There has been a reduction in imports of £569 million, a decrease in the rate of accumulation of stocks of £565 million and an actual reduction in the physical level of stocks of £100 million according to the Financial Secretary's figures in the National Income and Expenditure paper although in the Economic Survey they try to pass over the point by saying that the stock level was practically the same in 1952 as it was in 1951. This has achieved a balance of payments surplus of £291 million.
We cannot continually cut imports by £569 million, and I think the fact that exports in volume declined by 6 per cent. in 1952 is a very serious matter. This is the sort of problem and the problem of the reduction in production of 3 per cent. to which the Chancellor should be addressing himself instead of doing a political confidence trick, as I believe this Budget was designed to achieve. I say, therefore, that this Budget is to be condemned in its general terms. There are, of course, features which we welcome. It is an affront to social justice and it is retarding the progress which we made towards a better society. It is also to be condemned because it does nothing to meet the very serious difficulties with which we are faced as a nation, and the problems which, although temporarily solved in the balance of payments position, will be here again before very long to be dealt with.
§ 7.35 p.m.
§ Major Sir Guy Lloyd (Renfrew, East)
I trust that the hon. Member for Sheffield. Park (Mr. Mulley) will forgive me if I do not pursue in combat with him the arguments which he has presented to the House. I must confess that I have listened with some admiration to the arguments which he and his hon. Friends have presented in their efforts to try to pretend to themselves—and I think they sincerely try to pretend to themselves—that the Finance Bill and the Budget, like the last Budget, are onesided. The fact that the benches opposite arc so thinly occupied now surely makes one think that the great indignation, which hon. Members opposite would have us believe they feel about what they 653 describe as this class Budget and this appalling class Finance Bill, is largely false pretence.
§ Sir G. Lloyd
There is no necessity for us to be here because we are thoroughly satisfied with the Bill. Throughout the whole of today's proceedings I have sat here, and our benches have been considerably more occupied than those on the other side of the House. However, we will not waste time on that argument.
First, I am full of praise for the Finance Bill and for the Budget which it represents and implements. I like the Bill, and the theme and motive of the Bill. I like the fact which many have not apparently noted, at any rate in their speeches, that the Finance Bill implements a very large number of the promises which my right hon. Friend the Chancellor gave during the progress of the Finance Bill last year. I think that is to be appreciated, and I should like it to be noted that I appreciate it. The Bill also implements a very considerable number of the Chancellors hopes and hints that he would be able to do certain things this year. The Bill contains a large number of those hopes and hints which have been translated into reality, and we welcome the fact that the Chancellor was able to carry out those ideas which he obviously had last year.
Principally I like the Bill for the fact that it demonstrates the courage of my right hon. Friend himself. It is not a Bill that is designed to be popular, nor was the Budget before it. But my right hon. Friend took his courage in both hands, as is typical of the man himself, and he has shown to the country and to the House that courage is a good thing and always wins applause. In fact, it is always better for a Chancellor to be respected than to be popular, and the Chancellor is respected all over the House and all over the country for the way in which he has tackled the financial problems of the day.
I want to refer to one or two items in the Finance Bill about which I am par- 654 ticularly pleased. I welcome the restoration of the initial allowances. I am delighted that the Chancellor is to give special assistance to mining developments abroad. I wonder whether he would consider, before it is too late, including all kinds of Empire development in this assistance. Those entering the field of Empire development labour under difficulties at the present time. My right hon. Friend is giving special advantages by the initial allowances in order to encourage this valuable work in mining developments. Why confine this special assistance to mining development? Why not let similar assistance be given to other activities of our traders in the Empire markets, especially in connection with new development?
After all, the initial allowances are more of a loan than anything else and the Millard Tucker Committee Report, upon which the Chancellor has based many of the proposals in his Finance Bill and Budget, definitely suggested that, if the initial allowances were restored, they could be adjusted and could be differential in their effect. No doubt the Financial Secretary will have noted paragraph 305 of that report.
I have a sense of disappointment because the Chancellor has not taken the opportunity to do what, for many years, so many people have suggested might be done in the Finance Bill, namely, tidy up Income Tax administration. Whether the Finance Bill relieves or imposes fresh taxation, successive Finance Bills undoubtedly bear increasingly harshly upon everyone, and especially on the small trader, whom one might call the merchant adventurer. These people, who are so representative of our nation, are almost snowed under by the Income Tax forms and statements which they have to fill in. And what a burden it is. Why cannot the Chancellor streamline the administrative side of the Revenue Departments and try to get for all taxpayers a single assessment of direct taxation to include all Schedules, and to have, if possible, one collection? It is like a jungle which every year gets worse, and the longer we delay clearing it up. the worse it becomes.
You, Mr. Deputy-Speaker, might not be aware that Mr. Speaker is one of the 655 many who have to appoint the Commissioners who assess Income Tax. Along with Mr. Speaker is the Lord Mayor of London, the Governor of the Bank of England, the Governor of Broadmoor Asylum and other distinguished gentlemen who, in many cases I believe, do not realise that they have to do the job. In any case this position needs to be cleared up because it is mostly anachronistic.
Over and over again promises or near-promises have been made by both Front Benches that this problem would be tackled. Agreement has been expressed with people like myself who have said much the same thing for many years, but nothing is ever done. We now have the Millard Tucker Report, and that Committee is still sitting and the Royal Commission on Income Tax and taxation will also report in due course. That will mean a further delay. I beg the Chancellor to consider seriously, before next year at any rate, whether he will not attack this jungle and clear away all the dead wood by streamlining the administration of our taxation collection and Inland Revenue Departments.
While I welcome the fact that many of the sound recommendations in the Millard Tucker Report have been accepted and put into the Finance Bill, I would point out that there are some equally good ones which have not as yet been acted upon. I repeat "as yet" hopefully. Most hon. Members on all sides of the House are interested, as I am, in the welfare of the small trader and businessman who finds life very difficult these days as, indeed, he has found it ever since the war. There are many recommendations in that Report which would be helpful to him. For instance, it recommends that small businesses and professions should have an opportunity to qualify for the relief allowances. There does not seem to be much in the Bill to help in that direction.
The Report also suggests that depreciation allowances might be given on all commercial buildings on the same lines as for industrial structures and buildings. It is a pity that the Bill does nothing in this respect. I hope that the Chancellor will give sympathetic consideration to that suggestion because it would assist a large number of people.
656 Many of us are disappointed, and we realise how disappointed are the small traders, that the Hutton Committee was unable to find means of relieving the serious disaster which occurs each year to the small traders owing to the fact that there is no compensation for taxed stocks when there is a fall in Purchase Tax. Many of them, of course, are sufficiently well off to digest this loss, but there are many others who find it difficult to get sufficient credit these days. Credit restrictions are hitting them hard, and many are at a loss to know how to survive the disaster of not being able to recover the losses on their tax-paid stocks.
It is obvious that the Chancellor does not like Purchase Tax any more than we do. I hope and believe, therefore, that it is on its way out. As it is progressively reduced the small trader will find himself in a worse position every year. Even in January next year things are going to be very difficult for him, because people will say, "Why should we buy now? There will be a further fall in Purchase Tax in the Budget in April." So, from January to April, the small trader will be on the horns of a dilemma and will have great difficulty in keeping up his trade. If he has overstocked, and Purchase Tax comes down, as we have good reason to anticipate it will from now onwards, year by year, until it disappears—as I hope it will—the unfortunate man will be hit even harder still.
I hope that the Chancellor and the Treasury, in spite of the Hutton Report, will think out ways and means of helping the man who is hardest hit and in a very serious financial situation as a result of falls in Purchase Tax. There are many such people, and it is no use saying that because some can afford to absorb the loss therefore all can. It is not true to say that all can. There are a great many who cannot, and they are deserving of sympathy. I hope that the Chancellor will give that point his very sympathetic consideration.
Finally, though I do not know if this is directly concerned with the Bill. I urge the Chancellor and the Treasury to consider the effect which directives to the banks on credit restrictions to small traders is having upon them at present. Doubtless those directives were necessary when they were given—I have never disputed that—but surely they are not so 657 necessary today. If they could be lightened a little on the lower income groups—if up to, say, £5,000 credit could be allowed to those to whom it would mean everything at present—I cannot believe that it would have any serious effect on the financial and economic situation of the country. But it would be a great help to a large number of people who are at present suffering real hardship. I trust that the few words I have spoken will have the attention of those concerned when they read my speech in HANSARD.
§ 7.53 p.m.
§ Mr. F. Blackburn (Stalybridge and Hyde)
I hope that the hon. and gallant Member for Renfrew, East (Sir G. Lloyd) will forgive me if I do not follow him immediately in his remarks about Purchase Tax. I have certain remarks to make about Purchase Tax, but I should like to make them in my own order. The hon. and gallant Member would not expect me to follow a great part of his speech, which was a paean of praise to the Chancellor, and I am sure that the Chancellor would not expect me to do so either.
I must refer to one speech made from the benches opposite this afternoon. It was a most fantastic speech, which I never expected to hear in this House. It must have been a great embarrassment to hon. Members opposite and will no doubt be a great source of quotation by hon. Members on this side of the House. I refer to the speech of the hon. Member for Orpington (Sir W. Smithers). He said that our people are financially and economically uninstructed. We quite agree that some people are financially and economically uninstructed, but I suggest he should take his first lesson in 20th century economics by reading the speech of the Chancellor of the Exchequer, made in November, 1951. That might bring the hon. Member into this century, instead of leaving him in the last.
The present Chancellor must regard himself as one of the luckiest Chancellors of the Exchequer this country has ever known. I think that on this Finance Bill he is playing his luck—I do not know much about gambling, but I believe that is the correct term. I am certain that all hon. Members hope that his luck holds because it is so vitally important for this 658 country that we should not slip back any further than we did in the past year. The Chancellor has the consolation that if his luck does hold he will have the congratulations of everyone, and if it does not, being a Conservative Chancellor, he will be let down very lightly because he will have the whole Press of the country toning down the fact.
This Finance Bill and the Budget can only be judged against the background of the external economic situation and our internal requirements. In his speech on the Second Reading of the Finance Bill last year, the Financial Secretary to the Treasury spent some time in dealing with the balance of payments position and the external position. Today he has said nothing about it. I do not know whether he is taking it for granted that the problem has been settled. I do not think that is the case, for he would agree that in spite of the improvement which has taken place in the balance of payments, the position is still very precarious.
It is against that background that we have to consider the present position. I shall not deploy all the arguments used in Budget speeches about the recovery in our balance of payments position, but I think it important to stress at this time that it is against that position that we have to judge the Finance Bill. Our present position could so easily be upset. It has been said that if there is a slight recession in America it would have disastrous effects here. But we do not need to have a recession in America to have disastrous effects here. America only needs to continue or intensify her present policy.
I do not think that any country ever had a more generous ally nor, from the economic point of view, a more difficult ally than the United States of America. We have some excellent speeches from leaders in America—speeches full of idealism, speeches which resognise the great problems of the world and provide many of the answers—but, unfortunately, those speeches are not carried into action. It is a case of "A President proposes but Congress disposes." I hope no one will suggest that because I have made those remarks I am anti-American. Certainly not. I believe it vitally important that we should have economic co-operation with the United States of America. I believe it vitally important that we should have 659 economic co-operation with all the countries of the world that are prepared to co-operate with us. But I also think it important to point out the dangers in the present situation.
In any case, if I am to be accused of being anti-American because of the comments I have made, the responsible Press of America must be accused, as they are taking the same line. The "New York Times," on 2nd May, said:The President has repeatedly indicated his understanding of the importance of a liberal trade policy. Only this week he went so far as to say that the very security of our country is involved in trade, as indeed it is. But from the general impression one has of the sentiment in Congress, particularly in the House, a good deal more than benevolent expressions of hope will be needed to prevent the destruction of our reciprocal trade program.If a measure anything like the protectionist Simpson bill is passed no pious platitudes will undo the damage done to this country's standing in the community of the free world. … We have seen a parade of special interests appealing for more protection. Representative Simpson has modified his original position, but the pressures are strong on Congress to add new restrictions to the already none-too-effective Reciprocal Trade Act.It is not merely a recession that we have to fear from America, but the intensification of the present policy. Consequently we must be more active in this country in the future than in the past in trying to divert trade from the dollar areas. In order to weather the variations in world economic conditions we must have in this country a strong and resilient economy. We must increase our production and our productivity. We must increase our exports. We must ask ourselves if the Budget and the Finance Bill create the right atmosphere for the attainment of these objectives.
The Chancellor referred to his Budget as an incentive Budget, and that has been repeated this afternoon by the Financial Secretary to the Treasury. Incentive for whom? That has not been made clear. We must ask ourselves if the concessions have been distributed by the Chancellor in such a way as to inspire a feeling of equity, and at the same time produce the necessary results. At the time of the debate on the Budget an hon. Member opposite said he wished to remind hon. Members on this side of the House that it was important to have incentives for management as well as for workers. There is a corollary to that. It is 660 important to have incentives for those at the bottom of the scale as well as for those at the top.
If we look at this Budget we find there is little that those at the bottom of the scale will get out of it. I wish to deal with one or two concessions—
§ Mr. Blackburn
I do not think that the hon. Gentleman need have interrupted, because that point has been answered several times. In fact, it is possible that I may answer it to some extent when I refer to Purchase Tax. It can only be answered fully by dealing mainly with things which do not appear in the Bill but which could have been made possible by the Chancellor in his Budget. If he had money to spare there are other ways in which he could have distributed it.
I was surprised that the Chancellor did not take off the duty which he placed last year on petrol and light hydrocarbon oils, and in this I am in agreement with one or two hon. Gentlemen opposite. I take it that the postbags of hon. Gentlemen opposite are somewhat similar to mine and that they have received numbers of letters about increased fares from transport undertakings, from local authorities and from individuals in their constituencies. The Petrol Duty was increased last year, and I think that the Chancellor might have looked favourably on its reduction. I admit that light hydro-carbon oils are a constituency point with me. Certain industries in my constituency are hard hit because of this high tax, and when a tax directly increases the cost in industry I believe that the Chancellor should examine it very carefully.
My hon. Friend the Member for Midlothian and Peebles (Mr. Pryde) referred to the difficulties of the small cinemas. I received a deputation from cinema proprietors who put certain figures before me to indicate their present position. Those figures were so startling that I told them there was no point in overstating their cases, and that, if those figures were correct, they were existing at the present time on the sale of ice-cream. They 661 told me that they were not overstating their case, and that that was the position exactly; they were existing on the sale of ice-cream.
I am not begrudging the Income Tax benefits which the Chancellor has given, but they are enjoyed chiefly by the professional man, by management and by industry. I would remind the House that the average worker and the average householder receive no benefit at all. The average wage of a man in industry and over 21 years of age was given in October, 1952, as £8 18s. 6d. He is the gentleman to whom the hon. Member for Barry (Mr. Gower) referred. He does not pay Income Tax and receives little benefit even from the few concessions on Purchase Tax. He receives no benefit on the main items of his expenditure.
About the Excess Profits Levy and Profits Tax I have little to say. Most people expected this year that E.P.L. would go, and I think a good many expected that when it went the level of the Profits Tax would go back to what it was before the Budget of last year.
§ Mr. Blackburn
The hon. Member for Kidderminster (Mr. Nabarro) did not. But he is always ahead of the news. I think that other people expected that that would happen.
I welcome the new attitude of hon. Gentleman opposite toward capital investment. But what guarantee have we that the concessions which industry is getting now will be used for capital investment?
§ Mr. Blackburn
No. The hon. Member for Kidderminster may have a chance to make his speech later, and he has interrupted every other hon. Member who has spoken from this side of the House.
What guarantee is there that these concessions will go back into industry? I would remind the hon. Member for Kidderminster, and others, that before the war taxation was much lower than at the present time, but there was insufficient money ploughed back into industry.
§ Mr. Blackburn
No. I have not quite finished. I warn hon. Gentlemen opposite that while these tax concessions are being accepted at present there will be resentment and opposition from the workers if those concessions are used chiefly for increasing dividends.
I wish to thank the Chancellor of the Exchequer for what he has done for amateur dramatic societies, but he must have overlooked the amateur operatic societies. It must be a mistake that he has not granted as much to amateur operatic societies as to the dramatic societies. I think that both the Chancellor and the Financial Secretary will agree that it is not enough merely to say that amateur operatic societies should have a paid conductor. I hope that the matter will be examined again.
Regarding the concessions to cricket, reference was made this afternoon to one of the minor counties—Surrey I think—
§ Mr. Blackburn
I must be behind in my reading.
I think that everyone will welcome what the Chancellor has been able to do for cricket, but the right hon. Gentleman should not be surprised if, on the Commitee stage of the Bill, he is fired at from all sides by those who are interested in other sports. He will find an equally strong case can be made out for the football clubs in the smaller towns.
I want next to make some comments about Purchase Tax. It is not a tax for which I can arouse any enthusiasm, not even the limited enthusiasm of some of my right hon. and hon. Friends. I think it has a value for the purpose for which it was originally intended—restriction of consumption—but I think it is an inequitable tax for necessities because it hits the old-age and other pensioners and those with lower incomes more than it hits the rest of the community.
I will not quarrel with the reductions in Income Tax which have been made. Where the Chancellor feels that he is helping certain industries, I will not quarrel with him. I will not argue that those industries should not have that help. But I think a great mistake has been made in not giving further concessions to the textile industry.
663 Perhaps I may refer to a point which I raised last year concerning the tax on educational stationery. We all know of the rising rates; we all know that every local authority is having difficulty about the rates. Here is a small way in which the Government could help, for this Government must bear some responsibility for the present rise in rates. I hope I shall not be told by the Financial Secretary or the Chancellor, as I was last year, that it is difficult to distinguish between educational stationery and other stationery. In fact, it is perfectly simple because every educational authority in the country knows exactly what it spends on educational stationery, and the problem can be adjusted by means of a drawback.
Reverting to the question of textiles, there is great disappointment in the textile areas that no concession has been given to the industry in this Budget. The right hon. Member for Blackburn, West (Mr. Assheton) was certainly not expressing the view of the textile areas when he indicated that they would be satisfied with what they received last year. They are certainly not satisfied. We are glad that there has been a certain recovery in the textile industry, but no one can yet say that the position is stable. Large numbers have left the industry, and home consumption has fallen over the past year. That is evident from the figures in the Economic Survey; clothing consumption is down by 3 per cent. and the consumption of household goods is down by 8 per cent.
There is another very important point about the North-Western area; less alternative employment is available. If hon. Members study the figures they will find that in the North-Western area and, indeed, in the Northern part of the country generally, there are more unemployed than there are vacancies, whereas in the Midlands and the South there are more vacancies than there are unemployed. It is, therefore, important that areas in the North and North-West should be given what help is possible. I think that the textile industry still needs help and is worthy of help.
The effects of Purchase Tax are felt not only in this country. I was interested this morning to read the Report of the 664 Parliamentary delegation which visited the West Indies. In speaking of the Leeward Islands they said:As stated above, everything depends on two crops. Antigua, Montserrat, and in a lesser degree Nevis depend almost entirely on sea-island cotton…. Concern was expressed that purchase tax in Britain prevented an adequate sale of this specialised commodity….The effect is felt not only here but also in the Empire.
I want to conclude by expressing the keen disappointment of the textile industry. I will not go further into the question at present because there will be other opportunities, but, in my opinion, if concessions were to be given, the textile industry should have been in the forefront.
§ 8.15 p.m.
§ Miss Irene Ward (Tynemouth)
I feel that this Finance Bill is a triumph for Conservative finance. I think that is also the opinion in the country. A great many of the provisions in the Bill have been most acceptable over a very wide field of interests. As I listened to the right hon. Member for Bishop Auckland (Mr. Dalton) booming his way through his speech on the Budget, I wondered whether he remembered the sequence of events.
In my opinion this Government will be judged, when the time comes, on their ability to weather our financial difficulties. It was from that point of view that I listened to the speech of the right hon. Member for Bishop Auckland. He boomed along but forgot to say that when he left the Treasury and the late Sir Stafford Cripps became the Chancellor of the Exchequer, almost immediately Sir Stafford Cripps had to start to reverse the financial policy which had been operated by the right hon. Member for Bishop Auckland. All of us will agree, on whatever side of the House we sit, that Sir Stafford Cripps battled very nobly to try to save our financial stability, but events were too great for him and he had to devalue the £.
I have listened to a great many speeches in the House, and read many speeches made in the country, by right hon. and hon. Gentlemen opposite. They have all referred—and here we have a great deal of sympathy with their point of view-to the difficulties of the lower income groups and the old age pensioners, but nothing did more damage to the lower income groups and the old age pensioners 665 than the financial policy of the late Socialist Government. It is true to say that devaluation of the £ had a profound effect on the situation of the lower income groups and the old age pensioners. It increased their difficulties, it increased the cost of living and it made their position almost intolerable.
Then the right hon. Member for Leeds, South (Mr. Gaitskell) became Chancellor of the Exchequer, and he had to grapple with an ever deteriorating financial situation.
§ Miss Ward
The hon. Member says "Hear, hear." I am delighted to know that he recognises that it was a deteriorating financial situation when the Socialist Government were in power—and they were in power with a very large majority. It is a fact, and it has been stated without fear of contradiction, that when the Leader of the Opposition decided to ask for a dissolution of Parliament and to go to the country the Socialist Government were faced with the worst balance of payments crisis that this country has ever known.
§ Miss Ward
To a very large extent because of the very unsound financial policy which had been adopted over a period of years by the Socialist Government. The more we rub that in the better it will be, because it is one of the things which the people of this country can understand.
The point I particularly want to make is that, when hon. and right hon. Gentlemen opposite talk about the position of the old age pensioners and people in the lower income groups, they forget that no one is more responsible than themselves for the plight of these people today. I want to refer to the reduction of the standard rate of Income Tax. Of course, it is true that if people are not paying tax they cannot be relieved, but it may be remembered by hon. Gentlemen opposite that, when the right hon. Gentleman the Member for Leeds, South had to increase the standard rate of Income Tax in 1951 from 9s. to 9s. 6d. in the £ he imposed that increase on all sections of the community, including the lower income groups.
§ Miss Ward
In fact, the Conservative Government's Budget last year, in very difficult financial circumstances, removed two million people, who had been brought into the scope of taxation by the party opposite, from the number of people paying tax, and these people were certainly subjected to tax by the late Socialist Administration. Therefore, the argument of the right hon. Gentleman does not hold water.
The fact was that the party opposite increased the standard rate of Income Tax for the lower income groups. It is true that the Chancellor can cushion a certain number of people by making additional Income Tax reliefs and I am not denying that, but the fact is that many people who live on fixed incomes, retirement pensions and small investment incomes—spinsters, bachelors, widows and widowers—all had to bear that increased rate of Income Tax, and, therefore, the right hon. Gentleman's argument is not valid.
Having paid my tribute to the Conservative Chancellor of the Exchequer, quite naturally, being extremely independent, I want to raise one or two matters in which I am particularly interested and to which I hope the Chancellor will pay attention. I am not going to say a very great deal about our disappointment that no step was taken to implement our pledge to make a beginning with the application of the rate for the job. I know it will come.
§ Miss Ward
I know the reason why the Chancellor did not make a start on implementing that pledge, but I want to remind the Financial Secretary that, if wage increases are awarded by arbitration, then I shall come along with Parliamentary pressure, and I hope that note will be taken of it.
667 I want to come now to what is to me the most important point of all in this speech. I am going to say something specific and definite about the lower income groups. I note that, in his Budget speech, my right hon. Friend the Chancellor opened a very important paragraph with these words:We can now leave the realm of administration and come to some matters of more human interest."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 57.]Then he referred to the question of age relief in respect of the incomes of people who have reached the age of 65. As, along with a number of my hon. Friends on this side, I have taken a very great interest in this matter, I had hoped that we were really going to have something solid and substantial, but all that the Chancellor was able to do was to increase the income limit from £500 to £600. That concession, for which, I have no doubt, a great many people are very grateful—
§ Mr. Douglas Houghton (Sowerby)
Will the hon. Lady permit me? She will appreciate that, with the tapering arrangement, the £600 level of income in the age group has some relation to incomes up to very nearly £1,000 a year.
§ Miss Ward
That may very well be so, and I quite appreciate that angle of the matter, but that is not the point I was going to make. It is that that concession, in fact, refers only to investment income, because it puts it into the category which attracts earned income relief, but that concession does not touch people who are drawing pensions, either from the State or through superannuation schemes, because they have already come into the earned income category. Therefore, that concession is a very restricted one indeed.
I think the position of these people is quite intolerable. I hope that my hon. Friend the Financial Secretary will give me his attention, because I want him to appreciate the point I am making. The position of these people living on small incomes is quite intolerable. When I hear about all these discussions on the cost-of-living index and the like, I want to ask the Financial Secretary—he may not want to tell me the answer today, but he can do so on some other 668 occasion—whether he is aware that people buying coal in small quantities have to pay a higher price than people who buy coal in relatively large quantities.
The point is that the small income groups, the old age pensioners and the Tike, buy coal in bags. They cannot even stock up at summer prices because they have not the cellars or other accommodation even if they had the money to do so. Therefore, they lose on both counts. I would point out to hon. Members opposite that nationalisation did not help because, in my opinion, the increase in fuel costs—
Mr. Deputy-Speaker (Mr. Hopkin Morris)
I do not think nationalisation arises on the Finance Bill.
§ Miss Ward
No, Mr. Deputy-Speaker, it does not, but what I am asking is whether the price of fuel comes into the cost of living index. It may not come into the Finance Bill, but I have heard people talking about the cost of living and I have listened to all the speeches today in which it has been mentioned. All I am saying is that the small income groups have to pay more for their coal and that whenever a rise in the price of coal takes place they are penalised more than the rest of the community. I think that aspect of the situation needs being put on record. It is intolerable.
Having said how disappointed I am with what the Chancellor did about that, I come to another point. The argument is always advanced that when the food subsidies were withdrawn the Pensions (Increase) Act took care of the rise in the price of food. I think that is a fair argument, but the point is that the people in the small income groups, those living on Civil Service or teachers pensions, on railway superannuation, on pensions from banks and on Service pensions, have hardly received on the general position any help at all. I have never been happy at the fight we had to put up with the Treasury before they agreed to increase Service widows' non-attributable pensions. I do not think that that fight reflected credit on anybody.
During the war we began to expand the social services, educational facilities, resulting from the 1944 Education Act, housing subsidies, the health services, hospital services, maintenance grants at 669 universities, family allowances and very substantial Income Tax reliefs. It is important to bear in mind that a man and wife with three children on an income of £700 a year pay an infinitesimal amount in Income Tax.
A great deal has been done to make life reasonably fair and to give genuine incentives. We have provided free milk and school meals and have done a very great deal for the mass of the people of this country. But nearly all the people who were covered by the Pensions (Increase) Act had their pensions fixed on a pre-war income. They are, therefore, trying to eke out a most unhappy existence in a post-war world on a pre-war income.
Is it quite fair that the people living on small incomes whose pensions are based on pre-war incomes should have to contribute in direct taxation to people coming after them who receive the benefits of increased pay, increased social services and increased allowances of one kind or another? I know, of course, that when one puts the general case, the Chancellor will make very sympathetic reference to these people, but, personally, I am tired of sympathetic references. I want action.
I say quite definitely that with the increase of rates and the increase in the price of fuel, lighting, and transport these people have not sufficient either to feed themselves or to look after their houses properly or even to have a little amusement in life which I think is very important when one is getting old. It is important that one should be able to go about a little and meet one's friends.
I know that they are a very difficult class to deal with. Is there any reason why a single man or woman with an income of £200 a year should have to pay £4 18s. 6d. in Income Tax, or with £225 pay £6 17s. 6d., or with £500 a year pay £56 12s. 2d.? Married couples without children have to pay £2 18s. 4d. on £300 a year and £7 15s. 6d. if they have an income of £350 a year. People living on those small incomes ought to be relieved entirely of taxation.
I have a letter from the Chancellor in regard to the proposal I made that people aged 65, or 60 if you like, on small incomes under £250 a year should be freed from taxation. He said in his letter that my proposal meant that only single 670 people would be affected. That may well be, so I just go one step higher and say that the Chancellor could quite well put that right. He could include married couples by making a differentiation, as is made in National Assistance, between single and married and could give some additional Income Tax reliefs to elderly married couples at the age of 65.
It is absolutely urgent that this section of the community be dealt with. I cannot speak more strongly and with greater feeling. It is intolerable that they should be left the way they have been. The only party that can and will do anything for them is the Conservative Party. Of that I am quite convinced.
The increased allowances in respect of dependent relatives has given very great satisfaction. I am very glad the Chancellor did that. Many people warmly welcomed it. The other point is the increased housekeeper allowance. I find it very hard to understand why widows and widowers are entitled to housekeeper allowance, irrespective of their circumstances, while even elderly married couples who may have just as much need of support and care, do not get the allowance. Neither do spinsters and bachelors who may be at work, and have commitments of one kind or another.
This is a great injustice, which has rankled for many years among the affected sections of the community in this country. I did not press for an alteration last year because I thought the subject would be dealt with by the Royal Commission on Taxation, and I have no doubt it will be; but when the Chancellor increased the allowance to widows and widowers and failed to bring in elderly married couples, spinsters or bachelors, I remembered that the Economic Secretary and the Financial Secretary to the Treasury, as well as the Chancellor, voted for it when we were in Opposition. I was absolutely staggered that my right hon. Friend did not take steps to do in Government what he supported in Opposition. [HON. MEMBERS: "Hear, hear."] I like to be outspoken.
I like justice. I find that all these sections about whom I have spoken tonight have had very little consideration and are having a most abominable kind of life. I realise from my post-bag just how bad their circumstances are. 671 They have no trade unions. They have no manufacturers behind them, no Federation of British Industries and no British Legion. They have no organised body to make a case for them, and therefore they are forgotten.
I beg the Chancellor to look at the position of these people and consider whether it is fair to ask that out of their meagre, insufficient incomes to deal with post-war life, they should pay contributions in respect of other people whose incomes have been raised satisfactorily to meet the difficulties of the post-war world. I am quite certain that if the Chancellor will look at the problem from that angle he will be able to do something before very long to relieve these people.
I believe that the Budget is a triumph for Conservative finance. [Laughter.] To the jeering hon. Members opposite I make the point and I beg them to listen to it, that if it had not been for the Conservative Government there would not have been any finance at all. I plead therefore with a Chancellor who has the finance as well as the heart to make the rectifications for which I have asked.
§ 8.42 p.m.
§ Mr. G. A. Pargiter (Southall)
The hon. Lady the Member for Tynemouth (Miss Ward), like most of the speakers from the other side of the House, has paid some lip service to the Finance Bill and the Budget. Hon. Members opposite have damned it with fairly faint praise and have been much more pressing in their criticism than their praise. Yet this is the Bill which is being held up as the wonderful production of a Tory Chancellor.
What is this Finance Bill? In spite of the fact that the Chancellor was shockingly wide in his estimates as against returns, by fortuitous circumstances, very largely by the alteration in the terms of trade in our favour, and as a result of a slackening in the economy, the right hon. Gentleman found himself in a position to distribute a certain amount of largesse. It was the first time that a Chancellor had been able to do that since the war.
Let us look at the way in which a Tory Chancellor does the distribution and consider how we might reasonably have expected him to do it if he had had in 672 mind the principles which, he professed, constituted the object of the Budget. The Budget was supposed to be an incentive Budget. We proceed, therefore, to the initial allowances. That would be right and proper, because it would permit people to renew plant and equipment rather more readily than otherwise they would do.
Next, there is Purchase Tax; but how does that reduction work? Buyers at the top range have a reduction of 25 per cent, those in the second range have a reduction of 16⅔ per cent. and those who buy in the lowest range have a reduction of only 8⅓ per cent.; and the third range covers those things which most nearly affect the general public. So the actual benefit is in that order—25 per cent. in the top range, 16⅔ per cent. in the middle range and only 8⅓ per cent. in the wide range of goods used so largely by the housewife and the general public.
That seems to me scarcely the right form of incentive. It certainly seems an incentive to those who have the most, as usual, to get a little more, because they will pay less for their goods. It might be argued that these provisions might have some bearing on the continuance of old crafts in the gold and silver trades, but we have been told that in any case the amount involved is quite insufficient to achieve that. I am not at all sure, therefore, that the Chancellor will receive any credit for his action from those who are concerned with the production of that class of article.
Let us look at one or two things which the right hon. Gentleman might have done if he had been concerned with the question of incentives. Instead of reducing the standard rate he might have widened the three bands of Income Tax to a considerable extent and embraced the whole of the medium income ranges in order that they could have some substantial benefit from the reduction. It is the Surtax payer who will reap the greatest advantage, and the man with a small income who will reap the smallest advantage from this reduction. Had he chosen to widen the range of the three bands, the Chancellor could have given a much better incentive to the people as a whole.
He might have taken Purchase Tax off commercial vehicles. I have always opposed this aspect of Purchase Tax as 673 being a tax on capital goods, and I have never thought that much could be done by taxing capital equipment. I appreciate that when it was introduced purchases of vehicles were running at a very high level, to the detriment of overseas trade, and the Chancellor of the day— against my wishes—decided to introduce it. Purchase Tax has been reduced to 25 per cent., but the position with regard to the commercial vehicle manufacturing industry is that there is now no need to keep Purchase Tax to prevent buying in this country, because we want more and not fewer vehicles bought at the present time. The Chancellor might have used some of the money he had available for that purpose.
He might have reduced the fuel tax; not necessarily the Petrol Tax. If he did not want to give anything to motorists, well and good, but he could have reduced the tax on fuel oil, because by doing so he would have benefited heavy industry and public transport services, and the general effect would have been to reduce the general burden on industry. But he has chosen not to do that. We are still groaning under the increased burden which the last Budget placed upon us.
Nothing has been done about post-war credits. It would have been reasonable— perhaps with a ceiling of about £100— to have paid out widows by cashing their husbands' post-war credits. That would not have been a very heavy burden on the economy. I ask the Chancellor to consider whether that would have imposed any great burden on the Exchequer or have had a very inflationary effect on the company. Something could have been done, and it is time it was done.
With regard to the general level of prosperity, we should consider whether we are really so prosperous as hon. and right hon. Gentlemen opposite would have us believe. What is the position with regard to national savings? They form a very good index of the financial position of the mass of the people. Month after month since this Tory Government came into power there have been successive reductions in the amount of national savings. There is no question of new savings now; the old savings are being taken out because people are having to live on their savings. The old people and the poorer sections of the community can no longer make ends 674 meet, and when their savings are gone they will be in even worse difficulties That is an undoubted fact.
Let us now consider how far this Finance Bill and the financial policy being pursued by the right hon. Gentleman really deal with the problem of this country's trade. I want to consider particularly the engineering trade, which is a vital one. There we find a most disturbing threat to the balance of the trade. Not only has there been no increase in the overall volume of production but there has been a shift. Whereas in the previous year—according to the Economic Survey—one-twelfth of the engineering trade was devoted to defence, as much as one-eighth was devoted to that purpose during the past year, and the amount is probably still increasing in proportion. That may give us certain advantages in the balance of trade in the form of off-shore purchases by America. They have a considerable effect on the balance of trade at the moment.
It is concealed, not direct, aid. We supply France, Germany, Belgium, and other N.A.T.O. countries with certain defensive weapons, and America says, "Very well, Britain, you produce these weapons and we will pay for them." That is all very well while it lasts. What happens if America suddenly withdraws that form of help, as she may? While we are making these things at the expense of making things for overseas markets the Americans are stepping into those overseas markets. These are serious facts. and there is nothing in the Bill to give an incentive to rectify that position.
I ask the Chancellor to address himself to this problem seriously, because engineering is the key to the whole export problem. If we devote more and more to defence and to selling our arms for dollars, our economic position generally will, in the long run, be worse. If we find, as I hope we shall, that the demand for armaments falls off, our position will be worse, and America's will be relatively better, because America is maintaining her domestic industries and exports while maintaining a gradually reducing armaments programme, balancing this with off-shore purchases. I ask the Chancellor to find ways and means to deal with this problem of incentives for the normal type of export work, for heavy engineering products and products of that sort. Let 675 him give all the facilities he can for the production of capital goods and consumer goods for export.
Whatever may be said about the Budget's benefiting all classes, the number of applications for wage increases already made and coming in indicate that the workers of this country are not accepting the Budget as being to their advantage. They see the bulk of advantage going to those who are better off than themselves. It is perfectly natural, and one could not expect otherwise, that they should say, "As all these advantages are going to the higher income groups through Income Tax concessions, we are entitled to seek increases of wages." That is the natural response.
There will be a considerable amount of trouble in industry unless something is done about it. Unless concessions are made to help the lower income groups the Chancellor may have to face an upset in the economy due to increased demands for wages to meet what is a constantly rising cost of living. The local election results show, I think, that the only incentive in the Budget is an incentive to vote Labour. I hope that the Chancellor will take note of that.
§ 8.53 p.m.
§ Mr. Gerald Nabarro (Kidderminster)
The hon. Gentleman the Member for Southall (Mr. Pargiter) followed the theme of so many of his hon. Friends in both this debate and the Budget debate, that this is a rich man's Budget. There is a national newspaper which has as its motto, "Forward with the People." It is a Socialist newspaper. It boasts proudly of that fact. While I do not wish to make a controversial speech, it is pertinent to quote from that newspaper of 18th April to see what it had to say about the Budget that so many hon. Gentlemen opposite have found cause severely to criticise. This is what it says, under the headline, "Come on Labour":Most Labour speeches against the Budget have been heard. The attack is not very convincing. It has a routine sound. The mass of the electorate will not be roused by calling the most generous Budget since the war an unjust Budget, or a political one. Why the fury? Wherefore the grief? Whom has Mr. Butler hurt? He has hurt nobody at all. He has given a lot of people something. Even those who don't benefit by the income tax cut will benefit from the move to bring down prices and check the rising cost of living. Politics apart, the public approve.676 It finishes with this remarkable sentence:There used to be a song that said something like. 'Look at the mourners—bloomin' well mourning.' If Labour doesn't sit up soon, folk will think it must be the corpse.From the party political point with which I commence this speech, I should like to pass to matters of more general and greater importance, namely, the effect which my right hon. Friend's Budget proposals will have on industrial production. He is to be complimented in his Finance Bill with proposals for a sort of fiscal quadruped. I believe that the four legs of that quadruped must be judged in the aggregate and in conjunction with one another.
§ Mr. Nabarro
A donkey is one form of quadruped, but a much faster one from the production point of view is a filly. The four legs of this quadruped are: First, the reduction in the standard rate of Income Tax; second, the provision of initial allowances on a slightly smaller scale than those operating between 1949 and 1951; third, the early demise of the Excess Profits Levy; and, fourth, in the production field, the decision to give an overall standard reduction of 25 per cent. in the rate of Purchase Tax.
That fiscal quadruped should be a fleet and virile filly, and not a donkey, as the hon. Gentleman suggested. It is a filly carrying a much lighter mount and, in view of that, is much more likely to succeed in the race for better and faster production.
A great deal has been said in the course of this debate about the effect of the Purchase Tax reduction. I am, for my part, delighted that my right hon. Friend has not pursued the habit of earlier Chancellors by discriminatory tinkering with the tax on this or that article. What is wanted, surely, is to get rid of this pernicious tax. There is unanimity on that point, and I hope that my right hon. Friend regards the 25 per cent. reduction this year as a precursor to further similar reductions which will have the effect of eliminating the tax altogether before this Conservative Government passes from office in 1956.
The second point to which I want briefly to allude is the reduction of 6d. in the standard rate of Income Tax. Two hon. Members on the benches opposite 677 have mentioned in speeches this evening that the reduction in the standard rate of Income Tax will not necessarily lead to larger sums being ploughed back for the development, modernisation and re-equipment of industry. They suggest that the reduced amount of tax will result in bigger dividends.
On the contrary, industrial profits are going down—not up. Industrial profits in the last year of Socialist Government in 1951 were returned at £3,275 million and in the following year they had been reduced to £3,128 million. In an earlier intervention in a speech from an hon. Member opposite, I had occasion to say that in a harshly competitive world British business, commerce and industry today is much more concerned with sustaining its resources, with ploughing money back for its expansion, than by dissipating funds in the form of substantially increased dividends.
§ Mr. Manuel rose—
§ Mr. Nabarro
I am not going to give way to the hon. Gentleman. He has been here only 10 minutes all day. I believe the 6d. reduction in the standard rate of Income Tax is one of the essential encouragements that my right hon. Friend could give to the affairs of companies in relation to re-equipment. There is nothing that need be said about the demise of the Excess Profits Levy other than that I have no doubt that parties next New Year's Eve will be much happier and more convivial in business circles than they have been for years past.
I wish to devote the remainder of my speech to the question of initial allowances—
§ Mr. Nabarro
I am not going to give way to the hon. Gentleman. He has been in the Chamber only a few minutes.
§ Mr. Manuel
I have been here a long time today. The hon. Member will not get away with that. He cannot come here with his loose talk.
§ Mr. Manuel
On a point of order. Might I have some guidance from you, Mr. Deputy-Speaker? When an allega- 678 tion is made about me which is grossly untrue—that can be substantiated by my hon. Friends—what redress have I in getting the truth put before the House?
§ Mr. Deputy-Speaker
That is not a point of order. I keep a record only of the times at which hon. Members speak, not of the time they are in the Chamber.
§ Mr. Nabarro
The initial allowances which were introduced in 1945 formed a very important part of the fiscal proposals of the then Chancellor, Sir John Anderson. Briefly, as has been recounted earlier, a 20 per cent. allowance was given for plant, machinery and equipment, only 10 per cent. for mining exploration and only 10 per cent. for industrial buildings. In 1949 Sir Stafford Cripps, then Chancellor, doubled the rate in respect of plant and machinery to 40 per cent., but left the other provisions where they were. The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) abolished the arrangement in 1951.
They have been re-introduced this year, and though I favour them, I am not very enthusiastic about them. I believe that, at best, they are only a palliative to relieve two very difficult problems in industry. The first is that they help in the acceleration of capital account purchases, which must help re-equipment in the course of the next few years and, secondly, I suppose they give temporary financial aid to bridge the widening gap between the historical cost of assets and the very much inflated cost of replacement.
Perhaps the "Economist" in an article on 18th April, entitled "The Turn of the Fiscal Tide," gave the best account of the effect of these allowances when it said:Though the initial allowances are of real value to industry, they are, as has so often been pointed out, no more than an interest-free plan, since whatever is gained in the early life of a piece of capital has to be repaid in the endI believe that the objective of initial allowances today in achieving the ends that my right hon. Friend has in view can be fulfilled only if a much greater degree of selectivity is applied to the allowances.
It is interesting to read what Sir John Anderson said when he introduced the allowances as Chancellor in 1945. On 679 the Second Reading of the Income Tax Bill of that year he said:I propose to the House that we should, as an act of conscious policy, deliberately weight the scales in favour of those forms of capital investment which are most necessary to the industrial strength of the community. It is productive or creative industry that provides in the main industrial employment and is the foundation of our national prosperity. It is the production of things and the export of things rather than the distribution at homes of things that matter most in this connection."—[OFFICIAL REPORT, 14th March, 1945; Vol. 409, c. 259.]Sir John Anderson was then pleading for discrimination in the application of these allowances, and I believe it is of over-riding importance today that we exercise a greater discrimination. For instance, my right hon. Friend proposes an allowance of 10 per cent. for industrial buildings. I do not believe that that is particularly helpful. The value of the plant, machinery and equipment that goes inside an industrial building is five to 10 times as great as the value of the fabric of the building itself, and what we are concerned with in expanding production is essentially the performance, the modernity and the competence of machine tools and similar classes of equipment which are inside the building.
I would not grumble if a 10 per cent. on buildings was washed out altogether. In the 20 per cent. class, I believe there is a good deal of room for more selectivity. It is interesting that the right hon. Gentleman the Member for Batter-sea, North (Mr. Jay) wanted to exclude motor cars from the 20 per cent. initial allowances for Income Tax purposes. I want to exclude them as well, but for an entirely different reason to that of the right hon. Gentleman. He is referring to the managing director's Rolls Bentley.
§ Mr. Nabarro
That includes the senior executives of the nationalised industries who have the same kind of cars.
§ Mr. Nabarro
My reason for so doing —and I ask my right hon. Friend the Chancellor to have regard to this point— is that the allowance on motor vehicles for the purposes of wear and tear is already the most advantageous of any 680 piece of industrial equipment. For instance, the motor lorry or the motor car already depreciates on the reducing balance at the rate of 25 per cent. per annum. This fully depreciates them in a period of approximately five years and, if one puts on an extra 20 per cent. initial allowance it means that 45 per cent is granted in the first year. Personally, I think it is too much, and I prefer to omit such vehicles from the initial allowance provisions.
I suggest the elimination of the 10 per cent. on industrial building and 20 per cent. on motor vehicles as a whole but, on the other hand, a new category introduced in the 40 per cent. bracket—and this is of the greatest importance— namely, the encouragement of the installation of certain coal and power economising equipment in industry.
The right hon. Gentleman the Member for Battersea, North did not run a new hare this evening. He will remember his hon. Friend the Member for Brig-house and Spenborough (Mr. J. Edwards), who was Economic Secretary to the Treasury, replied to me from this side of the House on 8th June, 1951, when the entire Conservative Party, together with the entire Liberal Party—[HON. MEMBERS: "Oh."]—yes, there were nine of them then—were pleading for the retention of the 40 per cent. allowance on this class of equipment in view of the difficult coal position. We were defeated in the Lobbies by the Socialist Party on a decision made by the right hon. Gentleman the Member for Leeds. South.
I hope we are not going to introduce party politics into coal conservation matters. We may have a legitimate difference of opinion as to whether there should be an inquiry into the structure and administration of the National Coal Board, but there is not much difference of opinion in this House on the urgent need for conserving coal in industry. I know that I carry the majority of hon. Gentlemen with me on that account.
My right hon. Friend's Budget depends for its success on an increase in industrial production. He cannot get that increase without an increase in coal production. This year we lose 4½ million tons of coal as a result of the extra miners' holiday of two weeks instead of one, and on account of the Coronation holiday. There is little progress towards 681 making good that potential loss of 4½ million tons. My right hon. Friend the Minister of Fuel and Power sent me down these figures at the beginning of the week. In the 17 weeks to the 2nd May, 1953, coal production was 73,106,800 tons; in the same 17 weeks of 1952 the figure is 72,625,800 tons. There is an increase in 1953 compared with 1952 of only 481,000 tons.
Pro rata in the full year there will be a loss as a result of these holidays, even taking into account the slightly increased production continuing, and there will be a shortage of three to four million tons compared with 1952. In addition to that, if industrial production as a whole increases in accordance with my right hon. Friend's aspirations the coal shortage next coal winter will be to the order of 10 million tons.
§ Mr. Nabarro
I am not imputing blame to anybody. I am stating facts, and I would remind my right hon. Friend that a 10-million ton coal shortage, which is a figure that I assert this evening with conviction and sincerity, in the next 12 months, means the total elimination of all United Kingdom exports of coal. The Ridley Report stated in powerful terms that it was essential to do two things in industry—not only to improve and enlarge the Industrial Fuel Advisory Service for saving coal, but also to bring in some sort of financial incentive to install the necessary economising equipment.
My right hon. Friend the Minister of Fuel and Power thereupon set up still one more Committee, the Pilkington Committee, to advise how the Industrial Fuel Advisory Service was to be formed. The Pilkington Committee sent its Report to the Minister of Fuel and Power on 31st March, 1953. That Report has not been published yet, and I shall therefore not quote from it in detail, but one of the essential points—
§ Mr. Nabarro
The hon. Member asks how I got it. I have been sent suitable excerpts for the purpose of this speech. 682 The Committee makes this very important point, that it is futile to endeavour to improve—
§ Mr. Pryde
On a point of order. I have no hesitation in joining in any issue relating to coal, but I should like to know exactly how this speech of the hon. Member for Kidderminster (Mr. Nabarro) links up with the object of the Finance Bill.
§ Mr. Nabarro
Thank you, Mr. Deputy-Speaker. I prefaced this part of my speech by pleading for a 40 per cent. initial allowance on certain classes of industrial fuel saving equipment. The seriousness of the coal position at this moment must surely be a justification for it. I can understand that the hon. Gentleman does not like to recognise that we are not producing enough coal, but that is the fact.
§ Mr. Nabarro
It is futile, according to the Pilkington Committee, to establish a greatly enlarged and improved fuel advisory service for industry unless there is some financial or fiscal incentive provided.
§ Mr. Arthur Palmer (Cleveland)
On a point of order. Is it in order for the hon. Member to quote from a Government paper which has not been published and which is not before the House?
§ Mr. Deputy-Speaker
I understand that it is not a Report of a Select Committee, so it is quite in order.
§ Mr. Nabarro
Thank you, Mr. Deputy-Speaker. I plead with my right hon. Friend that before we reach the Committee stage—
§ Mr. Nabarro
It is not a Report of this House: it is the Report of a Committee which was set up and it is, there- 683 fore, perfectly in order for me to quote from it.
§ Mr. Manuel
As I understand your Ruling, Sir Charles, this Committee was set up by a Minister responsible to this House, and in due course the Report will be presented to the House. Surely before it is before the House we cannot have a Member receiving certain parts of it while other Members do not have it?
§ Mr. Deputy-Speaker
I understand that the Report will be made to the Minister and not to the House. Therefore, the hon. Member is in order.
§ Mr. Nabarro
I am grateful to you, Sir Charles.
May I wind up this point by saying that I believe my right hon. Friend should endeavour to introduce deliberate discrimination in the application of these varying rates of initial allowances for Income Tax purposes, and that whereas industrial buildings and motor vehicles should be cut out from the 10 per cent. and 20 per cent. brackets respectively, industrial fuel economising equipment of certain specified types should be inserted in the 40 per cent. bracket. In the next year or two that should make an important contribution to balancing our coal budget, without which it will be impossible for my right hon. Friend to balance his financial Budget.
§ 9.15 p.m.
§ Mr. C. W. Gibson (Clapham)
The hon. Member for Kidderminster (Mr. Nabarro) started his speech by quoting a newspaper which he said was a Socialist paper and which appeared to praise the Budget. First, it is not a Socialist paper and is not a Labour Party paper; and, second, a day or two later it took a different line altogether from that in the editorial which the hon. Member quoted.
Having said this was not a rich man's Budget, the hon. Member proceeded to make a speech in the whole of which he was engaged in trying to squeeze more out of the Chancellor, if he could, for the rich business interests of this country. There was not a word about the people mentioned by his hon. Friend the Member for Tynemouth (Miss Ward) in her speech. Had she been present, I should have liked to congratulate her on her interest and concern for earners of low wages and those living on fixed incomes, 684 who are getting nothing out of this Budget. I thought she made the Labour Party case completely by exposing the fact that there was no relief and no incentive at all for those on old age pensions and fixed incomes of pre-war value. I heartily agree with her plea that something should be done for them.
The hon. Member for Orpington (Sir W. Smithers) made a speech of which, fortunately, his own Front Bench will not take any notice. In the course of his speech he made reference to Mr. Arthur Deakin as having said something which supported his point of view. I felt it wrong that that should be allowed to pass without being corrected. In fact. Mr. Deakin has expressed the unanimous view of the trade union movement that this is a bad Budget which the Trades Union Congress cannot support. In the current issue of the journal of his union, published only a couple of days ago, Mr. Deakin said:In broad outline the Budget represents a further withdrawal from the policy of income re-distribution, which was followed during the war years, and the period when the Labour Government was in office. This is a matter of grave concern to our Movement. To argue that incentives are necessary to those who run industry and come within the higher income level groups, without giving consideration to those in the lower income groups, is not helpful at this time.That is the kernel of the criticism which we make of the proposals contained in this Bill. The Measure does not provide incentives for the mllions of trade unionists. They get nothing out of it, and it is no answer to say that there has been a reduction in Purchase Tax, which would give them something.
First, none of the D scheme goods have benefited by any reduction in Purchase Tax. Most of the other goods benefiting from Purchase Tax reductions which would be bought by the average working-class family are not bought every day in the week, as food has to be. It is the rise in food prices which is hitting every working-class family in the country. I believe that today's election results will show that, far from the people of this country believing that this Budget and this Government are good for the country, the very opposite is the truth.
The Financial Secretary said, in opening his speech, that the major purpose of the Budget was to fit the country 685 for the economic struggle. It is true that we are in for a fierce economic struggle. It is probably true that the nearer we get to peace in Korea the fiercer that struggle will become. But I cannot see any evidence that the Tory Government have done anything to help to prepare the country since they have been in office.
There are more unemployed now than two years ago, although it is true that the figures have improved a little during this last month. Many thousands are working on short-time and living on short-time earnings. There has been a big increase in the cost of foodstuffs, and according to yesterday's newspapers, there will be an 8d. increase in the cost of corned beef. Goodness knows the length to which other prices will rise before this Government have finished putting foodstuffs on a free market.
I say that the Budget fails to give any incentive to the people upon whom the economic success of this country really depends. The speech of the hon. Member for Kidderminster will not provide much encouragement for the miners, or the men who work in the factories, or the shop workers and transport workers. If we cannot gain their confidence, and make them feel they are getting a fair deal, we cannot increase the production of wealth in this country. The fact is that during this last year there has been a drop in the overall production of wealth in the country.
My fear is that, so far from leading to such an increase, the effect of this Budget on millions of people who will get nothing out of it will result in the very opposite. If that happens it will not matter if we balance our international trade completely, or if we get a big balance on the right side. We have had that before in the history of this country, and at the same time we have seen millions of men and women out of work. There has been terrific poverty in London on occasions when economically we were doing well internationally.
Members of the Tory Party do not realise that there has been a complete change in the economic thinking of the mass of the people. There is a complete economic change coming over this country and the world, as indeed this 686 Government may have discovered, because they have had to buy sugar by bulk purchase. They have had—and will continue to have—to negotiate through international machinery for the purchase of wheat. They will find that more and more there will have to be international commodity agreements and negotiations in order that we can get the foodstuffs and raw materials which this country needs.
There are proposals in the Finance Bill for the abolition of Purchase Tax on taxicabs. The Chancellor of the Exchequer has justified that in his Budget speech as a proposal which will assist both owners and drivers. That is completely wrong. Anyone in the industry will agree that merely taking the Purchase Tax off cabs will not solve the problems confronting the taxicab industry. Speaking at all events for the drivers, I can say that something much more drastic must be done. It will be no use raising fares again, because that will further reduce the amount of business being done.
The only thing which will ease the position is for something to be done about petrol charges. I admit that that is a very difficult proposition, but the alternative would seem to be the gradual elimination of a service in London which, although I do not find it useful because I seldom use taxicabs, is widely used, and will probably be used a great deal more during the Coronation period. I wish, therefore, to beg the Government to see whether, during the course of the Finance Bill, they can do something more to assist those concerned on both sides of the London taxicab industry.
They must take into consideration not only the recommendations of the Runciman Report, but also the recommendations of the working party which looked into this problem two years ago and recommended a strict limitation both of the number of taxicabs and the number of drivers. To leave this industry to what is called the free play of the law of supply and demand means that we shall lose the London taxicab service. It will die. In order that this industry shall not die, and that the 9,000 or 10,000 men and their families who get their living from it shall not suffer, something more drastic must be done to assist them than has been done in the Budget.
687 While I do not argue the case, I agree that there is need for some relief of the tax on petrol and hydrocarbon oils in those industries which use them as their raw materials. Some firms in my constituency do so use them. Having looked carefully at the evidence which they have given me, I am satisfied that these industries should be given equality of treatment with other industries which use oil, and that something should be done to offer them relief when they use oil for industrial purposes.
In spite of the blandishments which I am sure will be offered to the Chancellor, I hope he will not replace the Entertainments Duty on cricket. Like his Parliamentary Private Secretary, the hon. Member for Chelmsford (Mr. Ashton), I have a particular love for Surrey. I am a member of the Surrey Club. If other sports can prove a case, I have no doubt that it can be considered, but I believe there is a special case for relieving amateur sports and that the Chancellor was right in doing so. I hope that this concession will work out as he hopes for the cricket clubs in the country.
In conclusion, unless we in this country recognise that there is growing all over the world a completely new conception of economic life and economic planning, we shall not solve our difficulties or make any contribution to the building of peace and security in the world.
§ 9.28 p.m.
§ Mr. Gerald Williams (Tonbridge)
I have listened to nearly every speech made today, and the more hon. Members opposite have spoken, the better the Bill has appeared to be. Many have not been controversial but have had a few grouses; some have asked for more concessions; and others have been merely facetious. I find it an extremely refreshing Finance Bill.
With the reduction in Income Tax, which I am quite certain will lead in an indirect way to lowering the cost of production; with the reduction in Purchase Tax, which will lower costs in a direct way; and with the initial allowances to help us. we shall be able to reverse the vicious circle of rising costs.
I know that the Chancellor is anxious to speak, and I will be brief, but there is one point for which I wish to thank my right hon. Friend—his action about 688 sugar. For a long time I have been trying to get more sugar into the country. He has spent a large sum of dollars on buying it, and, although I have a completely "Waldronian" dislike for bulk purchase, it seems to me that when the Conservatives do use bulk purchase they use it to very much greater advantage than ever the Socialists did. The Chancellor has got us cheap sugar, without doing any harm to any arrangement with the Empire, and has saved the spending of a lot of dollars on expensive substitutes from which sugar is extracted. He will also save dollars on cereals which will not have to be bought, because when we have plenty of sugar we need less cereals.
I now want to put one or two of my own grouses. First, I do not know why the Opposition make so much mischief about dividend increases, for whenever dividends are increased, to them it seems all wrong. They forget that many dividends are reduced from time to time, and that, in order to have an incentive, we must have increased dividends. If not, all enterprise will be killed. As it is, at the moment, people are discouraged from risking their money, because, if they happen to be on a loser, they lose it all, while, if the concern does extremely well, they are allowed to keep only about one-third of what they make.
I have been in four small concerns myself since the war, and two of them have done well and two have done badly. Hon. Gentlemen may say that I am a bad businessman, but I should prefer to say that I am a fairly average businessman. If one loses everything on the bad enterprises, and is not able to have dividends increased when things turn out well, people will not try again. Much mischief has been made about dividends, but I say it is essential that they be increased from time to time.
The Chancellor has said that it is appropriate that the Government should do less and the private citizen should be in a position to do more. No wonder the Socialists do not like that. They prefer everything to be run from Whitehall. It seems to me that the individual, private enterprise, initiative and enthusiasm are the means whereby we shall get his country where we want it to be. The Chancellor has made that possible, and I believe that we shall see the results within the next year or two.
689 I want to ask the Chancellor once more to consider the question of Purchase Tax, the arguments about which have been put very forcibly by my hon. and gallant Friend the Member for Renfrew, East (Sir G. Lloyd), and which I will not, therefore, repeat. Feeling is very strong about the losses which the commercial world is having to bear consequent on the reduction of the Purchase Tax, and I did make some promise to see if something could be done about it. Well, something can be done. It can be done in the case of motor cars, which have chassis numbers which can be traced—although I know it is difficult in the case of nylon stockings. I think that, in the words of the late Sir Stafford Cripps, perhaps some rough justice could be done, and rough justice would be better than no justice at all.
I know that we have had a full report on this subject, and that the argument is that nothing can be done. But the tax has been reduced now, and the people concerned will, I suppose, get over it, helped by increased sales. The probability is, however, that the same thing will happen again next year and the year after. Therefore, I hope that, in spite of the Hutton Report which we have had, the Chancellor will go into the matter again and see if he cannot do something about it.
The only other thing about which I was disappointed was that there was not much incentive to encourage savings. That ought to be possible and quite easy through the great insurance companies, who are the people who encourage savings of every kind, and who are allowed Income Tax rebates on premiums to people who insure their lives. If these rebates were increased, it would encourage more savings. There is another suggestion that I would throw out on the question of savings; it is that the Chancellor should give a bonus on Savings Certificates that have been held for 10 or 20 years—a bonus which is larger than the holder would get at present. Further, if it was not considered a lottery, I would suggest that a number of the 15s. certificates should be drawn for repayment at 20s. every so often. It would give that little bit of speculation which the public like so much, and would encourage them to save.
690 Post-war credits are the last thing I want to mention. This subject has been referred to several times already, so I will not dwell on it unduly. It is a matter which is creating frustration and annoyance to many people, and I hope that before the Chancellor reduces any more taxes he will do something about repaying post-war credits. People think that they are being let down. Instead of owing the money to particular people, could not my right hon. Friend raise a loan and owe it to the subscribers to that loan instead of to the people who are suffering great hardship because they cannot get repayment of what they know is due to them? If my right hon. Friend could do that, he would satisfy very many thousands of people in the country.
This is a good Bill, and very little has been said against it by the party opposite. We on this side of the House welcome it, and want to encourage the Chancellor to give us just as good a Finance Bill next year.
§ 9.37 p.m.
§ Mr. Douglas Houghton (Sowerby)
There are a few things I wish to say, one of which arises directly out of the speech of the hon. Member for Tonbridge (Mr. G. Williams). Notwithstanding his defence of dividends, none of us can brush aside the important effect upon trade union opinion of sensational stories of scrip bonuses, high dividends and almost unlimited capital gains on the buying and selling of business enterprises and of large blocks of stocks and shares.
I do not accept the view of those of my hon. Friends who assign to this Budget the major responsibility for the fresh move towards wage increases. I have been in the trade union movement for 30 years, and those of us who have spent so long in the movement realise how complex are the factors which mould mass opinion and stir collective action. In many respects, they are deeply psychological and cannot be summed up or over-simplified by saying that they are predominantly economic. They are economic, they are psychological, and they can be and are political. All these combine to mould the opinion of our great trade unions which now have such a profound influence upon our economy and the level of wages and prices.
§ Mr. Houghton
But we must bear in mind that when the Trades Union Congress advises the Government, as it usually does before the Budget, of the opinions of the trade union movement, the right hon. Gentleman can be quite sure that he is getting sound advice from their point of view. He may not think it is entirely acceptable or even sound economic or fiscal advice.
There was something in the statement made to the Chancellor by the Trades Union Congress before his Budget with which I did not agree. But they were expressing the profound psychological reactions of the mass of the workers towards the present economic and financial situation. Any Chancellor who wishes to avoid disagreeable consequences from his Budget proposals and from the Finance Bill will try and interpret correctly what the trade union movement is saying to him and will do his level best to apply their purpose in his own actions. That, I think, is the best I can offer to the House as my analysis of the present position in the trade union movement.
There is naturally in any movement of workers a desire for a greater share in the rewards of their own efforts irrespective of other considerations. It is a legitimate thing for trade unionists to ask for higher wages if they think they are contributing more to the national income than before, and if productivity is rising so that there is a greater quantity of goods to be distributed. They want to join in. I hope that the movement which has just started for further wage increases will bear in mind the economic fact with which we are faced in this country, that a greater distribution of the national income unless it is accompanied by an increase in the national income is liable to have undesirable consequences.
§ Mr. Houghton
I shall say no more about that. I am, on the whole, against indirect taxation. It is fairer to tax persons than things. It is more equitable to pay as we earn than to pay as we spend. Indirect taxation is taxation on spending, and unless there are overriding economic considerations which demand a curb on spending, much the best thing when taxation relief can be 692 given is to favour relief on indirect taxes rather than upon direct taxes.
It is a sad reflection on the present state of our fiscal system that our great Welfare State, with its inestimable benefits of a social and domestic kind, rests so largely on taxes on beer and tobacco. At the turn of the century, one-third of the total revenue came from taxes on tobacco and alcohol. Today one-quarter still of our total revenue comes from those same two sources. It is a reproach to our modern society and to enlightened opinion in these days that so much of our taxation is drawn from those two sources of revenue. Taxation on other commodities, while not so predominant in the total revenue, is accompanied by all sorts of unstable things, like agitation for reduction, complaints by traders that we are affecting their business, and charges of unfair discrimination between one business and another. Yet, in the Finance Bill, the Chancellor is giving three times as much relief to direct taxation as he is giving to indirect taxation.
In the total revenue, the ratio of direct taxes to indirect taxes is as close as four is to three. Any Chancellor should pursue with determination relief of indirect taxes, because these taxes are regressive, unfair and not adjusted to ability to pay. We are also relieving Purchase Tax, but the difficulty of the Chancellor is that he cannot give the relief that he would like to give because of the problem of traders holding taxed stocks. In the Chancellor's Budget statement he said:Hon. Members will be aware that to go further would cause undue strain on the position of distributors carrying taxed stocks."— [OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 53.]That again is a factor in our fiscal system which we ought to get rid of. The Chancellor cannot give the reliefs to working people by relaxations of tax on commodities because he is confronted with this administrative problem of taxed stocks.
Those of us who are pressing upon the Chancellor the need to get rid of as much indirect taxation as he can are giving him good advice. But if relief is to be given to direct taxation then I suggest to the Chancellor that it should take the form of a closer adjustment of the tax to the personal and domestic circumstances of the taxpayers rather than a wholesale reduction in the rates of tax. The Chancellor could have restricted the cost of 693 the 6d. oft the Income Tax had he felt moved to adopt the course taken by his predecessors in adjusting the rates of Surtax in order to avoid giving the benefit of the 6d. off the standard rate to the very large incomes.
He could still have given the relief to industry without at the same time giving relief to the very high personal incomes. And there are numerous ways which we on this side of the House believe the Chancellor could have adjusted the tax more closely to the personal circumstances of individuals. He has done something in that direction, but he could have carried these reliefs much further.
Certainly reliefs to the family man would have been very welcome indeed. Harking back to what I said about demands for wage increases, the Chancellor should always keep his attention fixed upon the family man, because he is the spearhead of the demand for increased wages. He gets the support of the other trade unionists who are probably not so much in need of an increase but whose weight is thrown behind the mass movement for wage increases.
The Chancellor should have adjusted the child allowance in a way which would take many more married men with families outside the range of Income Tax altogether. That is all the more justified when one examines the incidence of tax in the case of husband and wife both working as compared with the husband being the sole wage earner with a wife at home looking after the family. Hon. Members would be surprised to see how the tax is loaded against the family man who is the sole wage earner as against the benefits conferred by the double set of earned income relief to husband and wife, both working.
The Chancellor should also have given consideration to some relief on the interest on small savings. I know that the right hon. Gentleman has no responsibility for Section 27 of the Finance Act, 1951, but he knows that it has brought a huge crop of cases where interest on Post Office and other bank accounts has not been returned and taxed, and where inquiries are now necessary and calculations of tax going back over many years, frequently with interest and frequently also with penalties added, cause a great deal of distress to a great many 694 people. All that avoidance was going on without the check which my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) introduced into the Finance Act, 1951. But I am sure that it would satisfy all considerations of fair dealing in this matter if the Chancellor would leave the check to discover all the cases which certainly ought to be pursued as avoidance of tax, but grant some measure of exemption from Income Tax on interest on a small amount of savings. The exemption which is now given to National Savings certificates within the limit of 500 certificates can be given to small savings in the Post Office and in other forms of Government investment.
I have referred to Section 27 of the Finance Act, 1951. I am sure the Chancellor will have learnt some lesson from what its operation has revealed and will feel that he ought to pay attention to other directions in which he might seek information to check widespread evasion and avoidance of tax. There is no reason why depositors in the Post Office should be the only persons who should be found out. Other people can avoid tax by other means, where additional sources of information given by statutory provisions would greatly strengthen the hands of the Inland Revenue.
I know that this is an unpleasant theme because, over the years, those who can dodge Income Tax or cheat the railways have come to be regarded as minor heroes in certain circles. But it is a serious matter from the point of view of the workers who, under P.A.Y.E., are taxed on every penny of the wages they earn; who have nothing to avoid, and nothing to declare. The Chancellor should turn his attention to those with a source of income over a wider field— those who are engaged in trade and business—who find themselves able to use devices which are placed at their disposal to reduce their just amount of tax.
I want to make one comment on the speech of the hon. and gallant Member for Renfrew, East (Sir G. Lloyd) who referred to the administration of Income Tax as a jungle. Surely it is the tax itself which is a jungle and not its administration. We hope the Royal Commission will point to a direction in which the tax may be simplified and thus facilitate its administration.
695 There is one aspect of nearly all Budget changes in direct taxation which the House probably does not appreciate. It may not be realised that all the coding for P.A.Y.E. is completed by the time the Chancellor rises to make his Budget statement, and if he changes the allowances or reduces a tax which involves re-coding, all that work has to be done over again.
I am under the strongest pressure from the members of my union to demand that the Chancellor shall announce his Income Tax changes in November and leave the rest until April. From the Chancellor's point of view that would not do at all, but so long as we have a system of taxation which must operate immediately at the beginning of the financial year, before the Chancellor has announced his tax changes for that year, we are bound to have a good deal of duplication of work. That fact should be borne in mind by the "hatchet" group, in which the right hon. Member for Blackburn, West (Mr. Assheton) and other hon. Members opposite are so prominent.
§ 9.54 p.m.
§ Mr. Hugh Gaitskell (Leeds, South)
The Second Reading debate on a Finance Bill generally ranges over a fairly wide field, and today has certainly been no exception. We have had a number of interesting contributions. I think we all enjoyed the speech which my hon. Friend the Member for Sowerby (Mr. Houghton) delivered just now. It was most thoughtful and interesting, and I am sure the Chancellor will study it carefully.
I should like particularly to congratulate my hon. Friend the Member for Barnsley (Mr. Mason) on his maiden speech. He was brief, fluent, firm and clear—four excellent qualities—and we look forward to hearing from him again in the near future.
This Bill has a few important and simple Clauses and some less important but more complicated ones. This afternoon the Financial Secretary spent most of his time on the more complicated ones and gave us some additional information on them. I want to start by making a few comments on those parts of the Bill before I turn to the major issue.
696 We on this side welcome the proposal to permit the Treasury to accept chattels in lieu of Death Duty for the Land Fund in certain circumstances. It is a proposal that was not embodied in the Gowers Report, but it has certainly been pressed for some by the National Trust, I think. For my part, I think there is a good deal to be said for widening the scope of securities and property of different kinds that can be paid as Death Duty.
The Financial Secretary gave us some interesting information about Clause 2 on beer. As I understood it, the purpose of that Clause is to provide a stimulus to the brewing of stronger beer in so far as it makes it possible for those who do brew strong beer not to pay their tax quite so soon. Presumably, therefore, it grants them to that extent the financial cost involved in the interest on the tax.
§ Mr. Gaitskell
I do not propose to go into this intricate matter any further tonight. Obviously, the question of strong beer is a highly controversial one. No doubt, my hon. Friend the Member for Ealing, North (Mr. J. Hudson) would have very definite views on this matter. We shall need to study the Clause very carefully before we make up our minds exactly what attitude to adopt.
I would welcome the Financial Secretary's words about the increased flexibility being brought into Purchase Tax. It is a pleasure, of course, to hear him once more defending delegated legislation. Despite his nonchalance, it was perceptible to us all that he is now completely reconciled to delegated legislation of the most extreme kind. Certainly on this occasion we support that proposal.
I turn to something rather more important, the concession to amateur sport and entertainments. We, of course, welcome this, and it is a pleasure to find that the Treasury have, after all, been able to discover a definition of it. I remember last year the Chancellor saying, in resisting an Amendment of ours, that it was impossible to define "amateur status" satisfactorily. One never knows what one can do until one tries. This will encourage the Opposition to make a number of further suggestions this year that, on further reflection, will lead to further solutions also.
697 I was a little surprised to find that in the case of cricket it was impossible to apply the amateur definition. I must say that that is a little puzzling, and I must tell the Chancellor that I also find it quite unconvincing. There are professionals and amateurs who play in football teams, rugby teams and also Association teams. I do not think we can expect cricket to be permanently in a different status from that of any other sport. I ask the Chancellor to reflect. Does he really think that in 20 years' time Entertainments Duty will affect virtually every non-amateur sport except cricket? I cannot believe that it can fee left like that, and, as he has already been warned, we shall be pressing very strongly once again for justice—I think that that is the right word—to be done to the other sports as well.
I should like to endorse particularly what my hon. Friend the Member for Sowerby said. We regret that there has not been a more serious effort made in this Bill to tackle the problem of tax evasion. Last year though we were in some difficulty, because it is not very easy to get such an Amendment in order, we put forward a new Clause on expense allowances, and I think that at that time, although the Chancellor was unable to accept it, he promised to look into the matter. It is a matter which gives a great deal of concern to a lot of people. I think that most of us feel—I do myself, and I know that most of my right hon. and hon. Friends on this side of the House do also—that a good many people get a good deal too much out of expense allowances. I know that it is a difficult problem. I hope that the Chancellor has not given up the attempt altogether to tighten things up.
I should also like to ask if the Chancellor has considered the point raised by my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes). The Chancellor may perhaps recall that during the Budget debates he drew attention to the rather obvious tax evasion taking place in the case of a number of textile firms changing their identity. I notice, incidentally, that the "Manchester Guardian" gave a long and rather formidable list of such firms only the other day, and I hope very much that even now on this subject it will be 698 possible to introduce an Amendment to the Bill to close that particular loophole.
I pass now to the bigger issues. The Budget was based to a considerable extent on the overseas trade position and, for the rest, on what might be called the internal economy and, particularly, the production situation. I should like to say a few words about the overseas trade situation first.
Without going into all the arguments again, I think that we can probably agree very largely that the United Kingdom balance is still a highly precarious one. That when we take into account the movement of stocks, as I think we should do, we find that over the past three years in each case there has been, bringing in the movement of stocks as well as the balance of payments figures, a small surplus but no more. I think that we all realise and it is not contested that this year's figures were clearly helped by the more favourable terms of trade, and we know that that may not continue, or, if it does, the difficulties on the export side are almost certain to increase. But I would say we are also very conscious that, having a precarious balance, it is made all the more precarious for us when our gold reserves are still so very low.
I should like to put to the House a few reasons why I think recent developments must make us rather more anxious about the dollar outlook in particular. I want, first of all, to touch on the question of United States aid. I think that it would be a great help to the House and to the country if the Chancellor, when he comes to reply, would clarify the situation. I will put a series of questions to him. I take it that the figure of £140 million which appears in the Financial Statement as being the counterpart for the economic aid still stands, and that we are going to receive the equivalent of that in dollars during this fiscal year?
In that case, are we to take it that £140 million represents economic aid which has already been granted to us in appropriations? Next, what is the relationship of this to the new proposals published today by the American Administration in which, according to "The Times," we are to receive 100 million dollars? If I may trouble the House with the exact position, this is what "The Times" says. The 699 new recommendation of Economic aid is200 million dollars to be divided equally between France and Britain.That, so far as I can make out, is all that is proposed.
That, of course, does not cover military aid but, as we all realise from the point of view of balance of payments and the dollar situation, military aid in the form of actual equipment does not help us in the same way as economic aid does. It is also different from off-shore purchases. I should like to ask the Chancellor whether he can give us some information on them as well.
There has been some reference to off-shore purchases by a number of my hon. Friends today, and I particularly want to say that I share their apprehensions about this matter. It has always been my view that to a limited extent at a time of general rearmament there is no reason for strong objection to this method of obtaining dollars. Indeed, I concede the argument the Government put forward, that as a result of this it is possible to maintain a rather larger capacity than would otherwise have been possible in certain fields, such as aircraft.
Nevertheless, it is undoubtedly true that there is a great danger that, when the defence programmes are curtailed, as we all hope they will be, our industrialists will, so to speak, be left on a limb, for they will have concentrated on exports for which there is not going to be a good market for very long.
I would refer the Chancellor to what was said about the subject in the E.C.E. "Survey of Europe Since the War." There is an interesting quotation in it from the "New York Times," a responsible newspaper which is not likely to exaggerate. It says:It will be a different story"—that is, about off-shore procurement—when the peak of defence spending in this country"—that is, the U.S.A.—has been reached and idle plant capacity at home becomes a political as well as an economic problem. There has been enough experience with so-called distressed areas of defence production in the past to suggest the howls that will go up in Congress if foreign 700 manufacturers continue to make things for Uncle Sam at such a time.That is a very significant comment, and it is a matter which causes us a good deal of concern, because it appears that the emphasis now is to be very much on offshore procurement.
But let me say at once—I believe the whole House is united in this—that we do not want economic aid or any aid if we can possibly do without it. We wish to be independent. However, if the United States has decided to cut down economic aid, as apparently is the case, then we have to make our plans accordingly for dealing with the dollar situation. The Chancellor ought to give us some idea of what is in his mind about this.
There is a second matter which also causes me some concern. If we are to adjust ourselves to this situation, one of the things that we should like to do is to expand our dollar exports, but, unhappily, everything that has been happening in the United States lately seems to suggest that it is going to be more and more difficult for us to expand our dollar exports. I am one of those who believe that a very great deal, no less than the peace of the world, depends upon Anglo-American co-operation and, particularly for people like myself, it is distressing to observe the trend of American opinion at the moment.
It may or may not be true, I do not know, that Senator Taft said of "trade, not aid" that he agreed with the last two words but not with the first one. However, it is significant that that sort of thing should be said. Also, we all know about the episode of the Chief Joseph Dam and the difficulty that the Administration are having in even renewing the Reciprocal Trade Act. It is not much good moaning about this, but I suggest that these events reinforce our appeal to the Government to base their policy, not on any fancy idea of early convertibility, but rather on building up as swiftly as possible supplies from non-dollar areas and expanding trade generally in the non-dollar world.
The third thing that I want to ask the Chancellor about is commodity prices. There have been some considerable falls in commodity prices lately, in tin and, I believe, in rubber as well, and I suppose that must give rise to a good deal of 701 anxiety in the Treasury because our dollar earnings depend enormously on the prices at which these commodities are sold. Can the Chancellor tell us anything about it and what the prospect is in that direction?
Finally in this field, can the Chancellor tell us something more about the German occupation costs problem? My right hon. Friend the Member for Battersea, North (Mr. Jay) touched on this in his speech during the Budget debate. We do not know in the least where we stand here, and we are entitled to an explanation. We all understand the difficulty, but we want to know what extra burden the Chancellor contemplates will have to be carried if E.D.C. goes through, or rather the agreement which this House approved some considerable time ago under which a new status is given to Germany. We will have to retain our troops there, but presumably the Germans will no longer continue to pay for them. That is an extremely serious matter, and it might involve a gold payment of some kind under E.P.U. arrangements. I think that is an additional cause for anxiety.
I pass to the more general aspects of the background of the Budget. The Budget proposals can be looked at in two ways. We can look at them first from the economic point of view. Are they going to achieve the objectives which the Chancellor has set, objectives which are not in dispute—the need for increased production, greater investment, greater exports and, if I may add a fourth the need for more production to save imports in case we do not get the exports? That is one aspect, and the other aspect is, simply, is it a fair Budget? I am going to say a certain amount about that later on, but I want to deal with the economic aspects first.
There are four main proposals, the abandonment of the Excess Profits Levy, the cut in Purchase Tax, initial allowances and the reduction in the standard rate of Income Tax. I do not want to say much about the first two. I only should like to ask the Chancellor once again, about the Excess Profits Levy, the question I put to him in my speech on the Budget —what is the position with regard to the Profits Tax? He will recall that that tax was reduced, specifically because of the introduction of the Excess Profits Levy, 702 if my memory is right, from 25 per cent. to 17½ per cent. in the case of distributed profits and from 5 per cent. to 2½ per cent. in the case of undistributed profits. I should be grateful if the Chancellor would clear that up, because it has a bearing on this matter. Are we to be left, when the Excess Profits Levy has been dropped altogether, with the same Profits Tax as existed before it was imposed, or a lower Profits Tax, and, if so, how much of an additional concession to industry is involved in that?
On Purchase Tax, I want to ask only one thing. It has been discussed very fully by my hon. Friends and I think that my right hon. Friend the Member for Batter-sea, North dealt with it very admirably this afternoon. I should like to press the Chancellor on the textile situation. We have had pretty strong protests from the textile industry on the working of the D scheme. This is not just a matter of the rate of Purchase Tax: it is a matter of the whole of that scheme. It was greeted, when introduced, with considerable misgivings on this side of the House, though we realised the difficulties that the Government were in. We felt at the time that the D figures had been fixed at too low a level. The House and Lancashire and Yorkshire are entitled to some statement from the Government on this matter.
I pass over the initial allowances and the Income Tax concessions, as these will be covered in what I have to say about the economic consequences generally. The Chancellor has defended his Budget, and rightly, I think, on the ground that additional spending is needed. I want to emphasise that. It has not been defended on the ground that it will increase savings. Although the right hon. Gentleman has never mentioned any particular figure or told us exactly how much more spending he expects to get as a result of it, we may accept the "Economist" estimate that two-thirds of the concessions will be spent.
I have little doubt myself that that will have some effect on production. It would indeed be very surprising if the release of this additional purchasing power did not in itself stimulate increased production, and if we do not get increased production it merely means that other more powerful forces are at work driving production down. That indeed may be the case. So far as it goes, those concessions are likely to have that effect.
703 It is true, of course, that the extra spending may affect imports. That is a point which the Government, who are always so keen on relaxing every kind of control, had better bear in mind. Leaving that on one side, I am prepared to admit that we may get some higher output to match, broadly, higher consumption. Where are we at the end of that? We have certainly a better position—more overtime being worked, less short-time, less unemployment, more television sets and a few more umbrellas available, and various other things that have been affected by the Purchase Tax concession.
But are we, as a nation, economically stronger? I do not think we are because it is the other aims—the expansion of exports and investment—which are the vital things that our economy ought to be getting at the moment. The crucial question in connection with the economic aspect which we have to ask ourselves is; what effect does the Budget have on these two things? If the House will bear with me, I want to take up a moment or two on each of them.
I suppose that most of us would agree that the level of exports depends largely on three things: on the state of overseas demand, on the level of costs in our export industries and on the energy and enterprise of managements in seeking our export markets. Exactly in what way will the Budget affect any one of those things? It is extremely difficult to see that it will affect them in any way.
Certainly the overseas demand is not going to be affected, and one would not expect it to be. There, I can only repeat that I think the Government ought to be pursuing, both in their contacts with Europe and the Commonwealth, what I can only describe as a much more expansionist policy. They ought to be encouraging governments to be less deflationary whereas, on the whole, so far as I can make out, the emphasis has been the other way.
In passing, may I ask the Chancellor to tell us what has happened about the great plan for Commonwealth development? We had hoped that that would have a stimulating effect on our export trade. Is something being worked out? Are the conversations still going on? Can we hope for large orders being 704 placed to develop Australia and other parts of the Commonwealth? As to costs, I do not think even the Chancellor could claim that there is any reason to suppose that any costs in the export trades will be reduced by the Budget.
Nor can I see any reason why the managements and businessmen are likely specifically, as a result of this Budget, to make greater efforts to export more. On the contrary, there is a certain danger that, if we increase consumption at home as is proposed, we make it rather easier to sell at home, and we diminish the tendency of people to sell abroad. I know that hon. Members do not altogether agree with me, and I do not want, at this time of night, to go into an argument— because I recognise there is an argument —though I believe that my case, in times of full employment, is a very powerful one.
At best there is nothing in the Budget to encourage exports. Does it encourage investment? The position here is surely this. There was a shortage of steel for a time, owing to the running down of scrap from Germany. That position has been overtaken as a result of building blast furnaces, and we now know that we have plenty of steel. While, however, we want plenty of steel, we do not seem so far to be getting additional orders. I venture to say that this is not unconnected with the monetary policy of the Government.
I do not want to go into a long technical argument, but, to put it shortly, it seems to me that whatever the merits of the use of a higher Bank rate may be in certain circumstances, it is extraordinarily difficult to reconcile a policy of that kind with the policy of encouraging a rapid increase in investment. Of course, the Government claim for that policy that last year it reduced investment. If they are right about that, I do not quite see how the same policy will increase it this year.
I ask the Chancellor to have another look at this aspect. He always speaks of the Bank rate policy as being a flexible instrument—to use his favourite phrase. If it is a flexible instrument, why not change it occasionally? It is difficult to understand why anybody uses the word "flexible" about something that is never altered; which everybody is so frightened 705 of altering because of the terrific psychological consequences that would ensue. That is why we have always said it is not a flexible instrument. While no doubt the Chancellor wants to encourage investment, I am afraid that in pursuing this monetary policy he is simply preventing it from happening.
It may be said that the real trouble is shortage of capital. Is it? Was there any shortage of capital last year? Of course there was not. That argument just cannot stand examination because we all know perfectly well that after the payment of tax, after the payment of dividends, after all the investment desired in stocks and fixed equipment, and the setting aside of what was wanted for future tax payments, no less than £600 million liquid reserves were left as financial assets. There is no reason to suppose that shortage of capital is holding up the position.
It has been asked by the Economic Secretary why, in that case, bother about initial allowances? Why does he? I am putting the question back to him, but I will give him my answer. There may be particular instances in which there is a shortage of capital where initial allowances would help. I do not want to say very much on that but I take the Financial Secretary up on one point. He resisted any increase in the rate of initial allowances by saying that it was a costly concession. I disagree with him completely. I do not think it is a costly concession; indeed, other hon. Members have pointed out that it is no more than an interest-free loan and nothing like such a costly concession as giving away undistributed profits.
Incidentally, if we increase initial allowances we get a corresponding increase in undistributed profits, and so any concession made by the Treasury is balanced by a higher corporate saving. I think there is a case for increasing the rate. A difference of 10 per cent., such as we get this year is really small in relation to the actual concession, and the amount of money which the company does not have to pay in tax for the time being is only, after all, a little more than half that because the tax comes into it.
I conclude that there is no convincing case on economic grounds for claiming that this Budget will have anything more than perhaps a temporary stimulating 706 effect on production in the consumer goods industries. I see no reason why it should have an effect on productivity or on exports.
Is it, then, a fair Budget? I think hon. Members opposite know our views on that. It is one of our major criticisms that the Budget is not fair and my right hon. Friend the Member for Battersea, North, in his very effective speech today, explained the reasons for that view once more very fully. I do not know why, but hon. Members opposite, and the Conservative Party in general, always seem to object very strongly when we tell them that something they are doing is not just and is not fair. We are allowed to talk about the balance of payments, monetary policy, initial allowances or productivity, and the atmosphere is quiet and cool and the temperature is low. But, as soon as we begin to discuss how much different people get as a result of the Budget, or any other Government policy, that is described as "low level debating," "cheap," "in bad taste," "inspired by class hatred and malice and envy."
That is really a very silly point of view to take. This is, after all, a major political issue. I suppose the different conception of social justice which exists on the two sides of the House is the greatest issue which divides us, and it really will not do for Conservative newspapers, or speakers, merely to impute motives to us when we raise this very vital issue.
Turning to the particular situation of this year's Budget, of course, the facts are not in dispute. I listened with entertainment, as we all did, to the hon. and gallant Member for Ayr (Sir T. Moore) in his endeavours to prove that it was all nonsense to suggest that this was a Budget which favoured the rich. His stories about the taxi-drivers junketing in Maidenhead and his tear-jerking plea for the cosmetic industry were, I am afraid, utterly unconvincing. Undoubtedly the rich, the wealthier people, do get the overwhelming bulk of the concessions in this Budget. That cannot be denied. I do not propose to go over the ground. but if we take the items one by one— Income Tax, Purchase Tax, E.P.L.—in every case it is the better-off people who get the concessions.
I do not think that the Government will deny that. They may say, "We 707 believe this is fair." At any rate that is an intelligible answer. Why do they believe it is fair? They say, "Because the rich already pay all these taxes, and therefore it is fair that we should ease the tax burden on them." That is, after all, the general answer which has been given. We on this side of the House have even been accused of hiding the facts, because we have not disclosed that wealthy people do pay high taxes. I do not think that anybody is in doubt about that.
But this attitude is one which we cannot possibly accept, because it is really based on the idea that the pre-tax distribution of income is fair and that, therefore, the job of the Chancellor is to reduce taxation where most is paid. That, they say, is his main job, and if there is £200 million to spare, as we have this year, I do not think it an unfair description to say that the logical Tory conclusion is to use it all in tax relief and to use most of it in reducing the standard rate of Income Tax.
We cannot accept that proposition. If £200 million was available to us it would be a matter of balance. We should say, "Where can we encourage spending in a way to help people most, in a way which will be fairest?" I do not say that we should ignore the taxpayer altogether, and that the money would all go in increased social services. But we should consider it right to take into account the position of those who are the poorest in the community and in consequence do not pay any direct taxation at all. Equally, if we are thinking in terms of the Income Tax-payer we should look to see how we could relieve the smaller taxpayer most, as successive Labour Chancellors have done.
I have tried, I hope in a relatively un-controversial manner, to explain to hon. Members opposite why it is we feel that the Budget is unjust. We recognise they do not agree. If I may say so to my right hon. Friend I do not think that this is a matter of the Chancellor not seeing the tables correctly. This is a fundamental difference in social philosophy. We are prepared to accept that that is so and we believe that when the people of this country see more clearly the implications of this Budget they will come to accept our point of view.
§ 10.28 p.m.
§ The Chancellor of the Exchequer (Mr. R. A. Butler)
At this late hour the House would not expect me to speak at very great length. But there are some important questions which have been raised by hon. Members and by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) to which I shall try immediately to reply.
First I should like to congratulate the hon. Member for Barnsley (Mr. Mason) on his maiden speech. If he will pursue controversy with the same fervour as he did today he must expect, when the bounds of a maiden speech no longer surround him, to meet a certain amount of opposition from this side of the House. But today we all felt that he kept well within the recognised limits of a maiden speech and paid a very nice and proper tribute to the traditions of the House.
The hon. Member for Midlothian and Peebles (Mr. Pryde) and the hon. Member for Clapham (Mr. Gibson) raised questions about the indigenous hydrocarbon oils. This matter was mentioned by the Financial Secretary, and I will say to them, in whose constituencies, particularly in Midlothian, this problem arises, that we are expecting now to hear from the interests concerned, and in due course we will consider what we are able to do.
The hon. and gallant Member for Down, South (Captain Orr) raised the problem of the linen industry in Northern Ireland. It is most important to realise the position in Northern Ireland, particularly the employment position. Northern Ireland has just introduced its own Budget. It is not for me to interfere, but I will only say that the problems of Northern Ireland are very present in our minds, and any opportunity that I have of meeting the Finance Minister, as I did recently, are very much welcomed by me. Therefore, I hope the hon. and gallant Member, while he may not necessarily expect to get all that he is talking about, will get in touch with me and the Government on these difficult problems.
I would like to say a word about the Scilly Isles, as I was not able to in the last speech when I wound up, in answer to my hon. Friend the Member for St. Ives (Mr. G. R. Howard). I am receiving a deputation from the Isles, and 709 pending the arrival of the deputation I will say no more except that naturally anything they put before me will be very seriously considered.
My hon. Friend the Member for Ton-bridge (Mr. G. Williams) was kind enough to congratulate us on the sugar position, and I think he is joined by almost every housewife in the country. The hon. Member for Clapham asked us to do more about London taxis. This gives me a very good chance of saying that, in so far as it is possible in a Budget or a Finance Bill to help the owners of taxis, we have done so, but the rest of their problems must be discussed with my right hon. and learned Friend the Home Secretary and, while I can give no assurance—because we have already had the Runciman Report—we are very well aware of the problem which they face at the present time.
I will get straight down to the main question put to me by the right hon. Member for Leeds. South about American aid, and the foreign position, but in case I forget it I would like to give to hon. Members a small piece of information with regard to a promise given last year about the Excess Profits Levy and output allowances for certain minerals. Hon. Members will remember that under Section 56 of last year's Finance Act certain allowances for E.P.L. purposes were made available for companies engaging in the mining of metals.
Hon. Members put forward many claims for extending the scope of this allowance, and Clause 25 of the present Bill extends the field in which a Treasury certificate may be given to cover any mineral and to the winning of it from a natural deposit of a wasting character— that sounds rather like hon. Members opposite.
I have this information to give to hon. Members, as it may interest some of them. As soon as the present Bill becomes law it is proposed to give a Treasury certificate for the following: china clay, ball clay and china stone; anhydrite; gypsum; pyrites; pitchblende; fullers earth; sand and gravel; silica and moulding sands; brick clay, including brick earth and shale; chalk; limestone. If there are any companies engaged in extracting wasting minerals not included in this list, who think they 710 can make out a case, I want to take this opportunity of saying that if they want the issue of a Treasury certificate in respect of their case they should make representations and they will be considered. That is in answer to a pledge given, and that is the latest information for the benefit of the House, and in good time before the Committee stage,
I will come straight away to the point raised by the right hon. Gentleman about American aid. I absolutely agreed with his speech, which was couched in terms of the national interest in considering all the problems that face us, that the House and country should have the latest information of Her Majesty's Government about the present position of American aid, particularly as we have seen so much in the newspapers today, some of which, of course—not the total picture—I was able to ascertain during my recent visit to the N.A.T.O. Conference in Paris.
I will give the following short report, therefore, to the House. The proposals for aid which have just been made to Congress by the United States Administration mean that there will be no further defence support aid of the form that we have known, after June, 1953, apart from what remains in the pipeline, of goods financed out of appropriation for 1952–53 and previous years. I am coming in a moment to the question of a counterpart. Congress has now been asked to authorise a small defence advancement for the United Kingdom amounting in all to 200 million dollars for 1953–54, consisting of 100 million dollars for aircraft production—and the House will be aware of that statement— and 100 million dollars for commodity purchases.
If Congress approved these proposals —and we must speak subject to that as we are Parliamentarians ourselves—the total defence aid to be appropriated for the United Kingdom for 1953–54 will be about half the corresponding total for 1952–53. The House must not take that as the final picture.
We are, on the other hand, expecting a considerable increase in receipts from offshore purchases, and this I was able to discuss with the American Ministers in Paris. The total of such orders already placed amount to some 340 million dollars, which is a big sum. The House 711 must understand that these are the orders placed. What interested me as Chancellor of the Exchequer was the nature and size of the payments and when the payments fall—what fiscal year.
The payments so far made against such orders have been small, but this is what I should expect after inquiry, that during the 12 months beginning 1st July, 1953, the growing volume of dollar receipts from off-shore purchases will broadly offset the decline in receipts from defence aid. Although unlike defence aid, receipts from off-shore purchases, unless they are applied to the home domestic, British consumption and then permitted to be used by the British within their own borders, do not present an exactly similar addition to our resources as defence aid.
Nevertheless, the House will understand that the placing of a large off-shore procurement order in our defence programme with the provision that that should be used by us does form a valuable assistance to our production and to the employment of our people, the importance of which must not be neglected. If this develops, as I believe it will, it will form a very valuable addition to our resources.
§ Mr. Pargiter
Would not the Chancellor agree that to do this to the detriment of our normal export production is likely to be very dangerous in the long run?
§ Mr. Butler
That is obvious, and I am coming to that in a minute. This is a policy which is being watched and which will have to be watched. But I was defining the advantages of the policy which I think are obvious.
This position illustrates that there is a considerable importance to be attached in future to the off-shore procurement programme, and I hope that will be noted on the other side of the Atlantic. So far as our current financial year is concerned—and this was the question raised by the right hon. Gentleman—the provision of the £140 million of counterpart appropriated in aid of our Defence Votes and included therefore in the Budget, still stands, and therefore the statement I made in my Budget speech represents for 712 this year broadly the outlook to which we can look forward. I cannot say what will be the prospect in respect of such arrangements in future years.
§ Mr. Gaitskell
May I ask the right hon. Gentleman two questions? First, on the last point, are we to understand that the £140 million is in respect of defence aid made in the current fiscal year, or previous year, and does not include the 200 million dollars so to speak? Secondly, so far as off-shore procurement is concerned, will the right hon. Gentleman tell us whether any part of the 340 million dollars will consist of purchases of things which will, so to speak, be handed back to us, or is it what might be called dollar exports?
§ Mr. Butler
In answer to the first point, the counterpart is largely accumulation, as otherwise we should not have been able to put it in advance in the Budget statement. It does not take account of any recent announcements such as I have made. With regard to the off-shore purchases, I cannot give a final answer to that as I am attempting to give the House the latest news in an attempt to keep it au fait with the position. I will certainly keep the House informed as to how the incidence of the off-shore purchase lies.
The next point to make is that the position of our economy and our prospects—as has been pointed out by several hon. and right hon. Gentlemen—is governed largely by the extent to which we can expand our exports. The right hon. Member for Leeds, South asked what was the prospect for the general trade and payments policy which we have been pursuing. I should like to make two observations about that in relation to our contact with the American Government. First, it would certainly be wrong if I did not tell the House that we were disappointed with the symptoms of progress which we have seen to date, and we have so informed the American Ministers. I can only say that the frankness of our conversations has been matched by the understanding created by that very frankness.
We have frankly discussed every aspect of the matter, including the Joseph Dam contract, and every other matter which has caused a certain degree of disappointment and, in some cases, disillusionment. 713 Having said that—and said it with emphasis—I think it would be wrong if the House were to consider that we should now abandon the objectives we set before us for widening trade and tying closer our ties with the American continent and economy.
I am glad to see that the right hon. Gentleman made a similar statement today. He said that in his view these developments were associated with the peace of the world. It is quite clear that the economy and finance of the free world must be brought closer together if our economy and that of the Americans is to make any sense and if we are to put forward the maximum effort. What is the use of building up defence forces and going to meetings at N.A.T.O. and in other ways trying to produce a combined foreign policy, unless we can bring our economic and financial policies closer together and so bridge the dollar gap?
I have no reason to suppose—and this is the only quarrel I have with the phrasing of the right hon. Gentleman opposite about this broad international matter— that it will be more and more difficult to do so. My impression is—and I say it with a sense of reality, after having been engaged in very long talks and going on long travels in the last few months—that it will not get more and more difficult, in the long run. I agree that there may be a period of difficulty and waiting while our friends on the other side of the Atlantic become accustomed to taking part in some of those discussions that we are so used to here with their own Congress and with the difficulties of assuming office as they find it. I have no doubt that during that period there will be difficulties, but it is just up to us to show the utmost patience and determination in our objectives.
The right hon. Gentleman asked about convertibility. I do not think I need go into a side-track about that tonight because I have already stated the view of the Government. There are certain conditions to be fulfilled, which are, first, continual success in making our economy sound in the sterling area; secondly, the adoption by the United States and other countries of good creditor policies which widen trade and give us a chance of earning our living instead of receiving aid—which we have made only too clear to them and from which I think we shall 714 see some result, and, thirdly, a system of adequate financial support.
Until those conditions are fulfilled I do not think the House or the right hon. Gentleman need spend time on thinking we are not sticking to the right and proper course of attempting to do everything we can to expand our exports in whatever way is most valuable. To show the determination and sincerity which animates Her Majesty's Ministers, I would accept the right hon. Gentleman's own words when he said that we must expand trade generally in the non-dollar world, provided that we retain the ultimate objectives that I have stated.
I go further. I think that now is the time in our history when industry generally—and the Government so far as they can help it—has to adopt any device of ingenuity or improvisation which will get us over this difficult time and widen trade and expand exports to the best of our ability. No device will be left unexamined. The possibility of trading with countries where currency is short, or the possibility of any sort of understanding will not be overlooked and I shall certainly not resent it if either I or my right hon. Friend the President of the Board of Trade receive suggestions from hon. Members from either side of the House how we can save our country's export trade and get us through the difficult months that lie ahead.
I do not think that the Budget has done anything less than to give a distinct fillip and encouragement to industry. Every time I have made contact with industry they have said, "Lighten the burden of taxation, and do not adopt the artificial devices some countries have, particularly for export subsidies." That advice has been the policy we have adopted. In the case of commodities policy, there is a rubber group sitting and a cotton group. That subject is under active discussion at the present moment with our friends in the United States. In the case of Commonwealth development, I cannot in the short time at my disposal give all the details, but the question of American overseas investment is being rapidly and seriously considered, and we are at the same time developing our own proposals to the International Bank. I understand that the private group that have set themselves up in the City are also doing their best.
715 The right hon. Gentleman asked about Germany. I am very glad to say that in Paris, at the N.A.T.O. meeting, an agreement was reached of a satisfactory character with the United States, France and Germany. It will ensure that the cost of our troops in Germany will be covered up to 30th June, 1954. So far, so good. Hitherto successive British Governments have always insisted we ought not to have to bear any part of the cost of maintaining our troops in Germany. So far, so good. The position after 1954 will depend on developments under the E.D.C., with which we were also concerned in our visit to Paris, and a great many other factors. The House would make a mistake if it under-estimated the problem this is likely to present both to our country and to others.
I think it would be a mistake for either the House or the country to underestimate the soundness at the present moment of our position generally particularly the results of our balance of payments and our reserves. The position was so satisfactory in fact that we had a very considerable increase in the reserves. I am not going to give any forecast how things may go. That would be very silly. All I can say is that if we keep our nerve, keep together in industry on all sides, to co-operate in increasing exports and working together, I think we can get through.
In this connection the speech of the hon. Gentleman the Member for Sowerby was particularly useful. He said we should pay attention to the spirit and the philosophy of the trades union movement. I assure him we do so. Indeed, I sometimes wonder if they are not very happy in sending us their views even though I am not always able to accept every one of them. I am sure first that industry itself is quite clear that they must not depend upon the Government to do everything, because the Government cannot; second, that the utmost moderation should be shown. I agree with the hon. Gentleman that the Budget is only one factor out of very many in the general psychological situation with which we all must deal with the utmost statesmanship.
Having said these rather serious words that, I think, are not inappropriate on the Finance Bill, and in answer to the right hon. Gentleman, I conclude by speaking 716 of the three main other points raised where I have struck a just balance in sport, Purchase Tax, Income Tax. Thus I shall answer the points made in the debate from that side of the House.
First, sport. It has been widely said, I know with some humour, that I was influenced in my decision about cricket by my Parliamentary Private Secretary. No man helps me more in my public work, and I do not think I have a better friend, but the first he heard about this was when I made my Budget statement at this Box. That is the spirit in which Budget secrets ought to be kept, and that is how they were kept. I must say he was quite pleased with me when I got outside afterwards.
The decision for amateur sport and cricket was not taken just for a whim. It was taken as a result of examination of the debates last year, the demand to assist amateur sport, and to find a definition that would meet the wishes of the House. I think we have done that. In the case of cricket the amount involved was small. The position of cricket, which is played during the week when people are at work, is one with other difficulties, too, and is by no means easy. I do not want to denigrate that noble sport. Its position is by no means an easy one, and in view of the sum involved, and the nature of the difficulties facing cricket at this time. I feel pretty certain that the decision was a correct one. At any rate I shall reserve my fire for what I have no doubt will be enlivening debates during the Committee stage—
§ Mr. Butler
—when I shall be able to answer my critics.
There has been much criticism of the manner of the relief of the Purchase Tax. The hon. Member for Sheffield, Park (Mr. Mulley), the hon. Member for Sowerby (Mr. Houghton), my hon. and gallant Friend the Member for Renfrew, East (Sir G. Lloyd) and others raised the point. As the hon. Member for Sowerby said, if I had wanted to reduce Purchase Tax to a greater extent I could not honestly have done so in view of the loss caused to the retailer. As it is, that has been one of the major problems, and, as my hon. and gallant Friend the Member for Renfrew, East said, this is a problem to 717 which we have not been able, despite the Hutton Report, to find a solution.
I am then asked, "Why reduce the rates?" the answer is that the 100 per cent. rate of Purchase Tax could not be held. Trades were languishing under its burden, and it was necessary to deal with that. In the case of the 66⅔ rate, I was surprised that the hon. Lady the Member for Coventry, South (Miss Burton) did not welcome the reduction of the tax on motor cars, because I can assure her that the reduction of the tax on cars was made after examination of the state of the industry, as well as of the rate of the tax.
§ Miss Burton
I did say today, on the other hand, in the House that I welcomed very much the reduction on motor cars, but that it would not help the old-age pensioners.
§ Mr. Butler
I will deal with the old-age pensioners now. The hon. Lady said that these reductions would not help the old-age pensioners in the least. That subject has, of course, been raised before, and I dealt with it in my winding-up speech on the Budget Resolutions. The case of the old-age pensioners is very near our hearts, but the question we want to ask from this side of the House is, why was it left to this Government last year, in the Budget, to make the first attempt for a very long time to raise the pensions of the old age pensioners?
§ Mr. Gaitskell
The right hon. Gentle-man knows perfectly well that we put up the pensions in 1951, and he only raised the pensions in 1952 because he cut the food subsidies.
§ Mr. Butler
The right hon. Gentleman made various adjustments in the old age pensions, which very considerably annoyed a great many of his supporters, and the increases which we introduced pleased not only our side of the House, but also hon. Members opposite. It has also been noticed by the old age pensioners, and when the hon. Lady the Member for Coventry, South says that nothing in the reduction of Purchase Tax helps old age pensioners, I point to one of the larger reductions, that on pipes, tobacco smoking equipment and so on, which has been reduced from 66⅔ per cent. to 50 per cent., which in itself helps old age pensioners.
718 I do not believe that a great many of the other things, which are included in the reduction from 33⅓ per cent. to 25 per cent. and which include a great many articles like shaving articles, paper, postcards, pens, playing cards and many other things, would not be useful to any section of the population, including old age pensioners. I say, therefore, that the hon. Lady is exaggerating in her statement about old age pensioners.
Then there are wireless batteries, which are relieved of Purchase Tax altogether. Wireless batteries are much used by old age pensioners and by rural residents in those northern climes from which the hon. Member for Orkney and Shetland (Mr. Grimond) comes, and those people, I am sure, are very grateful that they will have no Purchase Tax to pay in future on their wireless batteries. To say that we have not thought of lonely people, perhaps of a considerable age, living in cottages, is nonsense in this connection.
I have been asked a good many questions about textiles, especially by the hon. and gallant Member for Down, South. We had better discuss textiles during the Committee stage. I will only remind the House that last year textiles profited to the tune of £17 million, quite apart from the £20 million voted by the House in aid of production, that it was due to the action of this Government that the textile depression was saved and that over 100,000 people were restored to employment by the latter part of this last year. That is one of the many answers to right hon. and hon. Gentlemen opposite who say that we have allowed production to decline, when they know perfectly well that we inherited, in the textile industry and elsewhere, a situation of declining production which, largely by our own efforts, aided by the more sensible members of the committee, we were able to restore.
Further, when it is said that this Bill does not help the textile industry, I can assure the House that the reliefs in industrial taxation and the reliefs in personal taxation will be felt, I hope, as much by the textile areas, which we all want to help, as by any other section of the population.
Now I come lastly to Income Tax. A great deal of play has been made with the fact that, owing to the present structure of the tax, it is alleged that the bachelor 719 and those without families and unearned income and so forth, get more benefit than anybody else. First, I am glad to know, from the speech of the right hon. Gentleman the Member for Battersea, North (Mr. Jay), that the bachelor with £100,000 a year appears to have died, because the right hon. Gentleman quoted today a figure of £20,000. So he has come down to one-fifth. I presume that the bachelor with £100,000 has married his housekeeper to get the housekeeper allowance, but I understand from the Inland Revenue that she had four children and so he has come a great way down in the Table.
But, taking the position of the family and the bachelor, surely the commonsense answer to right hon. and hon. Gentlemen opposite is this. That so much has been done for the married man by way of Income Tax relief already that naturally the people left at the top who now get the opportunity of most relief are those who have not had the reliefs before. That is the way we look at what I did last year. There is no need to go back to previous Chancellors.
Last year I myself increased the child allowance to £85. That means that the child in the particular family to which the right hon. Gentleman was referring already gets an increased allowance due to the Conservative administration. Further, besides the Income Tax reliefs we gave last year, which included the alteration in the earned income relief, from one-fifth to two-ninths, about which there has been so much talk, we widened the bands of the Income Tax and increased family allowances from 5s. to 8s. Therefore, to come along and look at this Budget in isolation and say that we have done nothing for the family man, is most unjust and has already been observed to be so by the general electorate of the country.
The next point I will take in regard to this is to answer the hon. Member for Barnsley and others who have said that we are widening the gap and indulging in some sort of new social philosopy 720 which is evidently extremely anti-social in the eyes of hon. Members opposite. It so happens that if hon. Members had paid some attention to the re-adjustment in the lower rates of Income Tax in this Budget—that is, the reduced rates—they would see that whereas before the lowest rate was 3s., it is now 2s. 6d. In the old days before this proposal the top rate was 19s. 6d. The result is that previously the top rate was 6.5 times as much in each pound as the lowest rate and, thanks to our alteration, actually the gap has been lessened and now the top rate is 7.6 times as much as the lowest rate. So much for all this nonsense from the party opposite about our efforts to widen the gap which has, in fact, in the ratio of 7.6 to 6.5, been narrowed by the proposals in this Budget.
Therefore we come back to the main point raised by hon. Gentlemen opposite, that, because of the fears that have been expressed, they would find it impossible to lower the main standard rate of Income Tax in the manner I have done by 6d. All I can say is that they have talked a great deal about us being anti-social; but the most anti-social step which could have been taken by any Government at all would have been the ruin of our finances, and particularly our overseas finances, which were inherited by us in a very low state when we came into power. The country was then facing a raging inflation, and a very heavy drain on our life-blood overseas. Had this state of things continued, the working people of this country would not have been able to afford the raw materials, or the food, upon which they depend for their very living.
We have taken this fundamental step; we have given a spur to the country, and we hope that we shall be able to go forward with this Bill and finish the job.
§ Question put, and agreed to.
§ Bill accordingly read a Second time.
§ Committed to a Committee of the whole House.
§ Committee upon Monday next.