BUDGET PROPOSALS

HC Deb 12 April 1954 vol 526 cc800-922

3.26 p.m.

Mr. Douglas Jay (Battersea, North)

The weekend gap in this debate has been of value in giving hon. Members an opportunity to find out what their constituents say about the Budget. I do not think many will deny that the Budget came as a profound disappointment to the electorate and caused deep resentment amongst the old-age pensioners. There could hardly have been a more crushing condemnation of the Chancellor's Budget than the verdict of the electors in Edinburgh, East.

The Chancellor of the Exchequer cannot evade responsibility for creating the expectations whose disappointment has caused such a shock, from which his supporters are now suffering. I do not know whether the Minister of Works, when coining his famous slogan for the Budget, Treat 'em mean and make 'em keen", realised that it would make many people keen to Vote against the Government. Not merely the Economic Survey, but the speeches of all three Treasury Ministers, have been ringing with optimism and reeking with complacency.

Sir Stafford Cripps, whether one thought his policy right or wrong, strove to tell the public the facts. But the present Chancellor of the Exchequer has spent too much time sedulously concocting a legend. The legend is simple: that everything is going very nicely, and it is all due to his being Chancellor. That is why, instead of hard economic arguments, we get so many incantations about lightening the ship, sailing out of slack water, confidence, flexibility, and all the rest of it.

Let me give just a few examples. The right hon. Gentleman has never made the public understand that the country has gained £600 million or more in the last two years from the improved terms of trade alone—an amount, incidentally, equal to the whole housing programme last year. He has obscured the fact that 1952 was a very bad year, in which employment and production fell for the first year since the war; that this was the reason for his Budget reliefs a year ago; that production has still only a little more than recovered to the 1951 level; and that exports and investment are still lagging, in spite of the very large reliefs in profits taxation given to stimulate them last year.

The Chancellor has never made clear that, despite all this good fortune, the gold reserve today is still much lower than in September, 1951, and has only been kept from dropping further in the last few months by heavy American military expenditure all over the world and by large consignments of Russian gold to this country. I do not know why the right hon. Gentleman is so coy about the Russian gold, because it is all made clear in the "Economist" this week, as he may have seen.

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

I was not being coy about the Russian gold, which I very much welcome. I was simply disputing the extraordinary inaccuracy of the right hon. Member's reference to the reserve.

Mr. Jay

We are glad to have the Chancellor's admission that the Russian gold is coming in and that he welcomes it. I do not think: the right hon. Gentleman would really deny that the reserve is still much lower than it was in September, 1951. I hope the Chancellor would agree with me that one reason the sterling area has stood up better to the present American recession than it did in 1949 is that very programme of deliberate but perhaps rather austere investment under Sir Stafford Cripps in oil refineries, electric power production and greater home food production, which are giving great assistance today. Indeed, to quote one figure, to illustrate the success of the United Kingdom dollar export drive, the total value of United Kingdom dollar earnings last year was more than four times as great as it was in 1946; and most of the rise actually occurred before 1952.

Perhaps the greatest fraud of all practised on the public is the Chancellor's continuous silence on the huge increase in Government expenditure since he took office. Many hon. Members opposite—I say this more in sorrow than in anger—have deceived themselves by their own propaganda into thinking that great economies could be made without changes in foreign or social policy. I sometimes find it rather disturbing that so few of the public today seem to understand or even care about the expenditure side of the Budget; and this is one of the few opportunities in the year when we can look at the whole picture.

Perhaps one reason for confusion is the muddle between the "above the line" and "below the line" expenditure; and I would personally like to suggest to the Chancellor that the time has come to go over to the "alternative classification," started in the time of the Labour Government which at least shows, first, current, and second, capital, expenditure. That might enable people to see more clearly what is really happening.

Let us look at the record. I have always been a close student of Churchillian economics. Therefore, I begin with that one of the two 1951 Election manifestos which was written by the Prime Minister and not by the Chancellor. It was headed "Conservative Faith," and very conveniently there is a copy of it in "The Times" book on the General Election which is with us all the time. That manifesto stated that the Labour Government had "spent more than £10 million a day, or £22,000 million in six years of office." But the present Chancellor of the Exchequer, on the same basis, is spending at the rate of £30,000 million in six years. The manifesto then says: No community living in a world of competing nations can possibly afford such frantic extravagances … A Conservative Government will cut out all unnecessary Government expenditure, simplify the administrative machine, and prune waste and extravagance in every Department. So much for Conservative faith.

Now let us turn from these Churchillian fantasies and look at Conservative works as portrayed in the cold daylight of the Chancellor's White Paper. I take the conventional figure of expenditure above the line, and compare the actual figure of spending in the last year of Labour responsibility, 1950–51, and the Chancellor's estimate for the year now starting. The increase from that year of Labour's "frantic extravagance" is from £3,258 million to £4,523 million, a rise of £1,265 million, or, I think, just under 40 per cent.

Hon. Members opposite may very likely think that that rise is wholly due to defence, and that other expenditure has been cut down. But, out of that £1,265 million, only £778 million is due to defence, which leaves an increase of £487 million for other items. Of that, £92 million is due to the rise in the debt interest and another £352 million in the civil votes—from which I exclude Ministry of Supply defence items. Indeed, the rise is larger because the Exchequer contribution to the Insurance Fund was reduced in the interval. The increases on the civil side are mainly for education, health, National Assistance, and family allowances. We have always said that we believe those increases to be right and necessary. But what becomes of all the propaganda about "frantic extravagances"?

Let us ask ourselves soberly this afternoon what is the real reason for the total disappointment of Tory economy hopes, and what is the realistic Budget problem of the future. I suggest that there are four main reasons for the disappointment of those hopes. The first—and biggest single one—is the defence Programme, on which incidentally we had already embarked when the Prime Minister made all those orations about frenzied extravagances, and all the rest of it. The huge cost of defence is yet one more powerful argument, if one is needed in this Committee, to prove again that there can be no major relief to the Budget until we achieve agreed international disarmament.

I suppose that was what the Chancellor meant by his rather curious remark last Tuesday: During the coming year we must see to it that we obtain some definite relief from the defence burden."—[OFFICIAL REPORT, 6th April, 1954: Vol. 526, c. 208.] According to HANSARD, the right hon. Gentleman said "During the coming year" and not "years" That is quite different language from the Defence White Paper and, indeed, the Service Ministers' speeches in the Defence debates. Does this mean—and we must press the Chancellor to answer this—a big change in policy? Or is it just another echo of the fierce wrangles now rending the Cabinet on every subject from teachers' pensions to the Prime Minister's indiscretions?

The second reason for the Chancellor's failure to fulfil his economic promise is that, as we have always argued, there never were examples of enormous administrative waste which could save hundreds of millions of pounds. To give one small example, if the Committee look at the Ministry of Food Estimates this year, the total estimate is for £256 million —which is perhaps not worth much, as the Chancellor was £162 million out last year. There is to be a cut this year of one-third in Ministry of Food salaries. If I read the estimate aright, it will presumably involve a major demobilisation of that Ministry, which will, of course, bring delight to the hon. Member for Kidderminster (Mr. Nabarro). But he has not probably realised that that major cut will save, according to the Estimates, £3½ million out of £260 million.

Let me assure the right hon. Gentleman that I am far from saying there are still no administrative economies to be made. Certainly there are. We have had disturbing examples in the reports of the Select Committee on Estimates of wasteful expenditure, for example, on Civil Defence. The Chancellor, to give a small example, might also look again at page 44 of the Ministry of Works Estimates for what are called "Diplomatic Residences and Offices Abroad." Do we really need to spend, in one year, £600,000 at Bahrein, £190,000 at Cairo, £400,000 in Rome and £1½ million in Delhi, to mention only a few on a long list? Even so, here again let us note that the potential savings are in hundreds of thousands and not in tens of millions, let alone hundreds of millions.

The third reason for the failure of the Chancellor is the simultaneous growth in these last years of the number both of children and old people as a proportion of our total population. That has been going on ever since the war. It is well known, though it was apparently overlooked not merely by the Prime Minister, when he made those speeches in 1950 and 1951, but also by the present Economic Secretary when he was helping to prepare them.

Fourthly is the discovery of the Chancellor, after two and a half years, that we were right all the time in telling him that the food subsidies could not be blithely cut, as a carefree act of Treasury policy, without far-reaching damage to our whole economy. What an amazing story is the Chancellor's record over the food subsidies. In his 1952 Budget he announced a cut in the then figure of £410 million by £160 million, and immediately raised other expenditure by £80 million as a counterweight to that saving. But in that year he spent well over £300 million. In last year's Budget he said firmly that the subsidies would be £220 million. Then the facts of life intervened again, and the Chancellor, swearing he would ne'er consent, consented to spend £325 million after all. This year he abandons all pretence of virtue, and £325 million it is to be.

By this abortive effort the cost of living has been levered up, industrial peace disturbed, our exports hampered, political pledges broken, and, at the end of the day, if we add the £80 million increase in 1952 to the present £325 million, no money saved. Nevertheless, I congratulate the right hon. Gentleman on having accepted our arguments after two and a half years.

We in the Labour Government always maintained that the subsidies were justified, for two powerful reasons, apart from the overriding motive of social justice. First, we realised that any sweeping cut would send up costs and damage the export trade. It is remarkable to remember that in his 1952 Budget statement, when he made the cut, the right hon. Gentleman said almost nothing about the problem of wages, prices and exports. Yet in this year's Survey we are told that if the prices of our exports generally were to be pushed up by a rise in internal costs, we should be taking a short cut to national bankruptcy. There again, hon. Gentlemen opposite have learned a lot.

They try to argue sometimes that the cost of living, despite this queer subsidy policy, has been stable under the present Chancellor. In fact, the Official Index has risen by 10 per cent. But what matters, from the point of view of exports, is not the absolute movement in costs, but—what hon. Gentlemen opposite either forget or conceal—how they are moving relatively to those in our competitor countries. Our complaint is that living costs have been forced up here, at a time when world prices have been falling.

Some Ministers—including the Parliamentary Secretary to the Ministry of Pensions in a debate on Friday, 19th March,—have been trying to deny that we have been benefiting from falling world prices. Yet the Index of British Import Prices—and that is what matters—has fallen continuously since February, 1952, and is now lower by about 20 per cent.—worth about £600 million or £700 million of our import bill.

I think this cost-of-living story can best be told in this way, if the House will forgive a few more figures. In the two years, under the Labour Government, from the third quarter of 1949 to the third quarter of 1951, our import prices rose by 66 per cent. But the Retail Price Index rose only by 14 per cent. Under this Government, between the third quarter of 1951 and the last quarter of 1953, import prices fell by about 17 per cent. but the cost of living went up, not down, by a further 10 per cent.

Or compare our cost-of-living record with that of other countries. Since April, 1952, when the Chancellor first made his subsidy cut, living costs have risen here despite falling world prices. Over that same period, they have gone down in Germany, France, Canada and Belgium, according to the United Nations figures. They have remained stable in Holland; and the rise has been less than here in the United States, Switzerland, Sweden, Italy, Denmark and even in Argentina. That includes most of our main industrial competitors.

In the past year the Chancellor has achieved the astonishing feat of slightly raising the food subsidy figure, at a time when food import prices have been falling, and, according to his own Survey, leaving us with retail food prices averaging 5½per cent. above 1952. There, indeed, he has worked a miracle.

We also maintained subsidies because we always believed that they were essential for ensuring a high level of home food production against the uncertainties of world economic conditions. I see that Professor Austen Robinson, whose opinion I regard with respect, as I am sure the Chancellor will also, in the "Three Banks Review" for March has reaffirmed his view that a further one-third increase in home food output is a necessary insurance against the vagaries of world prices and food supplies.

What is likely to be the future of world prices? I must confess sometimes to feel-big that, in this matter of future world prices, as with the football pools, the small child sticking a pin in a bit of paper is as likely to get the right result as the economic Solomon in all his wisdom. [HON. MEMBERS: "Hear hear."] If the uncertainty is as great as that, as hon. Gentlemen opposite evidently agree it is, surely that is precisely the reason we ought to pay a substantial national insurance premium to preserve our own home food output?

For all those reasons, we ought to recognise honestly in the House that, until we can achieve real international disarmament, we must expect, like every progressive democracy, a pretty high level of public expenditure. It is partly the price of security against war and famine, and partly of that redistribution of in come and wealth, which makes the Welfare State possible, and which we, on this side of the Committee at any rate, are glad and proud to support. If so, it follows that huge cuts in direct taxation are not likely soon to be possible. The hon. Member for Spelthorne (Mr. Beresford Craddock) seems to be thoroughly realistic in his estimate of what we have to do. The hon. Gentleman more or less accepted this conclusion; and drew the moral that in order to maintain Defence and social services we must increase the wealth of the country—in other words, increase productivity—on which my right hon. Friend the Member for Blyth (Mr. Robens) will have something to say tonight—

Mr. Beresford Craddock (Spelthorne) indicated assent.

Mr. Jay

The hon. Gentleman seemed to be more realistic than the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton), who first talked about the hardship of the pensioners, and then went on to suggest that by some wonderful new machine of Treasury control somehow or other sweeping cuts could be made.

I believe that with the rise in production and national income some lightening of tax rates ought to be possible. But priority should go to reliefs for small Income Tax payers first, and exemption of necessities from Purchase Tax. Ideally, we should give reliefs in such a way as both to encourage saving, and to discourage dis-saving, if I may be allowed to use that word.

Here I should like to remark in passing to the Chancellor that we are glad that he did not rush hastily into accepting the Tucker Report recommendations on taxation and pensions. They raise far-reaching issues of social justice, and would cost a great deal in the end; and we all need some time to think them over before we make up our minds.

But if that is true, the Committee would be wise to accept the conclusion that a pretty high level of taxation on business profits will be necessary to our expanding economy. The last few years have shown the complete falsity of the traditional Tory argument—I think that many hon. Members opposite have now deserted it—that it was lack of money due to taxation which was holding up industrial investment. Nevertheless, I agree with what I take to be the view of hon. Members opposite that if the Exchequer is going to absorb large sums of money in revenue from business profits, it must use that revenue on an adequate scale for capital development as well as for current spending.

I see no reason why loans out of surpluses in the Budget should not be made available to private as well as to public industry for development. Indeed, if we go over to the "alternative classification" in the Budget, it might make that idea more practicable. That may be the secret of the development of some of our future Budgets. At least it would have the advantage both of encouraging industrial investment, and assisting a more democratic ownership of property, in which hon. Members opposite believe in theory and we believe in practice.

I should prefer that method of stimulating investment, as a first thought anyway, to the so-called investment allowances which the Chancellor is introducing this year. Certainly these investment allowances are better than doing nothing to stimulate investment. But I still doubt whether they are better than the 40 per cent. initial allowance would have been. The Chancellor's new scheme is a subsidy, or free gift, out of the taxpayers' money to private firms, equal to 9 or 10 per cent. of the value of the plant installed, whether the firm would have invested anyhow or not, and whether it can afford it or not.

I believe it is a good principle that, where public money is used to encourage capital development, it should be done by loan rather than by way of gift. In that way the new assets created remain in public hands. We followed that method with great success throughout the Development Area policy, so that all the factories built with public money are now publicly owned. I believe that that is preferable to the Chancellor's subsidy method.

If the Chancellor is arguing that there was no other means than this subsidy of inducing private industry to undertake this investment which is in the national interest, he is advancing the strongest argument for wider public ownership of British industry that we have heard for some time in this Committee. In any case, if the great difficulty is that private industry will not invest, why did the Chancellor not reduce the Bank rate? Why not at this stage have rather cheaper money? That method, through the lower debt interest, would save public money, and not increase expenditure, as will the investment allowances. What has become of the famous flexibility of monetary policy as circumstances change? Perhaps the Chancellor will tell us tonight why he did not draw that conclusion.

I should like to make one emphatic further appeal to the Chancellor. The truth is, of course, that the right hon. Gentleman has dissipated so much of last year's good fortune in bonuses for consumption by people not acutely in need that he has very little left to play with today. Nevertheless, judging by the speeches that we have heard in the last three days, I think that almost the whole Committee is willing and indeed anxious to vote him the money needed for adequate increases in old-age pensions, war pensions, insurance benefit rates. National Assistance and equal pay. In- deed, I believe that the Chancellor suggested on television the other night that he did not necessarily have to do this in the Budget but could do it later. If he is vacillating, we should like to push him on. We are fully ready to support, if necessary, the restoration of the profits taxation necessary to make those changes, out of the £340 million which the Chancellor has given in relief in direct taxation.

If it were open to us to put such a Motion on the Order Paper tonight, we should do so and support it in the Division Lobby. But though more votes were given to the Labour Party in the last Election than to the party opposite, and even more at Edinburgh, East last week, nevertheless, owing to the peculiar arithmetic of our electoral system, we happen to be sitting on this side of the Committee at the moment. Therefore, as we are unable to put such a Motion on the Order Paper today, I urge the Chancellor to search his conscience again, and do so himself. I can pledge him that, if he does, he will receive the unanimous support of everyone on this side of the Committee.

3.58 p.m.

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

It may be convenient to the Committee if I speak at this stage. This is the final day of the debate on the Budget and it may be appropriate if I say something about the commercial impact of these Budgetary proposals. The right hon. Member for Battersea, North (Mr. Jay) made a very agreeable speech. It seemed to me that "The Man in Whitehall" was beginning to acquire a certain modesty. He told us that the way in which he judged the future trend of world prices was the same as he did his football coupons, namely, by sticking a pin in the paper. We had always wondered how the Economic Surveys were prepared under the Socialist administration and now the secret is revealed.

Mr. Jay

The right hon. Gentleman must not rewrite my speech as much as that. What I said was that I have sometimes wondered whether that method was not as liable to get a correct result as any other.

Mr. Thomeycroft

So have we.

It seemed to me that the right hon. Gentleman's main theme was to read us a lecture on the evils of excessive Government expenditure, a lecture to which we listened with great sympathy and understanding. We fully appreciated it when he told us of the many difficulties that there are in the way of cutting back expenditure, but, of course, if the right hon. Gentleman wants us to spend less, the first step is to be sure that he does not urge us to spend more.

When one considers what the right hon. Gentleman and his right hon. and hon Friends propose—the tying of pensions to cost-of-living increases, the abolition of the National Health Service charges, and increasing food subsidies—taking the lowest figure from the "New Statesman and Nation," which in this connection might be regarded as a conservative estimate, the party opposite are on record as wishing to spend a further £600 million or so. It is a little difficult to regard the right hon. Gentleman very seriously if one remembers that his real proposals are not that we should cut back expenditure but that we should increase it by a large amount.

The criticism which he made, and which has been made by many hon. Members in this debate, is that this is a dull Budget. Speaking from a commercial point of view, I think that there are some solid virtues in a dull Budget. Dullness is only possible or defensible against the background of a stable financial situation and a sound economy. If anyone wants excitement in a Budget, then, of course, we could go back to the period of recurrent crises which preceded the time when this Administration took office.

Of course, if this country is in the middle of an inflation, one can have an exciting Budget. The revenue soars, prices soar, the overseas deficit soars, private savings fall, and in an endeavour to rectify the situation taxes are put up. But if at the present time Canada and the United Kingdom can manage on what can be called "carry-on" programmes, that is not a reflection on their Governments, but a tribute to the sound administration with which the countries are managed.

I know how much the right hon. Member for Leeds, South (Mr. Gaitskell) dislikes medical metaphors, but, if I may say so, the patient is no longer in a high fever or in the last stages of acute anæmia. He has got out of bed and is going to work in a bus or is going in a train to the office. It may be a dull and unexciting thing to do, but it is a very sensible and profitable thing to do, and one which I hope will continue for some time.

I had hoped this afternoon to speak shortly about one or two matters which particularly affect the Board of Trade. I do not propose to choose the easy ones. I want to say something about investment and something about exports. I am not arguing that there is no cloud in the economic sky, because there always will be cloud in the economic sky. Nor do I deny that good fortune, as well as good management, has played a part in our recovery. But I would say to the right hon. Gentlemen opposite that they should be a little careful about how they keep rubbing in the luck that dogs our footsteps, because if they are not careful we are going to be known as the lucky Government, and a lucky Government is going to be a popular Government in this country.

There is another thing about luck. There are two sides to this story. Falling import prices do not mean a rising demand abroad. While an alteration in the terms of trade certainly helps the Chancellor, it presents a very real problem to the President of the Board of Trade. We cannot have it both ways, and I think it worth while bearing that in mind.

Now, as to our situation, I do not propose to re-enter the statistical struggle which goes on in these debates; indeed, the precise figures are probably less important than the direction in which we are moving. It seems to me that, on all the evidence, we are moving in the right direction, perhaps not as fast as some of us would wish, but in the direction in which we want to move.

Production is moving up, and the increase is not simply due to the fact that there are more people at work, though there are—and good luck to them. The increase is due to the fact that they are producing more. Productivity is moving up. I hope that the right hon. Gentleman opposite is going to make some remarks upon this subject later in the debate. It is a subject which, I suppose, can be said to be primarily one for industry and the trade unions, but there are rôles which the Government can perform. I wish to say how much we all value the work of the British Productivity Council, under the very able chairmanship of Mr. Tom Williamson, in this field.

The index of wage rates has moved up faster than the index of retail prices. Real wages are therefore up and consumption is up. The gold and dollar reserves are up. They moved up each month in 1953, except in December, when we were paying back the loan. Exports have recovered progressively during the whole of 1953. All those things are moving up at the present time, and the fact that they are doing so means something very real in the standard of living and in the standard of human happiness of this country.

While these things have moved up, taxation has moved down. This year we shall get the full benefits of the tax reductions which were brought about last year. The additional benefit, on the basis of the 1953 Financial Statement, represents a fall of £90 million. If we add the £2 million for the Purchase Tax adjustments in January and the £4 million in this year's Budget, it means that over that period there has been a taxation reduction of the order of £100 million. With production, exports and productivity moving up, taxation has moved down. There are sensible people who see some connection between these two events.

Now I wish to take one or two of the difficult points, and to say, first of all, something about investment. I do not think that anyone could lay his hand on his heart and say that he is content with the level of investment in the private manufacturing field. If the level of total investment is up—which it is—that increase concealed a virtually static position in the private manufacturing field, and I think that most of us on both sides of the Committee have considerable doubts whether we are investing enough, that is, enough to meet the needs of an increasingly competitive world.

We are certainly investing far less per head than the United States of America, though on the figures—as far as I can assess them—it does not appear that we are investing much less than Germany. We are as a nation putting money into the public sector of industry. We are putting money into houses. I am not saying that is wrong; indeed, there are few things more important than the basic industries and homes for our workpeople. But I doubt whether we are putting enough in the private sector.

I do not think that anyone should be too dogmatic as to the reasons which determine a man either to invest or to wait before doing so. They are many and various, and different opinions can be held about them. It is true that many companies probably had enough liquid resources to invest, but not all had. The pattern cannot be applied over the whole field. I think it fair to say that one factor which must weigh somewhat in making a decision is what is the net reward and whether it is adequate to the risk that these people take. I think that in many cases the men who have asked themselves that question must have answered "No."

The right hon. Member for Bishop Auckland (Mr. Dalton) and the right hon. Member for Battersea, North referred to increases which they proposed in the Profits Tax. I am not debating the ethics of putting up the Profits Tax. All I say is that it is quite certain that such an increase would tend to make people invest less, not more, and would damage rather than augment the competitive strength of the country.

For those reasons, I must say, as President of the Board of Trade, that I welcome the growing effect of the tax reductions made last year which are coming into their full effect this year, and the additional aid provided by the investment allowances this year. These measures are concentrated in giving help where help is most needed, that is, in the encouragement of industrial investment.

Now a word on exports. There is one thing to remember about export figures, and I say this against some rather good March figures which I am going to mention in a moment. The absolute figure for exports is not worth very much. One can have a very high level of exports, but very little profit. A high level of exports brought about against a background of world inflation, of booming imports at high prices and recurring balance of payments crises, fosters precarious conditions in the export market. There may be an appearance of confi- dence, but it is a situation which can end in trouble, as it did when the Korean war boom fell away. Export crises and balance of payment crises were well on the way by the end of 1951. I am not here debating whose fault it was, or anything of that kind; I am merely stating the facts.

Firms' order books give a delayed action effect on exports, and in the first half of 1952 exports were still high, principally because there were still orders placed at the tail end of the current year and in the second half. Then events began to take effect. Orders fell away very steeply, as the Committee know. What we should recognise is that 1953 was a year of recovery. It started slowly. It was not as fast as we should have liked. It was not better than previous periods to the extent that we should have wished, but it was going in the right direction. Exports were actually going up during the whole of 1953, and perhaps, on the whole, rather faster towards the end of that year. But at the very end, and in January and February of this year, we began to feel something of the effect of what in the United States is called "readjustment."

I am glad to be able to say that our exports for March are well up on January and February. They are provisionally valued at £246 million—a higher rate than the fourth quarter of last year. With imports valued at £299 million and re-exports at £11½ million the excess of imports over exports on a trade basis was £41 million, well below that of the corresponding period of last year. Again, may I say that I do not wish to overstate the position, particularly on figures for a single month, but I think that we can say that we are moving in the right direction.

We must pay a tribute to the men who do the job, the directors, managers and salesmen, and all the workers in the industries concerned. Beneath all the statistics quoted may be discovered some very fine achievements. Our exports to North America, which in 1953 reached the record figure of £316 million, this month topped £24 million, which is 12 per cent. above the previous two months and equal to the first quarter of 1953. This was achieved despite all the difficulties in that market, and hon. Members who know of them will appreciate that fact. Not only should we pay tribute to the firms concerned, but also to Sir William Rootes and the Dollar Exports Council, who have done magnificent work in this field. New industries and old are sharing in this. Textiles have recovered from the situation which faced them in 1952. All our export industries have faced a much harder, tougher and more competitive world, but, on the evidence, I think that there is ground for the belief that we can live in it, and find success.

I do not propose to enlarge on the export services of the Board of Trade, except to say that some time ago a Select Committee of the House examined our export services. I am glad to say that the Committee found some kind words to say about them. They also said that we were hiding our light under a bushel, which is seldom said about a Government Department. We have been prompt to take their advice. My right hon. Friend the Minister of State, Board of Trade, has been in charge of the campaign to publicise these services. Thanks to his efforts, and to the renewed and increased interest of industries in this country in the export markets, the work both of our export services branch and commercial officers overseas has been considerably expanded in recent months.

I have been asked some questions about another Department for which I am responsible, the Export Credit Guarantees Department. As my right hon. Friend announced, that department has decided to develop its special bank guarantees. These guarantees are not necessarily designed to provide longer credit terms, but to meet the difficulties which extended credit terms place upon exporters of major capital goods, a point mentioned many times recently by informed writers. It transfers the burden of lending, after the goods have been accepted by the customer, from the exporter to the bank. We shall watch this development and decide whether any further adjustments are needed as it is brought into effect.

Mr. Alfred Robens (Blyth)

This is in respect of capital goods?

Mr. Thorneycroft

It is in respect of medium-term credit—it would be mainly in respect of capital goods.

Mr. Hugh Gaitskell (Leeds, South)

Is the decision about whether this credit is to be made available the responsibility of the Export Credit Guarantees Department, or the banks, or who?

Mr. Thorneycroft

Of course, in principle, the decision on this matter of credit, as with all others, rests with my right hon. Friend the Chancellor of the Exchequer. But once the decision in principle has been taken, the individual decision about whether a particular case is appropriate for this type of guarantee must in the last resort rest on the department, on ordinary commercial considerations.

Mr. Harold Wilson (Huyton)

Will the right hon. Gentleman explain the reason for the difference between the 85 per cent. ratio in one case and the 90 per cent. in the other, which I gather has caused a great deal of concern to many who would otherwise welcome the proposal?

Mr. Thorneycroft

We shall certainly consider that to see how it develops, but there is something to be said for people other than the Government taking some part of the responsibility for judging the risk which is being undertaken. I think that there is some merit in having it shared between the Government and the private interests concerned. There is another point. In the development of this type of guarantee one does not know the amount of demand which might be put upon it and, as a result, the amount of credit which might be extended. If we go in for unlimited guarantees of this kind, there may be some danger of a too high development of credit overseas. But I am not being dogmatic about this. I think it a sensible way of starting this arrangement, and we shall have to watch it as it goes along.

In that connection, and in reply to one or two hon. Gentlemen who have spoken during the debate, may I remind the Committee that the Export Credit Guarantees Department is a commercial and not a charitable institution. It must be solvent. It must provide services without subsidy from public funds. On this basis I claim that it has pioneered major developments in international credit insurance as it exists today.

I said without subsidy, and I mean that. The kind of trading world we want is a fair field for trade and no favours. A number of hon. Members have referred to the advantages which some of our competitors receive from export subsidies, in one form and another, provided by their Governments. Some reference has been made to the German practice, which allows reductions from taxable profits of 7 per cent. of export turnover, half by remission and half by tax deferment. Then there is the French system, in which there are substantial remissions of social welfare charges geared to the export turnover. We take the view that these tax remissions—which are not granted to industry generally, are not merely relief for exported goods from taxation on internal consumption, but are related specifically to exports—are an unfair trading technique.

Our policy has been, instead of adopting such practices ourselves, to seek to get agreement to abolish them. I would add that the Federation of British Industries has made vigorous and praiseworthy efforts to the same end. It has so far secured agreement with the Council of European Industrial Federations, its opposite number overseas, to seek to persuade the respective Governments to keep a standstill agreement; that is to say, to persuade Governments who might be thinking of retaliating not to retaliate.

I have discussed this matter with the German Minister for Economic Affairs, and we agreed then that the stimulation of exports by artificial incentive schemes was undesirable. We agreed to try to secure their elimination on an international basis. All these efforts have not been without some results. The currency retention schemes, which were some of the worst, have generally disappeared. During the past 18 months there has been no significant extension of the existing incentive schemes, nor has there been an introduction of new methods. However, I must say that the situation is still far from satisfactory.

There is a real danger here to European trade. The stage might be set for a race between countries in providing exporters with ever bigger and bigger subsidies. If that race started, it would have a damaging effect on all concerned and the European economy in general. I can see the temptation for a country which is in balance of payments difficulties to adopt some of these artificial methods, though I think that the temptation should be resisted.

In the case of Germany, however, one would have thought that whatever devices were needed to rebuild her shattered economy—and the whole world has watched with admiration the way in which Germany has repaired her shattered economy—whatever artificial aids were needed for that purpose, Germany's economy as a whole is not in need of aid of this character. It is not an economy in need of crutches. We very much hope that they will get rid of them.

My hon. Friend the Economic Secretary to the Treasury referred in his speech to our willingness to repay part of the European Payments Union debt in order to help to readjust the Union's arrangements. He emphasised, I am sure the whole Committee would agree rightly, that creditors must play their part in these matters as well as debtors. In particular, he said that the creditors must help to secure a smooth working system. The kind of artificial aids to which I have been referring in our view clearly hamper the establishment of such a smooth working system as all of us would desire.

I have dealt with some aspects of the Budget which are of special importance and interest to the Board of Trade and to the country as a whole. In conclusion, I would say that, of course, the aims of our commercial policy remain constant— to get rid of inflation at home; to balance our accounts abroad; and to promote the maximum volume of world trade. I think that I can claim that we have made some appreciable advance towards all of them.

The constant theme of the debate, reiterated by the right hon. Gentleman the Member for Battersea, North, was that we should spend less, tax less, and leave more room—I do not think that he quite followed us in this—for initiative and enterprise. I have no quarrel with these aims, which must be vigorously pursued, but upon one thing I think we might all agree. Anything in the nature of a really substantial increase in public expenditure would be likely to be disastrous to the fortunes of the country at present. The right hon. Gentleman the Member for Dundee, West (Mr. Strachey) has left now, but I would say to him that anything in the nature of an attempt to impose rigid controls on foreign transactions, or the widespread reintroduction of import control, would strike a heavy blow at our economy at our most vulnerable point—our export trade. We therefore reject such suggestions, and I hope that the Committee will reject them and agree that we should concentrate on how to proceed further and, if we can, faster, on what I think all fair critics must now judge to be the right road.

Mr. Robens

Before the right hon. Gentleman sits down, will he clear up this matter of the Export Credit Guarantees Department? I asked him a question, but I did not want to disturb the tenor of his remarks by further questions, so I waited until now. The Chancellor emphasised that this was for major capital goods. I understood the President of the Board of Trade to say that it referred to any goods and that the applications would be judged on their merits. Which is it? Is it capital goods alone, or consumer goods?

Mr. Thorneycroft

It is the medium-term credit, which is the normal term of credit used for capital goods. It is not proposed that the Chancellor or I myself should vet the applications which come to the Export Credit Guarantees Department. Although the principle must be laid down by the Government, the actual decision whether any application is suitable for guarantee must be left to the Department.

Mr. Robens

The Chancellor clearly stated that this was for major capital goods exports. It is important to know precisely whether it is for that alone or whether it can cover a number of other fields.

Mr. Thorneycroft

It refers to the terms of credit and not to particular goods which are put under it. The decision on detail will be for the Export Credit Guarantees Department. To the best of my knowledge, that is the answer. If I find that I am wrong, I will let the right hon. Gentleman know.

4.27 p.m.

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

At the outset, I should like to thank the Chancellor for introducing his amendment covering the holding companies that were set up last year to avoid Income Tax. He was obliged to act, but, on the other hand, had he acted last year when we suggested our new Clause he would have saved several millions for the Treasury. However, he has done it now, and we are grateful for it.

I should like to follow the President of the Board of Trade on one or two matters. The first is the excuse he made for business enterprises not having invested as much as he and the Chancellor think they ought to have done. He advanced one or two reasons why they have not invested as much as was expected. One was that perhaps the return would not be high enough. I wonder when the Chancellor is ever likely to be able to look at an economy where the returns have been higher than they have been during the last 12 months.

The Chancellor made a most important statement in his Budget statement on the question of investment. That is the theme which I wish to pursue, because he knows as well as we all know that all his concessions and allowances last year—whether in terms of Income Tax or Excess Profits Levy, or whatever it may be—did not do the job which he said they would do. That means to say that we must re-think on this question of industrial investment in the private sector, because those steps which lead to a response in consumption do not work in the same way in the investment section. The two things do not run together.

The Treasury organ has played its familiar tunes for many years. We pull out the stop of the restriction of credit and bring materials and goods on to the market so that prices fall. We pull out the stop of Income Tax relief and mop up a bit of unemployment here and there. All these are familiar devices which we have seen during the last few years.

Where did the money go which was released last year? The Chancellor knows quite well where it went; unfortunately, too much went in increased dividends and bonus scrips. If ever there were a year when investment should have been made it was last year, because on the horizon we could see the necessity for improving our competitive ability. What did we do? Very little. It is no use the President of the Board of Trade excusing the private sector of industry for not having done what he thinks it ought to have done. The factors were there—the upward trend of profits, a betterment in the balance of payments, prices of raw materials going down and yet export prices being fairly well held. What more could the private sector want?

Can the right hon. Gentleman hold out any better prospects to induce private industry to invest next year? The investment still has to be done. If the right hon. Gentleman can hold out better prospects, he did not do so in the Budget, because many of the things which he advanced in the Budget were the very things which will deter the continuation of private investment in industry. The share index of the stock exchange reached its highest point since 1935, yet there was no response worth talking about.

I propose to make one or two suggestions which some Government or another —either this Government or one which will follow—in my opinion must take into account in the future. Last year the Budget reverted to the 20 per cent. initial allowance, with 10 per cent. on buildings. I want to make a few constructive comments on buildings. Under the old initial allowance, 10 per cent. was allowed as a deduction in the first year, plus 2 per cent. per annum for the next 45 years until the original cost had been completely written off.

Under the new proposal—this big new inducement to take up the slack—what does the Chancellor propose? We must bear in mind all the favourable events of last year which helped to induce industry to invest. This is all the right hon. Gentleman is giving to industry in terms of assistance; under the new proposals 10 per cent. will be allowed as a deduction in the first year, plus 2 per cent. per annum for 50 years, until the original cost has been completely written off.

I have gone into this matter very carefully, having taken the Chancellor's advice last year in carrying out investment in the small business which I control. In terms of investment next year, what do I find? I find that the new scheme gives no immediate incentive to erect new buildings at all. If it does, I shall be pleased to hear about it. There is no difference in the immediate relief, but there is an additional allowance of 2 per cent. in the 47th, 48th, 49th and 50th year of the life of the building. If that is not so, I should like right hon. Gentlemen opposite to correct me.

What on earth is the use of that to me? But let me follow that up and see where it leads me. I am not the only person in this position. There are many people with older plant and older buildings than mine who see that unless they are able to put in new plant they will drop out of competition. It is no use the President making excuses at the Box and saying that the return on their capital outlay was perhaps not sufficient to induce them to make this investment when what we have to look forward to is a hard uphill fight to maintain trade as we have it and to be able to sell our goods overseas in foreign markets at a reasonable price in competition with the Germans, the Japanese and anybody else.

It is my conviction that we can do it, but we cannot do it on the basis of pulling out these old organ stops in the Treasury. There must be a re-thinking. There are other factors this year which may deter people from investing. The United States recession may go deeper. Other hon. Members have been speaking of that and I do not want to follow them. I will leave it to hon. Members who know far more about it than I do.

In addition, competition in overseas markets may be keener. An upward trend in commodity prices is taking place. Without question, that is on the way, and it might develop further. Will the investment allowances provide the stimulus? If the initial allowances did not last year, then the new proposal will not do so this year. I do not know whether the President of the Board of Trade realises this, but many mills in Lancashire are closing down. Occasionally, in papers like the "Oldham Chronicle" and the "Manchester Guardian," we see reports of a company which has decided to liquidate its business whilst its assets are good, so that the shareholders will not have the long period of dripping attrition which took place when competition was severe between the wars. Companies have sold their mills by auction and distributed their reserves, and I do not blame them for doing it, but what do they say when explaining to their shareholders why they are doing it? They say that they are now too far behind in terms of buildings and plant ever to be able to compete again, and if anybody on the Front Bench opposite is interested, I will supply them with the names of the firms which have done it.

In my opinion, there is one very hopeful result that we may get out of all this. Hon. Members have probably read many times the reports published by the Anglo-American Productivity teams which have gone over to America. In practically every one of them, and I believe there are 67 altogether, they have stressed the difference between the amount of capital invested in manufacturing machinery and in buildings in America. In fact, most of them say that nowadays 75 per cent. of capital investment in America goes into machinery and 25 per cent. into buildings. I do not want to follow that up and give the reasons why it is so in America, because it would take too long, but I do want to ask how are we ever going to redress the balance. How are we going to get more machinery of the right sort into the right factories?

The reason why I have selected this aspect of buildings is this. We cannot put the right machinery into the factories because we shall never get the right machinery until we have the right factories. It may interest the Chancellor to know that, during the past year, some researches have been made into this question of the relation between machinery investment and building investment, and the President of the Board of Trade may remember that, last October, at Belle Vue, there was an international textile machinery exhibition.

I made it my business to go to the stands, particularly to those of the larger companies, and ask this question: "Does space play a big part in the design of your machines? Are you influenced by the space available to your customers?" The representatives of the largest organisations replied in this fashion: "Mr. Rhodes, put your hand out and feel it; this is a fine example. This is the best machine we have. But you do not think that we should have made a machine like this if we had not been precluded from making a better design on account of spacing considerations in the old cotton mills? Of course, it is of tremendous importance to us. We cannot design as we would wish."

Let no one run away with the idea that this is only a long-term aspect of this question. Unless we can tackle this job now and make some constructive steps towards doing it, there will be no long-term interest for our industries at all. It is now that we must act.

American engineers have been producing adaptable buildings. They are adaptable in the sense that they provide a large amount of space between obstructions, so that, when new machines are designed, they can be put in without being unduly restricted in size, and, in my opinion, that is one of the reasons for the success of American manufacturing industry. We must tackle the job here. Let the engineers get on with the job of designing the machines which they would like to design, but, first of all, let us give these men the chance to do that job by providing suitable buildings for them to go into.

One of our great manufacturing industries is the cotton textile industry, and, if the President of the Board of Trade noticed the papers this weekend, he will have seen that Mr. W. T. Winterbottom, a very knowledgeable man in cotton, and as good a cotton man as any in the world today, has been saying that he was looking forward to the time when the industry could get down to the provision of new cotton mills. He made the same remark at the annual meeting of the Master Cotton Spinners Federation. If it is necessary that new factories be provided in order that new machinery may be installed, is it likely that what we have got in this Budget will make the slightest difference?

I am asking the President of the Board of Trade and the Chancellor of the Exchequer to think this one over again in the next 12 months. If it did not succeed last year, it is not likely that it will succeed this year. What are the Government going to do? Are they going to let the industry rot in old buildings? They cannot do that. They will have to put in a new stop on the old organ and put in some new pipes as well. They cannot do it by old Treasury methods, but I will suggest a method by which they could do it.

They could establish a corporation similar in structure to the Industrial and Commercial Finance Corporation, whereby provision can be made for buildings to be supplied on an engineering basis. The old ideas have gone by the board, as American industry has proved. American engineers can produce buildings in seven different types, each applicable to a different type of industry. There is a certain type of building which is suitable for the textile industry, another type suitable for light engineering, another for chemicals and another for heavy engineering. It can be done.

If industry, with all the difficulties facing it today in getting decent prices, or even any margins at all, on some of the export trade, could look forward to a future in which it could get new factories on a low capital cost basis, built by engineers and financed by a corporation of the kind I have mentioned, which could let the factories to the manufacturers, it would make a vast difference. Industrialists do not really care whether they own the buildings or not. All they want is to be able to manufacture with a reasonable amount of security of tenure.

What they would not want is the basis which we have seen operating at Harlow, because if buildings are erected on a basis of £3 per square foot, a monkey is placed on the shoulders of industry of which it will never be rid. Industry cannot afford buildings at £3 per square foot capitalised at 5 per cent. For a factory of 10,000 square feet, it would mean a basis of £30 per week. That could not be done.

I therefore appeal to the Chancellor of the Exchequer and the President of the Board of Trade to give some real thought to this question. It is not a party matter at all, but one on which they could get a tremendous amount of support from industrialists, no matter to what party they belong. It could be done, I suppose, on the basis of industrial bonds, but no doubt the Chancellor knows the answer, and, as he is the all-powerful figure in the Government in modern times, I hope that he will, in the next 12 months, bend his mind to this problem.

4.50 p.m.

Mr. Arthur Colegate (Burton)

I desire to intervene for a few minutes on the subject of industrial investment, which is a most important matter. Reference was made to it by the right boa. Member for Battersea, North (Mr. Jay), who found it impossible to look forward to any decrease in the cost of social services and of defence, and said that we just had to bear it and do the best we could. I cannot accept that point of view.

I believe it is possible to increase immensely the productivity of this country and I can never join in disparagements of the British working man who, in normal circumstances, and especially when working for piece rates, is the best in the world. It is important to see that he gets the best tools, but for a variety of reasons he has not got them to the extent he ought to have them, at any rate in some industries. The urgency of this matter is not fully realised by hon. Gentlemen opposite or even by Treasury officials.

The right hon. Member for Bishop Auckland (Mr. Dalton) referred earlier in this debate to an Inland Revenue report on "Estate Duty and Family Businesses" in connection with the 45 per cent reduction, which I heartily welcome. If we wish to see entirely the wrong attitude towards new capital formation we should read that report, which prided itself on not breaking up businesses. We want increased productivity and want our businesses to go ahead, yet we levy upon them death duties, a form of taxation which requires them to give up some of their assets. That is not the way to get efficient industry or to make people wish to import new machines from America or Germany.

The right hon. Gentleman, as an ex-Chancellor of the Exchequer, quotes with approval this negative document. It was quite narrow in its scope, because it wanted to get certain statistics, and it got them, but its attitude to the family business was, "Let them sell some of their assets, or securities outside the business like an insurance policy that a man may have taken out for his wife." If we want people seriously to consider the formation of new capital we have to deal drastically with disincentives that exist at the present time.

Mr. J. T. Price (Westhoughton)

I am following the argument of the hon. Gentleman very closely, and, up to a point, it is reasonable. How can he explain the obligation placed upon the proprietor of a business to sell part of his assets to meet death duties as affecting the equity capital in the business? The company still retains the same amount of capital. It is merely that other people hold it.

Mr. Colegate

That is not so. The hon. Member is thinking of a big public company which may transfer 10,000 of its shares from one holder to another without affecting the assets of the business.

That is not the case with the family business which has to transfer one portion of its assets. What usually happens is that the widow has to get a manager or a son to carry on, and if she has to sell part of the assets of the business she diminishes the amount of capital, equity or otherwise, in the business, which then goes limping along for some years instead of acquiring new assets. Every business which is healthy and is helping us to move into the new world of higher productivity and higher standards of life, whether it is a small family business or a big business, must be enabled to acquire new assets which will make for greater productivity.

The right hon. Member for Bishop Auckland actually proposed to increase the tax on undistributed profits to increase its revenue by millions, and seemed to think that would make for investment in new capital.

Mr. Anthony Crosland (Gloucestershire, South)

My right hon. Friend proposed an increase in the tax on distributed, not undistributed, profits.

Mr. Colegate

I have HANSARD here. It shows that the right hon. Gentleman proposed a lower rate of undistributed profits and proposed to increase the tax on both distributed and undistributed profits. There is no question about it.

The right hon. Member for Battersea, North, did very much the same sort of thing when he proposed to take money from businesses and give it back to them in the form of a loan. Can we imagine anything more inefficient? Think of the waste of time and energy in taking the money out and putting it back. That is not the way. We have to see that as far as possible we get rid of disincentives like high Surtax, and high death duties, which are absurdly high. They are so high at present that hundreds of accountants, solicitors and insurance companies are thinking out legal ways of avoiding them.

There are two entirely different attitudes in this debate towards the formation of new capital. One side is asserting that we want new capital and the other side is proposing to put on a series of disincentives to prevent us from getting it. The success of basic industries in forming new capital is compared with the position of the private enterprise industries. The nationalised industries have the use of Government credit and suffer no disincentives. They have cheap money. It is difficult to judge how far it was wise for the nation to put so much money into nationalised industries.

Basic industries have monopoly markets at home, but let us not forget what happened when the State tried to come in to do the job that private industry had done. Let us remember the groundnut scheme. There has not been a single reference on the other side of the Committee to the amount of money invested in the groundnut scheme. It is difficult to judge the comparative value of investment in the basic industries of this country and investment in national industry.

Although I know that the statistics have been compiled with every possible desire to be correct, I have very considerable doubt as to their value and how far they represent what is invested in private industry. If one has worked up a business and controls it oneself it is very difficult to say how much new capital is formed each year. There is depreciation. It is very rare today to replace the machine, the ship or any piece of plant after, say, 15 or 20 years' service with an exactly similar piece of plant. There is always some improvement. How far that has been reflected in the statistics I do not know—but I should like to know.

My final point is a matter which I have raised often, sometimes with a little success and sometimes without very much sympathy from either side of the House. I think that there should be a full inquiry into the effects of death duties as they are now administered. Sir Stafford Cripps, in part, realised the damage which was being done. As a result he set up the Gowers Committee, for which I shall always be grateful. Other Chancellors, in their Finance Bills, have made special provision for works of art, and so on. Now the present Chancellor of the Exchequer has had to breach the death duty position by considering family businesses. The whole of agriculture has had to have death duties modified for the same reason.

As time goes on I think we shall find that section after section of national productivity will be so adversely affected by death duties that something will have to be done about them, as something has had to be done about agriculture and small family businesses. No political prejudice should be allowed to prevent a full inquiry as to how death duties may be charged in a different manner. As it is now the moment a man who succeeds in building up a good business gets to middle age he has to think of the terrible death duties he is also building up. Let us not be hypocritical about fortunes. New companies cannot successfully be formed without its creators creating a fortune for themselves as well as for the community. That is a good and not a bad thing.

This is a matter to which all parties might give attention. It is not a question of evading any particular of duty. If an inquiry were held to put death duties on a sound basis, I think we should gain immensely by stopping methods of evasion. That would remove disincentives, and allow that minority which has the capacity, the genius and the character to create new businesses to go ahead with confidence, and to expand the businesses for which they are responsible to the very utmost for the benefit of themselves and of the whole nation.

5.4 p.m.

Mr. Frederick Willey (Sunderland, North)

The President of the Board of Trade complained that this Budget has been described as dull and disappointing. It is far worse than that. It is a bad Budget. And it is a bad Budget because it is a carry-on Budget. It is carrying on the bad things done in the previous Budgets. In our discussions on the Budget last year I remember that the President said, in his charmingly naive way, that people ought not to talk about the Budget as an instrument to redistribute wealth.

I am sure, however, that the Chancellor of the Exchequer himself would agree that one of the purposes of a Budget is to redistribute wealth and, in fact, that course was followed in the two previous Budgets. The position this year was that those who were well off and who have had the advantage of the previous Budgets had had their appetite whetted and had expected more. They expected old-age pensioners, families with low incomes, women working and others to get more, too, but as a compensation for they themselves getting more.

Those who are less well off had had time to appreciate just what the Chancellor has been doing in the last two years and, of course, assumed that some adjustment would be made in their favour this year. All those expectations have been disappointed. In fact, when I heard the Chancellor of the Exchequer refer the matter to his conscience, I knew that all was lost. I prefer him to refer it to his cold, political judgment which, I am sure, has more warmth than his conscience, and I hope that he will be able to revise his judgment so as to enable those less well off, who have so far borne the full brunt of his policy, to benefit.

The Committee will perhaps not be surprised if I say a little about food, because that subject has been discussed during the last few days and a good deal of reference has been made to food consumption levels. It is quite clear—and I am much obliged to the Chancellor for setting this out so lucidly in the Economic Survey—that we ate much less in 1953 than in 1950. We ate less protein, less fat, fewer calories—by every test we ate much less. Let us take some instances from the Survey, and take that as a guide and not the Economic Secretary who, I am surprised, appears to be disclaiming any responsibility for it.

The Economic Secretary to the Treasury (Mr. R. Maudling)

If the hon. Member will look at the Table mentioned above that, he will see that consumption of food is higher in 1953 than in the year before.

Mr. Willey

I can understand the apprehension of the hon. Gentleman, and I intend to deal with his point in due course. The Survey shows, in cold, indisputable terms that in 1953 we ate less dairy products, less meat—and "meat" is the comprehensive term, including increased supplies of bacon and pork—less poultry, game and fish, less eggs, less oil and fats, less potatoes, less pulses and nuts, less vegetables and less grain products. That was the record.

We ate more of three items only— sugar, fruit and tea. I will not say anything about sugar, except that we have been able to deration it rather later than we anticipated when we were in office, and I will not embarrass the Government by dealing in detail with the position regarding sugar arising from the stupidity and incompetence of their Administration.

We have had more tinned and bottled fruit this year than at any time since the war. That is a good thing—but what about fresh fruit imports? It is true that we had more this year than last, but we had less than in 1951, 1950—less even than in 1949. This year we have the new fruit and vegetable tariff policy. That will probably mean that we shall have less fruit consumption this year than last, so the Government will not claim much credit for the second item.

Mr. J. B. Godber (Grantham)

The hon. Member says that the new import policy means less fruit than before. Perhaps he will expand that, because previously we have had definite quotas beyond which we could not go, but there will be no such quotas in future.

Mr. Willey

I do not want to revive a previous debate in which the hon. Gentleman took part. It is arguable, and I believe that it will be shown that fruit imports and consumption will fall.

The third item is tea. In the previous Economic Survey we did not get an item for tea alone, but for tea, coffee and cocoa. If we look at the figures we can understand why it is now only tea. Imports of coffee have fallen very considerably. They are less than in 1951–1952 and even less than 1950 and 1949. On the average, tea now costs 2s. a lb. more than when this Government took office. It went up by 4d. a month ago, and it will go up a further 4d. next month. Why? According to the City Press, The tea pitch has been bright. I am not surprised. If we look at the import figures, we find that in fact we imported less tea in 1953 than in 1952. Of course, we now have the very savage operation of the law of supply and demand, and this is very adversely affecting those classes of our community whom I mentioned when I began—the old age pensioners, those with large families, women workers and the others.

But let us deal with these figures in another way just to see what the present levels of food consumption are. The Minister of Food on 22nd March gave the House these figures. He said that the 1953 food consumption levels in terms of 1950—the last full year of Labour rule—showed that we had in 1953 90 per cent. as much cheese, 91 per cent. as many eggs, 96 per cent. as much flour, 97 per cent. as much mutton and lamb—in spite of all the ewe mutton that came over from Australia; and how much red meat?—78 per cent. of the beef and veal that we ate in 1950. The Minister of Food has said publicly, "But there is all the canned meat now." How much canned meat did we eat in 1953, compared with 1950? We ate 69 per cent. as much, and just over three-quarters as much butter.

The consumption of milk has fallen by 4 per cent., but the last two months' returns are very encouraging because they show that the fall has been arrested and the January and February milk consumption figures are holding their own against the corresponding figures 12 months ago. What have the Government therefore done?—because this is an appalling prospect for the Government. We had the price disincentive in the Farm Price Review. We had a cutting back of the milk subsidy by £16 million compared with the original Estimate and we have a price increase which is to come into effect later in the year, when the price of milk is to go up from 1st November by ½d. per pint. In other words, the arrest of that fall in consumption has shocked the Government into action to depress further the consumption of liquid milk in this country, showing, as I have previously argued, that they are deliberately following a restrictionist policy in the matter of food.

What do the Chancellor and his lieutenants say about all this? The Chancellor talks in passing "of the return of plenty." I ask him to consult his conscience about that. I have given the figures. His only passing reference was to a return of plenty. The Economic Secretary says, "You have got to look at the figures given in the table above which show the consumer expenditure on food, reducing it to the common 1948 market prices." As far as food consumption goes, the figures are undeniable. Less food has been consumed—and this is not only basic food. As I have said there is less coffee; canned meat imports are drastically down on the two previous years; supplies of unrationed cheese are substantially down on the years. In fact, if we take all the foodstuffs, basic and non-basic, the comparison is the same. By and large, there has been quite an appreciable fall in consumption in comparison with 1950.

The explanation of the Economic Secretary's intervention is this. Against these restricted supplies there has been a greater emphasis on luxury spending. I think that is a bad thing. In any case, the important figure to bear in mind is that last year we spent £843 million more on buying for ourselves less food than we ate in 1950. The Financial Secretary, to whom I apologise for not having heard him, must have been in a very jocular and buoyant mood. He must have been misled about the subject through not being present during the debate we had on butter and cheese prices. He followed the line then taken by the Parliamentary Secretary to the Ministry of Food but that was late at night, and I am sure that the House appreciated that the Parliamentary Secretary was in a jocular mood when he threw in the argument about the stocks of butter. We all knew that this was a most preposterous and ridiculous argument to put forward, but at that time of night it was regarded as a light and flippant case made because he knew that he had not any reply to the points that had been raised.

The Financial Secretary to the Treasury agreed that we had less in 1953 than in 1950, but dealt with stocks. He said that in 1950 we had less meat stocks than in 1953. This has nothing to do with the case. We all know that we had reduced stocks at the end of 1950. That was because we were not getting the meat from the Argentine. That is the time of the year when the Argentine meat comes in. But let us deal with the other commodities mentioned by the Financial Secretary. Why the hon. Gentleman referred to bacon and ham, I do not know, because I have always conceded that bacon and ham was an exception. Although we were eating less meat last year than in 1950, we were eating more bacon and ham, but for some reason the Financial Secretary came to the Committee and said that there were 45 per cent. more stocks of bacon and ham in 1953 than in 1950.

But what happened four weeks after the end of 1950? We put up the ration. We put it up by an ounce until May, 1951. Then we put the ration up by another ounce. That was a remarkable achievement, was it not, on these low stocks? It is about time that we stopped getting these misleading figures from the Ministry of Food and I am sorry for the Treasury in being misled in this way. It is a great pity that there are very few trade people left at the Ministry of Food, and that we have to rely upon civil servants who do not appreciate what stocks are, in terms that are generally understood by the trade.

Regarding cheese, the Financial Secretary said we finished 1950 with 52 per cent. less by way of stocks than we did in 1953. But what did we do in January, 1951? We increased the ration by an ounce again. Again this surely was a remarkable achievement against such a stock position.

Mr. Maudling

If food stocks were so good at the end of 1950, why in 1951, the last year of the Labour Government, did they fall?

Mr. Willey

That was a question of supplies coming in. I am dealing with stocks. All I am doing at the moment is replying to the nonsense from the Government Front Bench. My whole case is that food consumption depends directly upon supplies, and apart from some exceptional food stocks not mentioned by the Financial Secretary, we do not carry substantial stocks. I appreciate the embarrassment of the hon. Gentleman.

The last example given by the Financial Secretary was butter. He said that in 1950 we had 23 per cent. less by way of stocks than we did in 1953. The Economic Secretary, at any rate, knows that for five months in 1950 we had a 5 oz. ration. If we ran a 5 oz. ration for five months with stocks less than those that the Government are now carrying, it is a disgrace that the present Government had never attained a 5 oz. ration. We can get an idea of the Gov- ernment's present stocks in this case, because at this moment they are about to decontrol.

What does "The Grocer" say? That journal says that the Minister of Food would rather eat margarine than his own words. In fact, they are disturbed about the stock position. They say: Retailers' efforts to get reasonable buffer stocks of butter before the D day for fats run up against the low level of the Ministry reserves. I must appeal to the Minister of Food to stop misleading the House. It is clear that the argument which was previously made late at night on a Prayer, and has now been repeated, has now been blown up. It is quite clear that it was absolute nonsense.

The importance of the level of food consumption is, first, that the Government have to declare their case about food consumption because in both General Elections of 1950 and 1951 they said a great deal about it. They complained of the abysmally low level on which we were existing. But now, it almost seems that 1950 was an El Dorado to which this Government holds no hope of returning. Secondly, against restricted food supplies such as we have been discussing the policy of the Government is directly and patently anti-social. It really will not do for a Chancellor of the Exchequer to talk about a return to plenty, nor for the Ministry of Food to talk about abundance unless they are realistic enough to say, "We have completely changed our outlook. We have sent out the business men and cannot find the food."

Mr. Gerald Nabarro (Kidderminster)

We have got the food.

Mr. Willey

Perhaps the hon. Member was not present when I began my speech, but, if he reads it in HANSARD, he will see the figures.

On food policy generally, there has been an absolute collapse into chaos and disorder. I will remind hon. Members of the figures given by my right hon. Friend the Member for Battersea, North (Mr. Jay). We started last year with food subsidies running at £250 million. I took the view then that it was the intention of the Chancellor to remove all consumer subsidies except those on milk and bread. He has now told us that in fact this is being done, but, in spite of his estimate of the subsidy being £210 million—making allowance for sugar—a year ago eventually it became £325 million. If that is not chaos, I do not know what is.

I come now to the statement made by the Chancellor this year. He told the Committee that he had reduced the consumer subsidies to £87 million, that is on milk and bread. But there is a catch to this. He went on to say: The reduction of the scope of the consumer subsidies has, of course, widened the area over which assistance to our agricultural policy is given in the form of direct undertakings to producers. The right hon. Gentleman led us to believe last year that he was reducing the burden on the taxpayer, but the result he now tells us is that the total food subsidy, on his present calculation—heaven knows how wrong he may be in view of our experience last year—will be £325 million, or £100 million more than he estimated last year. As the right hon. Gentleman said, this gives us a good deal to think about. It certainly does.

I now turn to the question of eggs. The Chancellor's explanation about eggs was that, the hens simply would not graduate in any of our schools of political economy."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 209.] Neither would the Chancellor. Last year he abolished the subsidy and we got the Supplementary Estimates in which the subsidy was increased to £26,700,000. We know that this year we shall consume less than last year. That is clear from the January and February figures.

Mr. Nabarro

They are much fresher.

Mr. Willey

Why should they be fewer? They are fewer but, as adjusted following the Price Review, the subsidy remains at more than £31 million. If that is not chaos, I do not know what is. Last year the argument about eggs was that they were too plentiful, but with all the figures, the Ministry of Food could not destroy the argument that we ate fewer then in 1953 than in 1950. Yet their argument was that we had abundance. Now while consumption falls the subsidy is going up—

Lieut.-Colonel Marcus Lipton (Brixton)

£9 million up.

Mr. Willey

I regret to say that two distinguished remaining eggs traders in the Ministry have gone back to the trade, although I do not blame them in the light of events. However, although we have less eggs, the subsidy has gone up.

If we turn to cereals, the cost of imported wheat and flour has gone down and three quarters of our wheat and flour is imported. The Economic Secretary claimed credit for what was done about the International Wheat Agreement. I doubt whether it was justifiable, but it is a welcome thing that grain prices have fallen. But why has the bread subsidy gone up? Why has the price of bread not gone down? Why do we find that the subsidy on grain is more than £70 million, which is £50 million more than it was at the time of the Supplementary Estimate a few months ago. If that is not chaos, I do not know what is. We have no cheaper bread, but an increased subsidy on bread and grain, on which there was no subsidy last year until the Supplementary Estimates.

The dilemma which faces us all can be put in this way. World prices of food have fallen; according to the Government they have fallen by 5 per cent.— Something like five per cent."—[OFFICIAL REPORT, 10th November, 1953; Vol. 520, c. 898–9.] to quote the Leader of the House. The cost under the Price Review has fallen and, according to the Government, it is £23 million less. We have had a whole series of retail price increases and we have more to come. The toll on the taxpayer has been increased, especially for eggs and cereals. Yet we all remember that a year ago the Chancellor said in his Budget statement that fortunately, owing to eggs and cereals, the subsidies would be considerably reduced. Instead of food subsidies we have a system of deficiency payments.

Viscount Hinchingbrooke (Dorset, South)

On a point of order, Mr. Hoy, I understood that one of the objects of establishing a Committee of Supply and a Committee of Ways and Means was that in Supply we should talk about supply and in Ways and Means we should talk about the raising of taxation. Is that not so? If it is, is not the speech of the hon. Member for Sunderland, North (Mr. F. Willey), which is a recapitulation of a Ministry of Food speech on Supply, entirely out of order?

The Temporary Chairman (Mr. James H. Hoy)

Normally that might be the case, but, during the course of the debate there has been considerable reference to food supplies, and it would be rather late in the day for hon. Members to expect me to unscramble it.

Mr. Willey

I am much obliged, Mr. Hoy. In reply to the noble Lord, I would say that if he had intervened earlier I might have addressed myself to a different problem. But a great deal of attention has been directed to this question and all we have had from the Government is that it provides "a good deal to think about." We want to know what they are going to do about it. At the end of his speech the Chancellor said: we have nothing to fear, and much to hope." —[OFFICIAL REPORT, 6th April, 1954; Vol. 526, C 227.] So far as food is concerned, he has got this in the wrong order. On food policy, we have much to fear and, I am afraid, very little to hope.

5.29 p.m.

Sir Ian Fraser (Morecambe and Lonsdale)

Hon. Members who are waiting to speak will be glad to know that I am not going to make a long speech, but only wish to ask the Chancellor a question which I very much hope he may find it possible to answer tonight. I shall, therefore, only take two or three minutes and, if I may be excused, I shall not follow the hon. Member for Sunder-land, North (Mr. Willey) into the realms of food policy, nor shall I speak on the economic situation generally.

Some weeks ago the British Legion went to see the Minister of Pensions and National Insurance to put before him a case for a rise in war pensions. I should like to thank him for the courteous way in which he met us, and for indicating that during the lifetime of this Parliament it was the Government's intention—provided that the national finances allowed—to do something more for ex-Service men. I have practically quoted his words. When the Budget was opened, and the Chancellor of the Exchequer did not find it possible to deal with this matter, it naturally caused considerable disappointment among ex-Service men and my friends in the British Legion, though we were pleased when the Chancellor, in his broadcast that night, said that he would not forget them.

During the course of the debate there have been 53 speeches, 31 of which have mentioned pensions in some shape or form, and 12 of which have mentioned ex-Service men's pensions. I should like to thank these hon. and right hon. Members in all parties for having given us their support. I understand the Government's difficulty in raising old-age pensions, and all the civil benefits which are, naturally, considered with them, before they have had a full inquiry into the state of the funds, the report of the Government Actuary and all the other facts which it is necessary to have in such a complex and expensive matter. A delay of a few months, although not agreeable to the old people or to their many friends, among whom I count myself, is, nevertheless, understandable.

But all the facts relating to the war pensioners are known, and, to me and my friends, there did not seem to be the same reason for delaying a decision in their case. Moreover, it is our view—and I am glad to feel that it now has support in all parts of the House—that their situation is on a slightly different footing. I shall not recapitulate the many reasons which we have given for feeling that priority should be given to the claim of disabled ex-Service men in respect of their war pensions, and to the widows of the fallen; I shall come to the question which I want to ask.

The Government have said that in the lifetime of this Parliament they will do what they can in this matter. It is true, I believe—I should like it confirmed— that war pensions are governed by Statutory Instruments or Royal Warrants, which can be brought to the House at any time. They need not necessarily be referred to in the Budget, or await the sanction of the Finance Bill. If, therefore, it so happened that an Election were coming in the autumn—and I do not say whether that is a good or bad thing; I am merely asking this question in that eventuality—might we expect and hope that this promise, so far as it goes, would be kept before the Election took place, notwithstanding that the much wider, more costly and more difficult subject of old-age pensions might have to wait until the review to which I have referred has been carried out?

I still feel that priority should be given to this matter on its merits, and it would be very disappointing if the Government, in the event of an Election in the autumn, were to say that they could not deal with the claim of the ex-Service men until they had dealt with all the other claims. That is my only question. I earnestly ask the Chancellor to give us the satisfaction of making a comment, however brief, upon that matter tonight.

5.35 p.m.

Mr. William Ross (Kilmarnock)

I sincerely hope that the Chancellor will not make up his mind about pensions, whether they are war pensions or anything else, under the shadow of a General Election. The matter is not one in which party advantage should be sought by provisions being rushed through before an Election.

Sir I. Fraser

I was not seeking party advantage; I never have in this matter. I was only trying to make sure that this matter would not be lost sight of it there were an Election. That is quite a different consideration.

Mr. Ross

It may be quite a different consideration, but what the hon. Member should have been asking for was as quick a decision as possible in the question of increasing the pensions of the war disabled and their dependants, which hon. Members on this side of the Committee regard as a genuine need. I shall speak later on the question of old-age pensioners, because we cannot measure these questions in terms of priority: both classes are in very considerable need of an increase.

What has surprised me about this drab Budget is the quietness of hon. Members opposite. New records are being reached by the Government. We have a record-sized Budget for peace-time. Never before has so much money been raised by taxation, and never before has any peace-time Government proposed to spend so much. When we consider the solemn warnings we used to get about Government expenditure from every Tom, Dick and "Harrier" opposite, in their irresponsible days in Opposition, we cannot but wonder why they applauded the Chancellor's Budget speech.

It is interesting to recall what the Prime Minister had to say when he addressed the Conservative Conference on 16th October, 1950. His phrases were certainly not ambiguous. Indeed, I expect they were carefully chosen. He "said: £20,000 million in five years has been spent by the Socialists at the rate of £11 million a day; £4,080 million is being spent this year. How could anyone imagine a jaunt and jubilee of this kind … could lead anywhere but to a grave misfortune? In that year £4,080 million was not the exact figure, but even if it were, we now find this Government proposing to spend £4,523 million—at the rate not of £11 million but £124 million a day. If £11 million a day was leading to national disaster, where is £12.4 million a day leading? This is indeed a financial H-bomb, but I do not expect that the Prime Minister will give us any words of wisdom on that subject.

This Budget has to be taken rather seriously, quite apart from the question of its size. There is nothing wrong about the size of a Budget, provided that the industrial production is able to support it. The trouble arises from the way the money is being spent. A staggering amount is being spent on defence. One pound out of every £3 is going on defence. If we take into account American aid the sum is £1,555 million, and that means that £1 out of every £3 being raised in revenue is being spent on defence.

Hon. Gentlemen opposite, when they were in Opposition, used to tell us they did not mind money being spent on defence, and that what they were concerned about was getting value for money. We do not hear very much about that now, but I am quite convinced that of the £1,500 million being spent on defence a considerable amount could be saved if the Government applied themselves to the task of saving it. It is necessary in these days that we should save every penny we can if only to be able to give the pensioners and their dependants that little extra that they require. I hope the Government will tell us what they are doing to cut down waste.

That nations have to spend so much on defence is a measure of man's folly, and that we are spending so much in this country on defence is a measure of our diplomatic failure. If human and social considerations do not weigh sufficiently heavily with the Government, surely the cost of defence should spur them on in their diplomatic efforts, to try to obtain a solution to the question of our military commitments. Unless we have new leadership towards disarmament, which is so urgently necessary, the nations, if they do not perish by the sword, will perish by the very cost of the sword.

We are spending more on the social services, but the question is, what are we getting in return for the additional sum that is being spent? I do not think that any one on either side of the Committee would say that we are getting better services, whether in the National Health Service, education or any other. Part of my duty is to look carefully through the Estimates, and one thing that strikes me about them is the increase in wages and salaries. It is, of course, a consequence of the Chancellor's own past Budgets that wages and salaries are swallowing more and more of what is being spent. I think there has just been a new agreement with certain doctors in hospitals that will cost another £3 million, and that has not even been allowed for in the present Estimates or this Budget.

The Budgets of 1952 and 1953 have brought us to a position in 1954 in which we are spending more and more and getting less and less for it. The services are actually being cut down despite the increases in expenditure. That is one of the challenges the Government have failed to meet. Of course, there are the same repercussions in industry that will run us into difficulties with our exports. The Government have nothing to pride themselves on in the past two years. They are spending more and we are getting less in the way of social services.

The Chancellor had a phrase for it. He said … humanity goes hand in hand with economy."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 210.] I do not know how he could use a phrase like that if he thought of the plight of the old-age pensioners. In his treatment of them humanity is not marching hand in hand with economy. Some of the most bitter lines ever penned by the poet Robert Burns were those in which he described the old people he saw in his day: Look not alone on youthful prime, Or manhood's active might; Man then is useful to his kind. Supported is his right. But see him on the edge of life, With cares and sorrows warn, Then age and want, Oh! ill-match'd pair! Show Man was made to mourn. That is what is happening in this country today. Age and want are again walking hand in hand among many old-age pensioners.

There was an hon. Gentleman opposite talking about an increase of 25 per cent. for the old-age pensioners since this Government came in. That is just not true. Old-age pensioners, when the Labour Government left office, were getting 30s. The Government increased the rate to 32s. 6d., an increase of 8J per cent.

What is the prospect for the old-age pensioners? Little wonder that one old-age pensioner in the by-election in Edinburgh, East stood outside a polling booth with a notice on a sandwich board, which said: No grant for the old-age pensioners! I do not need to tell what the name of the Conservative candidate was: it was Grant. The verdict at Edinburgh, East was not a verdict of the old-age pensioners only, but a verdict the ordinary people of the constituency pronounced on the lack of humanity in this Conservative Budget of this year.

The Chancellor has been generous, let it be remembered. He was generous in his last Budget. He was generous to Income Tax payers and to businesses, and one of the things that prevents further generosity this year is the loss of about £100 million revenue that will be felt when the full effect of the abandonment of Excess Profits Levy comes next year. But not a single penny for the old-age pensioners.

The old-age pensioners in Scotland will be faced in this year with tie effect of legislation presently passing through Parliament, for rents are going up by 8s. in the £ for old houses, for rented properties in Scotland. We usually find that the older people live in the older houses, and the burden of those increased rents will fall on them. The hon. Member for Edinburgh, South (Sir W. Darling) calls this a nominal increase. He did not take the same attitude when the engineers were asking for 15 per cent., but the "nominal" increase of 40 per cent. in rents will make all the difference to the old-age pensioners.

The price of tea is going up again by another 4d. There has been an increase of over 2s. per lb. in its price since this Government took over. The Chancellor cannot deny these facts, and, knowing them, cannot shrug off contact with ordinary people and their ordinary problems. It is utterly disgraceful that the Government should talk about economy with humanity in the face of the struggles these old people are having.

In the past few Budgets there has been a change in the way in which the money is spent. Consumer subsidies are to be limited to £87 million on milk and bread. I leave aside the question of deficiency payments, which my hon. Friend the Member for Wednesbury (Mr. S. N. Evans) would probably like to enlarge upon. The cut in subsidies has to be considered with the increase in Government expenditure. Two years ago the Budget estimated for £410 million in this field. There is this great reduction on direct food subsidies at the same time as there is this great increase in expenditure. With these changes taking place, and affecting millions of people, it is not the Chancellor who is being generous. He is being generous to Income Tax payers and industrialists at the expense of all these other people. That is one of the reasons why people have lost faith in this Government.

Some people are suggesting that the reason for the East Edinburgh by-election result was something that happened two days earlier. The Scots people are not like that; they do not suddenly change their political minds. I am sure that even the hon. Member for Edinburgh, South would agree with me in that. The Scottish people have just lost their faith in the Government. We had the same result in a by-election in Dundee some time ago, and we shall get the same kind of result next Wednesday, at Mother-well. I wish that the Government would look at the problem more nationally. One thing that we want in the country if we are to fulfil our industrial and export tasks is a healthy sense that everything is being done which can be done for the people, and that sense of fairness is lacking at present.

The Government have failed in their "incentive" Budget. We were promised increased investment which would lead to the modernisation of our industry to equip us for the tasks confronting us, but we have not got that. From what the Chancellor has told us, I do not see how we are to get it. The real incentive to business men would be stable or improving world trading conditions. There again, we step out of the home political field into the international field. The President of the Board of Trade may be concerned about this. In the debate on Scottish industry last year he lectured Scottish business men, telling them to break down all the barriers. We asked him to break down some of the barriers in East-West trade, but he has not done so. The lead in this matter must come not from business men, but from the Government Front Bench. If it is afraid of what will happen next year, business will not expand. More than anything, some investment allowance is needed.

The Chancellor will generally have the support of the Opposition for what he has done in that respect, although we shall have to examine the details. The same thing applies to what he has done in the export guarantees field. Much can be achieved there by letting people know exactly what can be done for them by means of the Export Credits Guarantee Fund. The fund has done tremendous work over the last four or five years. Many hon. Members opposite have paid tribute to it in the past, although, at the same time, they seem never to think much of Government interference. Government interference in this field has been the factor which has in great measure led to the expansion of our export trade in the past. We can do a great deal more in that field.

I wish that the Chancellor had been able to tell us a little more about what action is to be taken not only in this country but throughout the sterling area and the Commonwealth to prevent the effects of any American depression from driving this country back. He is conscious of the dangers, but I am sure from what he said that he has no idea what he is going to do about it. One of the troubles about the abandonment of controls on imports, and so on, is that there is very little that he will be able to do about it. He has thrown away all the instruments by which he could have applied himself to the task. What we have got is not a standstill Budget but a Budget of drift. We have more fears than we have hopes when we consider who is sitting on the Government Front Bench today.

5.55 p.m.

Sir Edward Boyle (Birmingham, Handsworth)

At the outset of his speech the hon. Member for Kilmarnock (Mr. Ross) said that he thought that too high a proportion of our total revenue was being spent on defence. I wish to state—I do so especially as I shall have some critical remarks to make about hon. Members opposite later—that I believe we were right as a nation, in 1950, to go in for the £4,700 million arms programme, but that the mistake which was made by the Labour Government was in not making room for it in our economy. Nevertheless, we were right to embark on the programme, and it is because we have carried out this very great degree of rearmament that the international scene today is a little less threatening than it was three or four years ago.

Today, it is quite clear that there will be no rapid end to international tension, and this means that we have to plan for the future. As my right hon. Friend the Chancellor of the Exchequer said in his Budget statement: We must toe up to date; but we must have economy, too."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 208.] I do not think that my right hon. Friend could have gone further in his Budget statement in recognising that we must have some definite relief from the defence burden next year. He did not overlook the point which the hon. Member for Kilmarnock made in his speech.

The hon. Member for Sunderland, North (Mr. Willey) made a speech which I have often heard during the present Session and have always enjoyed. He said that he thought that my right hon. Friend's political judgment was warmer than his conscience. What we are most concerned with in the present debate is my right hon. Friend's economic judgment, and it is my firm opinion that it has been fairly sound during this last two-and-a-half years.

The right hon. Member for Leeds, South (Mr. Gaitskell), when opening the debate for the Opposition on Wednesday, said that this was a bad and unfair Budget … because it leaves out in the cold the people who should have had the first attention."—[OFFICIAL REPORT, 7th April, 1954; Vol. 526, c. 383.] Those who believe that my right hon. Friend should have been more generous with reliefs are committing themselves, whether they realise it or not, to one of two points of view. Either they believe that my right hon. Friend should have budgeted for a deficit above the line as well as below the line, or they believe that he should have increased some taxes to be able to afford greater reliefs.

We have had examples of both points of view during the debate. The hon. Member for Gloucestershire, South (Mr. Crosland) and the hon. Member for Stechford (Mr. Roy Jenkins) both clearly implied that my right hon. Friend should have risked running a deficit above the line. The hon. Member for Gloucestershire, South based his argument on the fact that the value of the gross national product was likely to go up, in 1954, by about £400 million. As I understood his argument, he claimed that this prospective increase, even when allowance had been made for higher Government expenditure, for increased investment and for a larger volume of consumption, would still leave a balance which could be used to finance budgetary concessions. The hon. Member for Stechford said that he thought that the rising curve of private savings would have justified a less austere Budget.

I always feel very nervous in disagreeing with both those hon. Gentlemen. They both took first-class degrees in politics, philosophy and economics while I gained only a third-class degree in modern history. Nevertheless, on this occasion I disagree with them very strongly, for two reasons. In the first place—which is the principal point—I cannot believe that it could possibly be right to run a deficit above-the-line at a time when consumption is still rising, when we still have full employment and when the United Kingdom balance of payments is still not so secure as to justify any complacency. I remember that Lord Keynes, in his famous last article, talked about "modernist stuff gone sour and silly." This is what I feel about any attempt to prove that this can be the right moment for a Budget deficit.

There is a second argument that I should like to use, all the more because I do not think that anyone has referred to it during the debate. My right hon. Friend is already running a very heavy deficit below the line. Last year he very rightly abandoned what had come to be known as the Crippsian orthodoxy of running a surplus above the line sufficient to cover the whole of the below-the-line deficit. My right hon. Friend said— and I quite agree with him—that the Budget surplus above-the-line was a very blunt instrument for securing a sufficient volume of savings.

I should have thought that it followed from my right hon. Friend's decision last year—and this is the answer that I will give to the hon. Member for Stechford—that the budgetary function of any increase in private savings was rather to cover the below-the-line deficit than to justify a deficit above-the-line as well. It seems to me that the implications of the economic views of the hon. Member for Stechford, in his speech last Thursday, really were distinctly inflationary.

The right hon. Member for Bishop Auckland (Mr. Dalton) took a rather different point of view. He said that my right hon. Friend could have had between £50 million and £100 million to giveaway if only he had increased the tax on distributed profits by 5 per cent. and the tax on undistributed profits by 3 per cent. In other words, the right hon. Gentleman thinks that at a time when it is vitally important to increase investment in productive industry, my right hon. Friend should actually have increased the burden of industrial taxation. I must say that to me this suggestion can only be described in a phrase which the right hon. Gentleman himself once used when we were in Opposition: totally irresponsible … lunatic finance."—[OFFICIAL REPORT, 10th June, 1947; Vol. 438, c. 947–8.] We all remember the right hon. Gentleman having a song in his heart. I do not know whether he has ever heard of a type of song which is very popular on the other side of the Atlantic, called a "Calypso," the essence of which is that none of the lines scan with any of the others. I think that my hon. Friend the Economic Secretary answered him adequately in his own speech in which he said that … what weighs in the minds of people who have to invest money in industry is whether the net return on their investment after taxation is adequate to justify the risk of investment."—[OFFICIAL REPORT, 8th April, 1954; Vol. 526, c. 553.] I cannot believe that this is an occasion when it could possibly be wise to increase the burden of taxation on industry. It would be a very great disincentive to investment in productive industry at the present time. I would say, incidentally, about the tax on distributed profits, that I know that hon. Members opposite feel strongly on this point, but do not let us forget that the distributed profits tax applies to profits paid out in the form of dividends on preference shares just as much as it does to profits paid out in dividends on ordinary shares. Hon. Members opposite forget the very severe burden of distributed profits tax on those companies which have to provide for a high proportion of preference stock.

My general view of these Budget proposals is that my right hon. Friend was absolutely right neither to increase taxation nor, at the same time, to run a Budget deficit above the line.

Mr. Charles Pannell (Leeds, West)

Is is not a fact that my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) suggested that the reason the Chancellor could do nothing for the old-age pensioners or anyone else was because of his rather profligate conduct with the Budget last year?

Sir E. Boyle

I am glad that the hon. Member has made that point. My answer is that no one complained last year that my right hon. Friend was giving too much away. [HON. MEMBERS: "Oh."] No. There were complaints on the other side about the distribution of reliefs, but no one complained last year that the total of the reliefs was too large. I will gladly show the hon. Member afterwards a quotation of the hon. Member for Gloucestershire, South in which he specifically said how glad he was that my right hon. Friend did not last year take the advice of an organ like the "Economist" which would have led him to be rather more austere. I do not think that the hon. Member has made a valid point.

We have been accused in this debate of excessive self-congratulation. Even an honest man in politics can sometimes be something of a partisan, and this tendency towards self-congratulation is certainly not confined to any one side. I noticed the other night that the right hon. Member for Huyton (Mr. H. Wilson), in what was, in general, a most gloomy speech, was talking about the record of the late Government and said: Taking what I think are the last published figures of the Government about 1951, we find the statement that during that very difficult year, under the Labour Government, stocks in this country rose by £610 million. It is the common experience of every housewife that if she stocks up the larder her purse does not look quite so good as a result."—[OFFICIAL REPORT, 8th April, 1954; Vol. 526, c. 648.] Housewives who stock up when prices are rising steeply should not congratulate themselves on specially good housekeeping. This certainly seems an instance of self-congratulation which was hardly justified.

I should like to deal with three specific points which have been raised during the course of this debate by hon. Members opposite—production, unemployment and exports. First, production. The right hon. Member for Leeds, South had a bit of fun about production the other afternoon, when he said that our record in production rather reminded him of the Grand Old Duke of York with his 10.000 men marching them … down the hill and marching them up again."—[OFFICIAL REPORT, 7th April, 1954; Vol. 526, c. 370.] Anyone who has studied the Economic Survey, 1954, and had a look at Chart 3, on page 19, which reveals the trend in production during the last two or three years, will agree that, as a result of this military operation, the Duke of York's Army have certainly occupied a far more commanding position than they ever occupied before.

We find that in 1951 the present Government inherited a downward trend in production. The Economic Survey, 1953, showed that production in the last quarter of 1951 was no higher than production in the last quarter of the preceding year, and this downward trend in production Which we inherited, coupled with a serious shortage of steel and a textile recession, made Lt fairly certain that the level of production in 1952 would be down. But by the end of 1952 there was already an upward trend, and Chart 3 of this year's Economic Survey shows very clearly that it was not fair to say that in 1953 we did no more than recover from the decline in the previous year.

I was rather surprised to hear the hon. Member for Stechford say, on Thursday, that 1952–53 was a year of growing unemployment, because that simply is not true. In April, 1952, there were 467,800 people out of work. By the end of 1952 that figure had fallen to just below 400,000. It rose a little in January but by April it was down to 375,800, which I make a net reduction of unemployment of 92,000 for the financial year as a whole. So it is not true to talk about that year as having been a year of rising unemployment.

On the question of exports, a number of hon. Members have complained during this debate that exports have been lagging. When we look at the table of the Economic Survey it is clear that the exports in the second half of 1953 were about 10 per cent. above the exports for the second half of 1952. I think that one also has to remember one point which was made by the right hon. Member for Leeds, South in the House last November, when we debated economic affairs, that the improved terms of trade, while they very much help our economy as a whole, have certainly not helped our exports.

The Economic Secretary very rightly reminded the Committee the other day that The sort of world in which prices of raw materials are falling is the sort of world in which prospects for British exports are getting more difficult."—[OFFICIAL REPORT, 8th April, 1954; Vol. 526, c. 550.] I agree with the hon. Member for Leeds, South about the danger of export subsidies and I should like to say to the Committee that that was a subject which we did consider briefly in the Economic Committee of the Council of Europe last summer. The Italian delegate M. La Malfa produced a memorandum on this subject and I hope that the Council of Europe will be able to consider it again this year.

Now, a word about the concessions in this year's Budget. I certainly do not regard all these concessions as unimportant. The concession about post-war credits meets a very real grievance, which I have constantly come across in talking to my constituents. I am very glad that my right hon. Friend is making this concession in cash and not trying a scheme of certificates; otherwise, people would have suspected some kind of a trick somewhere. He has been wise to do it in the form of cash.

The investment allowance seems to me a most important concession, which will be of ever more significance as the years go by. I am particularly pleased about the revision of Section 55 of the Finance Act, 1940. One has known of many cases where the duty payable on the assets of companies has been greater than the total marketable value of their shares. The 1940 Act was passed shortly after the fall of Dunkirk, at a time when the House, rightly, had its mind on other matters, and it is right that after this long lapse of time we should now make a revision.

Turning to old-age pensions, I know perfectly well that people find it extremely difficult to manage today. I probably have in my constituency a disproportionate share of old people, and I have also a large number of people Living on small fixed incomes who find it difficult to make ends meet. But when considering the future of National Insurance, we should never forget the heavy commitments to which we have already pledged those who will be of working age in 25 years' time. I am always just a little bit anxious when I hear people use the phrase, "Subsistence benefits as of right," because whether we can secure an adequate standard for our old people depends not on the assertion of rights, but, in the last analysis, on the production of new wealth by the combined efforts of all sides of industry.

I believe this to be a good Budget, which can only strengthen the national economy and sustain the position of sterling in the exchange markets of the world. It leaves us in a favourable position to weather any changes in the economic climate which may come upon us in the months ahead.

6.12 p.m.

Mr. Frank McLeavy (Bradford, East)

I am sorry that the hon. Baronet the Member for Handsworth (Sir E. Boyle) in his concluding remarks felt unable to support the claim that has been made on behalf of the old-age pensioners. I do not think that merely by a review of National Insurance we can hope to meet the claims and needs of the old-age pensioners. In addition, of course, there are the war pensioners, who are undoubtedly in urgent need of further financial assistance.

I do not think that, simply because the Chancellor of the Exchequer was over- extravagant about 12 months ago, it means that, when faced with the demands of the old-age and war pensioners, he should not review the concessions which he gave last year and amend them in the light of his responsibilities to the various categories of pensioners. The plight particularly of the old-age pensioners is one which the House of Commons ought not to allow to remain unremedied until we can review the National Insurance Act.

Hon. Members on both sides of the House will know from correspondence with old-age pensioners that this is a most urgent problem that Parliament should meet generously. It cannot be dealt with merely by saying, "We sympathise with the old-age pensioners, but they must wait until we have gone through the mechanical review of the National Insurance Act." The human issue which is at stake should be faced by the Government and Members opposite with resolution and determination to end this plight of the old-age pensioners.

I refuse to believe that a nation which can spend enormous sums on national defence, necessary as it may be, and on the social services cannot find a means immediately to alleviate the poverty and distress of the old-age pensioners. It is a standing disgrace to the House of Commons that, in face of all our national expenditure in one way and another, we refuse to meet our obligations to the old-age pensioners.

I add my appeal, even at this late hour, to the appeals which have been made from all quarters for the Chancellor and the Government to accept, not only the view of hon. Members on both sides, but the view of the national Press and of the country that old-age pensioners should receive immediate consideration. A few weeks ago in Bradford, in company with all the Bradford Members of Parliament, including the hon. Member for Bradford, North (Mr. W. J. Taylor) from the benches opposite, met over 3,000 of the old-age pensioners in the City Hall. No one could meet them without realising how human is the problem which Parliament must deal with in the Budget. I feel ashamed that the House of Commons allows the Government and the Chancellor of the Exchequer to get away with a refusal to meet their obligations.

The post-war credits concession is all right as far as it goes, but one felt that the Chancellor might have taken the advantage of reducing further the age limit, which is a contentious point with those to whom post-war credits are due.

The Chancellor has failed to meet the serious problems of fuel oil taxation. Deputations have been sent to the right hon. Gentleman by all sides of the industry, and the Trades Union Congress have made representations; but the Chancellor apparently has not been able to meet their claims for a substantial reduction in fuel oil taxation. In London the travelling public are faced with further increases in fares. The municipalities also are faced with the problem of ever-increasing fares, not only because of heavy taxation, but because of the general policy of the Government. The costs of materials and wages are going up and transport, whether in London or the provinces, requires some special consideration from the Chancellor.

It may interest the right hon. Gentleman to know that transport is the only industry that pays taxation upon fuel oil. Agriculture has been exempted to help the farmers, and in addition it receives lavish subsidies. Yet the Chancellor fails to appreciate that, if we were to abolish fuel oil taxation on the passenger transport industry, it would make a very substantial contribution to preventing further increases in fares. I am not suggesting that it is a solution, but it would be a very important contribution to a very difficult problem. In view of the fact that the passenger transport industry is the only industry which appears to pay this tax, I see no justifiation for the Chancellor refusing to exempt it in the same way as he exempts agriculture.

If we are not prepared to meet the question of the heavy charge for taxation on fuel oil, then we shall be in the position of having to face the continuous rises in fares in London and the provinces. This, in turn, will result in further demands for increased wages by the travelling public, particularly the workers, because such increases will mean a further rise in the cost of living.

I should like to place one or two facts before the Chancellor for his consideration. The present rate of 2s. 6d. tax on fuel oil accounts for as much as 12 to 16 per cent. of the passenger transport industry's operating cost. I think that about 90 per cent. of these buses and some 14 per cent. of road haulage vehicles are run on what is called Derv fuel oil. If all buses were exempt and if road haulage were included, it would make a very substantial contribution to reducing costs to the travelling public.

How does this excessive tax affect municipal transport undertakings? In the city of Bradford the average consumption of fuel oil by a motor bus is 7.7 miles per gallon, and at the present rate of taxation this means a cost of 3.89d. for every mile run. In Halifax the average is 8.46 miles per gallon and the tax represent a cost of 3.54d. per mile operated. The oil tax for the year ending March, 1954, is estimated to cost £68,327 and the tax on other fuels just over £20,000, making a total in taxation, in the main for fuel oil and for a certain amount of petrol, of something like £89,000 a year.

In Sheffield the average is 9.023 miles per gallon and the fuel tax per mile operated is 3.325d., with a total cost of £268,750 per year. Those factors in the running of the transport industry ought to be examined very carefully by the Treasury, as they undoubtedly represent a very serious inroad into the cost of municipal transport. Coupled with that is the ever increasing demand for more wages arising from the increased cost of living, and this means that the municipal transport undertakings are merely going from one application for an increase in fares to another.

I understand that quite a large percentage of the municipal transport undertakings in the country will have to ask for further fare increases because there have been no concessions in fuel oil taxation. These increases, if they come about, will have to be paid by the travelling public, and this will lead to further wage demands to meet the increased cost of travelling.

I believe that if the Chancellor made a concession to the passenger transport industry by granting a concession on fuel oil taxation, it would be of great financial assistance to the industry, because.

if we can prevent too great a rise in the fare structure, then the demand upon the industry for increased wages will be that much less. Anything which contributes to keeping down the cost of living and, therefore, the cost of our export goods ought to receive serious consideration from the Government.

I know that the party opposite have always talked about the need to exercise the greatest possible economy in the administration of our social services; but no one has had the courage to put forward in this Committee the only solution that will result in economies being effected. That solution is the committee system of controlling the Government machine. I do not think that with all the vast Departments of State it is possible for each Minister, however competent and however anxious he may be to effect certain economies, to exercise that control which Parliament should demand. If we had the committee system in operation, with Members of Parliament dealing with the actual administration, as is customary in municipal authorities, then we would be likely to get greater economies than in any other way.

I should like the Chancellor and the Government seriously to consider how far the committee system could be introduced not only to give greater control over the Executive by Members of Parliament, but to give them an opportunity, in the complex business of the administration of these large Government Departments, of using the experience and the knowledge which they have gained in industry and in their periods of service with local authorities. I venture to suggest that the large Government Departments are controlled purely by the civil head—by well-paid, competent administrative officers. If a House of Commons committee system were applied and hon. Members were allowed, as they ought to be, to go into the expenditure of Government Departments in more detail, we would be on the way to greater economy and, incidentally, to greater democracy.

I should like the Government to consider another aspect of our expenditure. I believe the time has arrived when we ought seriously to consider transferring regional hospital board control to local authorities. In case any hon. Member, particularly hon. Gentlemen opposite, tries to make a cheap jibe at this sug- gestion, may I say that I have always been in favour of the municipal authorities running our hospital services? Some time ago an hon. Member spoke about the desirability of doing this when we had reformed local government, but I believe that we should not wait for that reform to deal with this urgent matter. It can be done by allowing the local authorities in a given regional board area to nominate the members of the board so that they can act as watch-dogs for the nation. The local hospitals could then be administered on behalf of the regional boards by the local authorities concerned.

What is lacking in our hospital management system today is what was provided under municipal control, namely, the intimate personal contact of the elected representatives of the people. Today we have people nominated to the regional boards who do not necessarily have any connection with the municipal life of the area. One of my greatest criticisms of the hospital boards is that, immediately they were set up, somebody conceived the idea that the salary rate of local authorities was not good enough and decided to give them a Civil Service type of salary. There was thus a considerable inflation of expenditure in connection with salaries and wages which ought never to have happened, and which would not have arisen if we had kept to the municipal rate.

I remember a borough treasurer of a small municipal borough coming to me on one occasion and asking for a reference because he was applying for a job as accountant to a hospital management committee. I said, "Surely you do not want to leave a job as borough treasurer to go to a minor job of this character?" He replied, "I do. There is less responsibility and more pay." It is the same in the case of doctors, and I fear that if we are not careful we shall be paying so much to the professional and administrative side of our hospital service that we shall have nothing left with which to give service to the patients.

This is not a political matter but nevertheless it is a serious one. I wish that hon. Members on both sides of the Committee would make representations to the Government that, as soon as practicable, the management of our hospital system should be passed over to local government representatives. If we can devise a scheme whereby reports are presented as a matter of courtesy, and for debate, to the local authorities concerned, we shall not only give greater public satisfaction but we shall also give to the people a better service, and we shall be able to economise without economising in the provision of a first-class medical service.

6.36 p.m.

Mr. Hugh Fraser (Stafford and Stone)

I feel sure that hon. Members on all sides of the Committee will welcome the speech made by the hon. Member for Bradford, East (Mr. McLeavy). Speaking from a purely political point of view, may I say that it was the most constructive speech we have heard from the Opposition benches. Some hon. and right hon. Gentlemen opposite have found little or nothing to say about this Budget except to indulge in what one might call amusing exercises in dialectical statisticalism to prove that everything was far better under them.

Really some of the speeches made by the hon. and right hon. Gentlemen—in their own consideration at least—brilliant economists such as the right hon. Gentleman the Member for Huyton (Mr. H. Wilson), the hon. Member for Gloucestershire, South (Mr. Crosland) and to some extent even the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) himself, attempted to prove that 1951 was a better year than 1953. It is no wonder that the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) has been advocating votes for babies. I suggest that his next move should be to advocate votes for doggies too, because the House and the country cannot tolerate the type of stuff we have heard. It reached its supreme point in the speech of the late Parliamentary Secretary to the Ministry of Food, the hon. Member for Sunderland, North (Mr. F. Willey), when this afternoon that hon. Gentleman tried to show, at enormous end tedious length, that we were better fed in 1951 than we are today.

Lieut.-Colonel Lipton

In 1950.

Mr. Fraser

Yet the stocks were being run down to such an extent in 1951 that this country was spending its balances overseas at the rate of some hundred million pounds a year and decreasing its sterling balances at the rate of nearly £600 million.

Compared with the Socialist vision of Valhalla, or the El Dorado of their hopes-of 1951, the year under review has been successful, but the comparison we must make is whether or not this year has achieved the necessary objective for our own safety. Some of the bad points have been pointed out by learned economists on the other side of the Committee almost ad nauseam. The point is made that there have not been sufficient exports, and secondly that there has not been sufficient investment. If one studies the last two years, the fall last year can well be explained. We were suffering a first recession since the war. We were threatened by the United States recession even then. There were also the painful adjustments after the period of the Korean boom, and right hon. Gentlemen opposite had cut the initial allowances in the 1951 Budget. Therefore, it is easy to explain the small diminution, and it was small when one takes the general total figure into consideration. When one considers the threat of recession in the United States and the recession that we experienced in several of our industries, especially in the textile industries, on the whole exports last year were satisfactory.

The good points of last year, in which my right hon. Friend's Budget played a not inconsiderable part, are remarkable. There was the overall balance of payments. There was the improvement in the stocks position. The right hon. Member for Huyton was keen to show what a monstrous run-down there had been the previous year, but there has been no mention of that this time. Stocks have gone up by £170 million. There has been a remarkable achievement in improved dollar earning, and it has been shown that British industrialists are prepared to go into the difficult markets if they are given a little assistance. Sterling is now a strong currency.

I know that the hon. Member for Gloucestershire, South at one point suggested that it was too strong and was causing some difficulty. If that is so, it is all the better that this year the Chancellor has seen fit to do a certain amount of liberalising of sterling. There has also been a considerable freeing of terminal markets and recently the restoration of the market in gold to the City of London.

There has been great progress in these things, a great progress in our invisibles.

It comes strangely from hon. Members opposite to speak as if they deserve the credit for the creation of the oil refineries by Shell and Anglo-Iranian when one considers that they were the people who had as much to do with the troubles in Abadan as the Anglo-Iranian Company itself and that they resisted us in the investment that we should have made in the Canadian oilfields, which I am glad to see that the Anglo-Iranian Company have now made.

My right hon. Friend has achieved all the things that I have just enumerated whilst keeping the most glittering and most effective weapon of all—interest rates—in its scabbard. He has withdrawn it only an inch or two. He still maintains control by that sword point. As my right hon. Friend said, it will remain a flexible rapier which he will use as need arises.

All this is very satisfactory up to a point, but how does what has been achieved compare with what it is necessary to achieve? That is a problem that worries every serious Member on both sides of this Committee. Some hon. Members opposite say that the Chancellor has left himself little room for manoeuvring. The hon. Member for Bradford, East pointed to the needs of old-age pensioners and of transport users, not merely in the East Riding but all over the country. The trouble is, however, that we have now reached a level of Government expenditure at which there is no room for manoeuvre. That is a problem that faces all of us today.

No country is more open to trouble from abroad than is this country. No country is in greater need of reserves. Therefore, the present Budget provisions are necessary in view of American uncertainty. No country's trade is more precarious than is the trade of this country. Unlike most countries our whole major investment is in international trade, our ordinary shares, so to speak, are in foreign trade and in exports and our home debentures are of subsidiary interest. Our capital is geared to such an extent that a minor slump in any part of the world means real danger to our economy. A 5 per cent diminution in American trade may easily have serious repercussions here. America sneezes and we are in danger of catching a severe cold. For various reasons, that has not happened yet, but in face of that danger, how could the Chancellor do anything but budget methodically the income he expects against expected expenditure and not take risks at this stage?

The basic problem of this country's level of expenditure remains and we are up against the problem of competition arising in the outside world. If the world gets up at seven o'clock in the morning, we must be astir at five. To survive we must not be merely equal, we must excel. How do we stand? The figures that were produced by my hon. Friend the Economic Secretary to the Treasury showed clearly that competition abroad from the United States, Germany and Japan is growing. They also showed quite clearly that the level of taxation in those countries is lower than ours.

I know that many hon. Members opposite are advocates of a high rate of taxation. It is difficult for them to complain of high taxation and to make the main attack which can be made in seriousness against this Budget. They advocate and have always advocated high taxation and a high rate of Government spending, but if we are faced with dangers from America we cannot spend our way out of this slump in the same way as the Americans do. That is simply impossible. If we attempt a Keynesian process when faced with the reactions of an American slump, we shall spend our balance of payments completely and utterly. We must face the facts as they are. It is no use our indulging on this side of the Committee in a dream of Imperial autarchy or on the other side in a dream of Socialist States united in trading with Eastern Europe. In our economy there are no tricks, or very few tricks are possible.

My right hon. Friend the President of the Board of Trade spoke this afternoon of the difficulties which we may encounter through the failure of other European Powers to come into line with proper trading practices and indulging, as some are indulging, in tax rebates for exports, and so on. Let me remind the Committee that there is no question or possibility of this country, with so much of its energy depending on exports, ever indulging in such practices without breaking down the whole system of trade. I should have thought a reference of this subject to the organisation of G.A.T.T. would have been well justified.

What is wrong today, and the danger today, as the Chancellor has remarked in previous speeches, is that over-taxation, forced on us by the rearmament programme, by the welfare services and by what I believe to be public extravagance in several Departments, is driving the capitalist system into the ground. That belief in the capitalist system applies not merely to hon. Members on this side of the Committee, but to the bulk of hon. Members opposite. To quote the right hon. Member for Lewisham, South (Mr. H. Morrison), 80 per cent. of the economy must remain in private hands. I could quote from hundreds of speeches of hon. Members opposite. We are faced with the problem of taxation in other countries being lower.

The effect of taxation on any economy does two things. It must reduce effort, as we all know from talking with constituents or our friends. Secondly, in a capitalist economy, it must reduce the desire of certain persons who have money to take risks. Investors are not interested in a gross return, but they are essentially interested in the net return after taxation has been paid. Since 1952 we have had this considerable increase in expenditure, not merely on armaments, but also an increase for local government and on the Civil Votes. I believe those increases are running at something like £400 million more than when this Government came into office. Part of the causes are inherent in the system of social services which all parties accepted when they were brought forward by the National Government during the war. But part of those calculations are fast proving far more tyrannous in their weight on the public—on the taxpayers and creative masses—than was imagined by those who created them, notably by Lord Beveridge.

We have to face the fact that unless we are careful there will have to be an agonising re-appraisal of this whole system in this country. The hon. Member for Bradford, East spoke wisely when he said that these things cannot go on. Look at the level of expenditure in increased assistance last year to local government, an increase of something like £60 million or £70 million. Expenditure outside housing rose last year, I believe, from £860 million to about £920 million.

Mr. Pannell

I do not know to what set of figures the hon. Member is referring, but does he know that throughout the sphere of local government more than 70 per cent. is accounted for in wages, salaries and conditions made by national agreements over which neither side has control? Does he propose to cut down on the lot?

Mr. Fraser

Perhaps the hon. Member will have an opportunity of dealing with that matter later. We must look at the question of expenditure. The Chancellor has promised to do so and my right hon. Friend the Member for Blackburn, West (Mr. Assheton), in a powerful speech, has advocated some of the things which have to be done. Treasury control has to be tightened and made more effective. The hon. Member for Bradford, East spoke of using hon. Members for that purpose, and there might be something in that.

I believe that there are at least areas in which some sort of economy should be effected. The first is armaments. There we have to make a re-appraisal of policy. We have to see whether it is not possible with new and more effective weapons—I am not talking of atomic weapons—to make a greater use of new techniques with a smaller number of weapons and of personnel. I believe that the Government of Australia are making a re-appraisal of that kind and it may be that such a re-appraisal could be made here to see whether major economies could be effected, having regard to the technical improvement in striking power, by which a smaller number of men and machines may be used. We should also look at the questions of obsolescence and expendability. Some of the war machines being made today are too much of an investment—too perfect in themselves—and not sufficiently regarded as expendable, which all weapons of war should be. There is a possible economy there.

In county council expenditure there is room for possible economy. In my County of Staffordshire expenditure and empire building tend to continue in mounting scale. An hon. Member spoke of pointing out where some economies could be made. I have a Question on the Order Paper regarding an orphan school being constructed, or already constructed, in Staffordshire by the County Council at a cost of £54,000 for 30 pupils. It is not just a question of frills, but of furbelows in national and local expenditure. The right hon. Member for Leeds, South said that there must be a change in policy before efficient cuts can be made. I cannot agree with that. I believe that in all business efficiency can show 5 per cent., 6 per cent., 7 per cent., and 8 per cent. reductions.

Finally, I believe that economies can also be made in the National Health Service as at present instituted. We face the fact that we are spending nearly £4,500 million on social services, on debt, on armaments and other above-the-line expenditure. Our competitors are not expending at the same rate in relation to their national product. We are not building up our reserves at a rate sufficient to meet the chill and ill winds which may blow from abroad and which, if they do, will have a greater effect on this country than on any other.

I believe that this year's Budget is the right Budget and that the achievement of the Government so far has been indeed remarkable. But the time has come to look again to see whether or not this country can sustain the amount of outgoings it has to make each year.

7.0 p.m.

Lieut.-Colonel Marcus Lipton (Brixton)

I sympathise with the hon. Member for Stafford and Stone (Mr. H. Fraser), because he was in a great difficulty. He was at pains to persuade the Government to do something which, so far, they have found it quite impossible to achieve, namely, to give effect to the pledges they made in October, 1951, and on previous occasions, that they would introduce substantial economies into the administration of our affairs. That is crying for the moon so far as this Government is concerned, and the hon. Member will have to make up his mind how he stands in relation to his own party if he is convinced, or even if he hopes, for substantial reductions in Government expenditure.

The hon. Member said that, in his view, it would be possible to effect substantial economies without any serious change of policy. That would not seem to coincide with what the Chancellor said in his Budget speech. The right hon. Gentleman made it clear that substantial reductions in expenditure were quite impossible without serious changes in policy. The hon. Member for Stafford and Stone suggested that various economies could be made in the expenditure upon defence, upon local government and in connection with the social and welfare services. Since October, 1951, he has had every opportunity to press for such economies. Ministers to whom he has had easy access have been in power. Why, therefore, is it that he has not yet succeeded in persuading them to introduce even one of the smallest economies which he now advocates?

He says that these things cannot go on. We heard that story during the five or six years when the Labour Government were in power. We were told then that public expenditure must be reduced. But now that their party is in power hon. Gentlemen opposite find themselves in exactly the same (position as they were in those days. At all events, they are able to make exactly the same kind of speeches now as they did then. It must be an agonising experience for the hon. Member for Stafford and Stone to have survived these past two years and have to make the sort of speech he made today.

Mr. H. Fraser

Perhaps the hon. and gallant Gentleman will remember that by the action of this Government the country has been saved from the agony of total bankruptcy in its foreign payments.

Lieut.-Colonel Lipton

If the hon. Gentleman believes that he will believe anything.

Let us consider the internal purchasing value of the £. It is now 19s. 2d. The Chancellor of the Exchequer boasts about the gold and dollar reserves, but they are still below what they were in October, 1951. We hope that in due course the Chancellor will be so successful as to bring them back to the level at which they stood when the Labour Government went out of office. He should keep on trying. If the Government stay in office long enough—and that, also, is a moot point—the gold and dollar reserves may eventually be brought back to where they were when my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) was at the Treasury.

I do not think it can be denied—because to me it seems such an obvious thing—that despite all the ballyhoo and Conservative propaganda, our gold and dollar reserves are still less than they were in October, 1951. We wish the Chancellor well. We hope that in due course he will be able to bring them back to where they were. But I doubt very much whether he will manage to do it if he persists in disregarding the advice which hon. Members on this side of the Committee are only too willing to tender to him.

We have been overwhelmed by an avalanche of statistics and I do not wish to weary the Committee by recapitulating them. I suggest to the President of the Board of Trade that he should look at a very interesting book recently published by the Cambridge University Press, entitled "British Economic Statistics" and compiled by A. V. Royd and C. F. Carter, two eminent professors. There, the right hon. Gentleman will find an argument that the figure work going on in Whitehall is based on assumptions held together by guesswork. We Should not, therefore, be too impressed by the forecasts made by right hon. Gentlemen opposite about what lies ahead in the forthcoming financial year.

The hon. Member for Stafford and Stone talked about savings in defence expenditure. There was a saving during the past financial year for which the Government cannot take credit, because it was achieved as a result of a complete miscalculation. I refer to the Air Ministry Estimates, where the expenditure was estimated at £498 million and it was found possible to spend only £416 million. In effect, therefore, the Government have made a saving of £82 million. That was not due to wise foresight on their part, but, on the one hand, to incompetent budgeting and, on the other hand, to the expectation of a degree of production from our aircraft industry which neither the manpower nor the materials situation could sustain.

Similar savings were effected on the Army and Navy Estimates. The spending in those Departments was less than the rather substantial figure that it was not possible to spend on the Air Estimates. That is the only way in which the present Government are able to save money. It is done by over-budgeting and then finding, for a variety of reasons that it is not possible to spend the amount which has been budgeted.

The hon. Member for Stafford and Stone asked that the Government should bring in measures of economy. In that he was less than fair, because the Government have already introduced measures of economy to which I now wish to refer. It may have escaped the notice of the hon. Member, but during the next financial year the Government have budgeted for £1 million less in expenditure on war pensions. That may be something about which the hon. Member can feel proud, because it is partly due to the fact that if we allow a sufficient number of people to die we can save money as a result. The Government also propose, during the coming year, to save £2 million on non-contributory old-age pensions. There is a total of £3 million which the Government will save. I admit that that is not achieved through the exercise of wisdom on the part of Ministers, but by allowing the mortality rate to operate—

Sir William Darling (Edinburgh, South)

How would the hon. Member stop it?

Lieut.-Colonel Lipton

—so that the more old-age pensioners die the more money is saved.

The Government argue that, notwithstanding these savings, it is impossible to increase pensions in any way.

My hon. Friend the Member for Sunderland, North (Mr. Willey) drew attention to the fact that, despite the propaganda of the present Administration, we are eating less food now than we did in 1950.

Colonel O. E. Crosthwaite-Eyre (New Forest)

Which year?

Lieut.-Colonel Lipton

In 1953, we ate less food than in 1950. Let us not bog down that simple statement with a lot of statistics. If it is necessary to produce statistics I can do so, but it will take me an hour or two longer than I should otherwise take.

When the Financial Secretary attempted to deal with this matter in his usual polysyllabic way he said something about stocks being run down. He said that stocks were run down to such an extent in 1950 that more eggs, butter, and so on, were eaten then than in 1953. I am always suspicious about Ministers who talk of percentage figures in the running down of stocks. The only way in which I can judge the value of a comment of that kind is if I know exactly what the stocks are. If the Government would tell us what the stock situation was at the end of 1950 in respect of these commodities, and what it was at the end of 1953, then we could better test the validity of the argument used by the Financial Secretary the other day.

Sir W. Darling

Is that stocks in Government store or stocks on the shelves of the shops and the larders of the housewives?

Lieut.-Colonel Lipton

It is impossible to say. The Financial Secretary was studiously vague about that. The hon. Member must take up that matter with the Financial Secretary and not with me. If the hon. Gentleman wants a row he ought to have one with the Ministers on his own Front Bench, who are clouding the issue in more ways than one.

My complaint against the Administration is on the way in which they are running down stocks to a dangerously low level. They are running down stocks to an extent which is having, and which will have, the most adverse effects from the strategic point of view. Few figures are available, but from the revised Estimates of the Ministry of Food it would appear that they intend to try to give themselves a credit during the forthcoming year to the amount of £138 million as a result of what they describe as the "net decrease in the value of stocks."

I should like to know a little more about that. This method of taking capital funds and shoving them into our revenue accounts and, at the same time, depleting our stocks of food is a practice which is open to the gravest possible objection. Competent people engaged in the trade have told me that our strategic food reserves are lower than they have been for a long time.

Colonel Crosthwaite-Eyre

If the hon. and gallant Gentleman makes a serious allegation like that, he must disclose its source.

Lieut.-Colonel Lipton

No. I will not fall for that one. The hon. and gallant Gentleman must know that anyone engaged in the trade who would go on public record as having said that, or as having told tales out of school, would have his future in the trade ruined.

Colonel Crosthwaite-Eyre

Which trade?

Lieut.-Colonel Lipton

In the grain trade; let us leave it at that.

This run-down of stocks is going on for the purpose of bolstering the Revenue and providing the Government with money to enable them to balance their Budget and to cut down the Estimates of the Ministry of Food and the Ministry of Agriculture. We are getting into a ridiculous position. For instance, £9,400,000 is to be spent on payments for eggs during the coming financial year, but the people are consuming fewer eggs.

Also, £3 million more is to be spent on bread, and the people are eating less bread. According to trade figures the price of foreign grain and eggs is going down. World prices are falling and we are eating less, yet Government expenditure is going up. That argues a degree of incapacity which it is most difficult for ordinary people to understand.

There is a further example on which I find it impossible to get a straightforward answer from the Government. Let us examine the position about the imports of Canadian barley. In 1952, we imported £1,400,000 worth of Canadian barley. In 1953, imports went up to £14,300,000. They went up tenfold. That was due to throwing open the grain import trade to private enterprise. Not only did these vast imports of Canadian barley impose a drain on our dollar reserves, but, also, they put the Ministry of Food in a most unfortunate predicament, to the great disadvantage of the taxpayer.

The Minister of Food was left with about one million tons of British barley which he could not get rid of because private importers flooded the market with Canadian barley. The hon. Member for Leominster (Mr. Baldwin) will be able to confirm this, if he wishes. Despite the fact that the Minister of Food has had to cut the selling price of British barley to the market by several pounds per ton in the past few months, he has not been able to get rid of it.

The President of the Board of Trade takes the view that it is right and proper that there should be no dollar limit. He said that in the House of Commons on a previous occasion. There is no limit to the dollar expenditure which can be incurred by anybody who wants to import Canadian barley; yet there are vast stocks of British barley which the poor old Minister of Food cannot get rid of except at a loss to the taxpayer. Therefore, we lose on both hands. We lose dollars by spending them on commodities we do not need and we make it impossible for the Ministry of Food to get rid of its stocks.

When I asked the President of the Board of Trade, recently, whether there was any restriction on the import of Californian barley he said that there was not. He added that the brewers would continue to use British malting barley exclusively and would see that only British malting barley would be used for brewing British beer. Most unfortunately, within a day or two of his making that statement an agreement was announced between the brewing industry and the British farming interests as a result of which the price of malting barley has been cut by 11s. per cwt. for the coming harvest and the brewing industry has undertaken to ensure that not less than 90 per cent. of British malting barley is used in the brewing of British beer.

That is how the Government treat even their best friends. When the whole truth is known about the way in which the Government are wasting dollars and making it impossible to get rid of British agricultural products and when it is realised to what a dangerous extent our food stocks are to be run down by the Government, the day of retribution will come. But by that time goodness knows what damage will have been done and what suffering will have been caused

These are serious matters which I felt it my duty to raise. I do not believe that the Government realise, or have made any serious study of, the implications of abandoning controls, especially controls on certain imports, both on their own imports and in view of the possibility of a recession in the United States or any other part of the world. The Government have not worked out the extent to which their attempts to reduce food subsidies will result in any useful advantage either to themselves or to the taxpayers.

There are many serious implications behind the Budget, which carries on many of the evil traditions for which the Conservative Party is noted. For all these reasons, the Budget is not only bad, but is also full of evil possibilities for the citizens of this country.

7.22 p.m.

Viscount Hinchingbrooke (Dorset, South)

The Committee has well and truly caught the spirit of my right hon. Friend's carry-on Budget. I have never seen so many hon. Members carrying on their normal political avocations and so few of them present in this debate. That is particularly so on the other side of the Committee where I see at least six empty benches to represent to my right hon. Friend the grievances of constituents which hon. Members opposite have told us were manifest in the recent by-election.

The political organisers of the Parliamentary Labour Party must have been rather busy. A number of speeches have been made which have not had any very great relevance to a Committee of Ways and Means. The hon. Member for Sunderland, North (Mr. Willey) was put up to talk about food, and after he had talked about food in his accustomed manner in Committee of Supply for about half an hour he admitted to me, following an intervention by myself, that he had been out of order. The strain on hon. Members opposite must have been rather great.

I crave the indulgence of the Committee this evening to do that which I do not often try to do, and that is to make a rather tedious speech which is fairly full of figures. I almost had to stifle a yawn in deciding to make the speech, though I hope that I shall not be like that eminent statesman in the 19th century who woke up to find himself still addressing the House.

"The Times," in its leading article today, reflecting on what it conceives to be a general disappointment at my right hon. Friend's Budget statement, says: Everybody was expecting something for himself, perhaps encouraged at the last moment by an illogical outburst of optimism in part of the Press. The fact that there was no Budget surplus to give away was ignored. The object of my speech is to try to show that there is, in fact, a concealed surplus which has been ignored and to ask my right hon. Friend to have a look at it in the critical review of our national finances which he has promised in the next 12 months.

I maintain that the concealed surplus is the provision in the estimates for capital assets which ought to be met by loan. Might I, in parenthesis, say that I agree with the right hon. Member for Battersea, North (Mr. Jay) in asking that the conventional form of the Budget accounts should now be abandoned and that we should concentrate on the alternative classification, which is a much more accurate rendering of the facts. I should also like to ask, just by the way, for the abolition of the Blue Paper which is handed round in the debate. It serves no useful purpose whatever now. The empty spaces are never filled in and it is not in tune with the statement made by the Chancellor of the Exchequer.

If the Committee will bear with me, I would invite hon. Members to have a look at the background of the recommendations which I want to make later in some detail. I maintain that budgeting since the war has been too conservative, not only in the Budgets for which my right hon. Friend has been responsible but also in the previous Budgets when the Labour Party was in power.

I have here some figures of the overall deficits—that is to say, the above the line and the below the line deficits—which can be found this year on page 22 of the Financial Statement and on comparable pages in previous years. In 1949–50—that is the first Socialist Government Budget which I have taken—the estimate was for a surplus of £14 million; there was an actual surplus of £62 million. In 1950–51, the estimate was for a deficit of £7 million; there was an actual surplus of £247 million. In 1951–52 —the last Socialist Budget—there was an estimated deficit of £457 million and an actual deficit of only £158 million.

Then comes the single year where the trend was reversed. In the first Conservative Budget of 1952 there was an estimated deficit of £75 million and an actual deficit of £436 million. I shall say a word about that in a moment. For 1953–54, there was an estimated deficit of £440 million and an actual deficit of only £297 million. This year, the Chancellor has estimated for a deficit of £397 million, and no doubt when the year is over, unless something is done in the way that I want it done, the actual deficit will be much less.

Taking the year 1952–53, when the trend was against what I am saying, it is difficult to disentangle the subsidiary reasons for it. There was a revenue shortfall of £180 million, largely due to the recession which was reflected in the Inland Revenue and Customs receipts, and an excess expenditure of £180 million, due principally to satisfactory progress in the defence programme and to the very much more satisfactory progress with the housing programme.

The major reason for this reverse in that year was, of course, that the economic crisis in which the Socialist Government landed the country necessitated a very early Budget, and the Treasury estimating for the year in advance was, accordingly, upset. They had to look forward 13½ months instead of 12, and that is the real proof of the point I am trying to make against the Treasury.

When a person is seriously ill, any normal constitutional ailment which he has goes into recession; when he recovers from the illness, that constitutional ailment reappears. When the Treasury is not put out by a change of Government, but is taking things in its normal annual stride, it exhibits its constitutional weakness for hyper-orthodoxy in the national accounts. Time and again, since the war, Budgets have been too harsh; incomings have proved to be more buoyant than expected and outgoings have proved to be less overwhelming than expected. That is the first major point I want to make.

The next is to try to show that Budget balances are not significant weapons in the fight against inflation. It is an easily accepted but old-fashioned view that if we see a Budget in surplus, we may be quite sure that the result will be deflationary, but that, if it is in deficit or estimated to be in deficit, it will promote employment and general activity. That is simply not the case, as the figures show.

The claim that the Budget is the main instrument of policy is correct in regard to the various social and economic fields which it touches, but the idea that it is a really effective instrument of inflation or deflation cannot be substantiated. In 1949–50, and again in 1950–51, there were large Budget surpluses, and the cost of living and general inflation were rising sharply in those years. In 1951–52, in 1952–53 and again last year, there were large deficit Budgets, inflations and the cost of living were levelled off, and are now held, thanks to the administration of my right hon. Friend.

Taking it on another level, that of the National Debt, it is supposed to be inflationary to make any significant increase in the internal National Debt. Let us look at the figures. The overall increase during the last three years of the Socialist Government was only £200 million; that is to say, from £23,500 million to £23,700 million in 1952. In the first three years of the Conservative Government, the overall increase was £800 million; that is to say, from £23,700 million to £24,500 million in 1954. It is quite clear, that in the same period of three years, the Conservative Government have increased the National Debt by four times the amount by which their predecessors increased it, and inflation has been stopped.

Mr. Jay

Would the noble Lord not agree that, in looking at the cost of living, he would take into consideration the course of world prices?

Viscount Hinchingbrooke

Certainly, but I am taking the general case that is made that, without other devices and controls, a Budget surplus is a deflationary weapon and that National Debt increases are inflationary.

The main reason for this more satisfactory state of affairs in which inflation has been stopped is, of course, the fact that my right hon. Friend, shortly after assuming office, instituted two or three controls which are far more powerful than any Budget surplus. He raised the Bank rate, issued directives to the banks about how money should be used, and he instituted the limitation of capital expenditure. These are the powerful devices in the State at present, and they are not fiscal devices, but monetary devices.

Incidentally, while it may be the case that the capital expenditure programme will shortly be brought to an end, and that the ordinary market economy will prevail, if that is not the case I make the plea to my right hon. Friend, in parenthesis, that at some stage in our proceedings on financial business during the year in the House of Commons, the capital expenditure programme should be brought to the Floor of the House, so that we shall have an opportunity of discussing the principles that lie behind it.

Summarising my remarks so far, I make two assertions. The first is that a major cause of harassing taxation since the war is the hyper-orthodoxy of the official attitude to the national accounts. The second assertion is that, now that market and monetary controls have regained their supremacy over Budget and fiscal regulation, it is quite safe, from the point of view of rising prices, over-employment and everything else, to indulge in more unconventional forms of Budget finance.

Before I go into details about what I propose, I should like to say something about the anomalies which exist in the national accounts. It is argued that, if we transfer below the line large sums of money which are of a capital nature, we must treat death duties in the same way. I do not accept that, for three reasons. The first is that the origin of the means by which death duties are discharged is not always a capital origin; that is to say, by the sale of land, houses or chattels. It is frequently a sum created by savings accumulated out of individual income, either in the hands of the individual himself or by a life of capital redemption policy.

Secondly, even if the amount of the death duties is capital in the hands of the individual, it is income in the hands of the State, just as ships are capital in the accounts of shipowners but income in the accounts of shipbuilders, or blocks of shares are capital in the accounts of an investment trust and income to a broker or a finance company.

Thirdly, death duties, though income to the Exchequer, are not a fortuitous income, accruing by luck or by policy decisions or maturing at the wish or convenience of the person or institution making the repayment. Death duties are regular duties which are annually upheld by decisions of this Committee, and I maintain that, so long as we have this conventional form of accounts, death duties should remain above the line.

There is one other anomaly on which I should like to enlarge before I proceed to give details. A current example of how the Treasury is at present confused about accounting principles is the decision this year—and here I agree with the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton)—to keep the fortuitous liquidation of food stocks above the line, under the miscellaneous heading of £245 million, while maintaining post-war credits on the payments side below the line. How does my right hon. Friend reconcile those two things?

In the alternative classification these items are switched, food appearing below the line and post-war credits above the line—a most curious exercise. Surely the recovery of accumulated annual expenditure and the release of accumulated annual income are operations of the same kind and should be treated alike. Though it does not really help my case, I should like to be Conservative and orthodox and to put both these items below the line, on the grounds that both accumulated liabilities and assets fall for treatment as capital.

Let me come to the detail of the proposals I want to make, beginning with one general observation. Many people fear that if we put below the line and treat as capital sums of money now provided out of annual taxation, it will be a signal for a very big spurt in the activity of these services or processes or whatever it may be, and that, in consequence, whatever the State is responsible for will grow enormously. Nevertheless, we must avoid a dog-in-the-manger policy. When the State has become responsible for the management of great concerns such as the development of atomic energy or the provision of new roads, the State must not be more backward than large private concerns like Imperial Chemical Industries in the provision of capital.

Like so many of my hon. and right hon. Friends I deplore the trend which has led to great industries and services being taken out of the realm of private enterprise and put under the cover of the State, but, once they are there, we must see, in the interests of the national economy and for the general buoyancy of our affairs, that they are well served and get the money that is required, and that they are not held back through the niggardly view that we cannot afford the taxation necessary to provide them with the capital that they need.

In selecting items, one has to decide upon some sort of principle. The Crick Committee on the Form of Government Accounts went into this matter very thoroughly indeed in the period of the Socialist Government, and came to the conclusion that no single principle of accounting could be applied. Who am I to say that there is one? My proposals broadly satisfy a number of principles, though I must admit that in the minutiae of selection there is inevitably conflict between them. It is for those experts who will review this matter in the coming year to make the decisions most appropriate.

These are the principles. First of all, there is little object in the exercise of transferring sums from above to below the line and meeting them out of loan unless the sums are appreciable. In a Budget of £4,000 million it is no use toying around with £50 million or £60 million. Secondly, there must be no significant surplus or deficit above the line resulting from the transfer. What is transferred below on the expenditure side must equal what is remitted in taxation.

Thirdly, what is transferred below and is met by the borrowing must include all categories of expenditure which private industries and State corporations normally set up as assets and meet by borrowing, that is to say, capital expenditure calculated to produce an economic return even though that return may not be immediately collected. The main category which I should transfer includes land, buildings and plant associated with civil, as opposed to military, research, development and storage.

Fourthly, there is an additional category justifying inclusion below the line, of which atomic plants and roads are the outstanding examples. Here the return is not directly in terms of monetary sales, dividends or interest, but in increased national productivity. That is a point where, unless we are very careful, our feet leave the ground and we soar into the empyrean, because there are vast spheres where the State lays down capital assets on which no return is possible. Therefore, I have rejected capital expenditure on assets which enhance our civilisation, such as universities, schools, hospitals, public buildings and, if you like, prisons.

Here are the details: The gross total is £270 million, of which £84 million is on land, buildings and plant, £51 million is on storage and stockpiling, £50 million is on development, and £84 million is on research. I will, if I may, rapidly proceed through the items. I only wish that we on the back benches had the facilities to do what the Government do, merely attach these tables for publication in the OFFICIAL REPORT.

In Class II of the Civil Estimates, Vote 11, A4 there is an item for colonial development and welfare schemes of £15.6 million; and in B for colonial research schemes another item of £1.3 million. In Class IV there is an item of £6 million for grants to universities, but how much of this is expended on research one is not able to say. I have, therefore, excluded it. There is B.B.C. capital expenditure in Vote 12 of £180,000.

In Class VI we come to more important items. In Vote 2, services in development areas, £4.8 million; and in Vote 3, financial assistance in development areas, £2 million. In Vote 9, for the Ministry of Materials, capital expenditure is £278,000 and in Vote 10 that Ministry's strategic reserves are increased by the enormous figure of £44½ million. I do not think one can say how much of that is for defence. All one can do is to take a token figure, so I have taken £22 million.

In Vote 11B, Ministry of Supply research and development require another enormous figure of £140 million. Again, one does not know how much of that is for military and how much for civil development, so I have taken a token figure of £70 million. In Vote D, miscellaneous establishments includes storage depots, canteens and hostels, costing £5.8 million. Vote F for land and buildings requires £7.9 million; Vote G for works services £16.5 million; and Vote H for plant and machinery, £17.9 million. Perhaps a good deal of that ought to be excluded as being in the military category.

In Class VII for common services, works, etc., is Vote 3A for public building, including new works, alterations, additions and purchases, and requiring a total of £3.1 million. This sum includes the provision of laboratories and research institutes. The Vote totals £6.3 million. I have taken only a half of it as a token amount. Class VIII, for agriculture and food contains a number of rather small items. First is Vote 2D, for field drainage and water supply grants, amounting to £2.3 million, and then Vote 3A for land drainage and flood services, costing £6.6 million. Vote 3B is for the purchase and improvement of land, at £810,000. By the way, these are all figures shown in the current Estimates.

Also, there are 3E, agricultural and drainage machinery service, £2.8 million; 3H, agricultural, education and research, £4.3 million. This Vote includes such items as £440,000 capital expenditure on the Foot-and-Mouth Disease Research Institute, at Pirbright. Hon. Members will find details on page 55 of the Estimates. Vote 7, Agricultural Research Council, £1.4 million; Vote 8, Agricultural Development Fund, grant-in-aid, £1.2 million; Vote 9, Forestry Commission, for the development of State forests and the acquisition of trees to be planted, £7.7 million; Vote 11, Ministry of Food, strategic reserves, purchase and storage, £10.5 million.

Class IX, Transport, Fuel and Power: Vote 2A, Road Fund, £38.5 million. That is an increase of £5.5 million on last year's figure. We are told that that is the item for new roads and, quite clearly, it qualifies under the categories I have given. 3K, grant to dock and harbour authorities for repair and installations on East Coast which were damaged by flooding, £95,000; Vote 4, civil aviation, capital expenditure, £5.5 million. The details are on page 39 of the Estimates. The amount required for 1954–55 for the development of the London Airport is £2.6 million. This includes £1.5 million for the development of the central area. The estimated amount required for the development of the Airport after this year is £2.6 million. There are significant sums for Gatwick and Prestwick.

We come to Vote 5: E.1. fuel and power research, £.4 million; E.2, fuel saving loans, £.7 million; E.3, safety in mines, research, £61,000. Vote 6: A.1, Ministry of Fuel and Power (Special Services), £12 million. That is a substantial increase over last year of £5 million and is devoted to capital expenditure on the supply, storage and distribution of petroleum products. Vote 7: Atomic Energy. This is important because the Atomic Energy Department has come into being and for the first time has its own Vote. The sum asked for in 1954–55 is £53.6 million. The following subheads are noteworthy. Land and buildings and works services, £14.3 million; plant and machinery, £13.1 million; loans for production of uranium, £5.1 million.

Vote 8 deals with the Department of Scientific and Industrial Research. The figure is £6.2 million.

Mr. Godber

On a point of order. Is it really in order for my noble Friend to give all these matters in such detail when there are so many Members anxious to catch your eye, Sir Rhys?

The Deputy-Chairman (Sir Rhys Hopkin Morris)

That is not a point of order. I imagine that the figures are being given in support of the hon. Member's argument.

Viscount Hinchingbrooke

I am extremely sorry. I had, in fact, entirely finished, except for my concluding remarks. That completes the items I wish to bring before the Committee.

I have only one thing more to say in order to meet the criticism that may be levelled that, after all, it is purely an accountancy device to create fictitious sums which, if remitted in tax, would promote inflation and elevate the cost of living. I would answer that this treatment is the only way to release these desirable classes of assets from the inhibitions which surround their development, due to their association with taxation which is already inordinate and intolerable. The inflationary consequence depends entirely on the maintenance of financial controls which, as I specified in the beginning of my speech, are external to the Budget altogether. It depends, also, on whether taxation is reduced to those who save or to those who spend.

I am very grateful for the patient way in which the Committee has listened to the presentation of this very dull and detailed material.

7.56 p.m.

Mr. Charles Pannell (Leeds, West)

The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) will not, I am sure, expect me to follow him in his lists of figures. I took him up earlier in the day when he suggested that my hon. Friend the Member for Sunder-land, North (Mr. F. Willey) was out of order in introducing food and other prices into the debate. As I understand it, this is the only debate during the year on the economic state of the nation, and many things are relevant—including, presumably, the tedious repetition of figures. We usually follow the noble Lord with interest and sympathy. He makes a constructive contribution to the debate, although it is usually done with an assumption of superiority which we generally find as charming as it is unwarranted.

I want to speak about pensions in a context rather wider than old-age pensions. I want to talk also about a problem which must be of serious moment not only to the Government in power at the moment but to that which will be in power after the next General Election, and which is of interest to both side of the House.

Reference has been made to the fact that in what the Chancellor calls the basic industries—the nationalised industries— there have been no shortage of investment, although there tends to be such a shortage in private industry. Consideration of investment in industry must include not only capital investment but the attraction of labour to the various industries. I do not want to refer to the Millard Tucker Report, which goes into the percentage given to certain top-hatted gentlemen, but to the divergence now appearing in our economic structure between the public and the private sectors, particularly as regards superannuation and its general effect upon the economy.

Broadly speaking, we can designate the public sector as comprising civil servants, local government servants, teachers, people in the nationalised industries, and people of that type. This sector enjoys superannuation, sick pay, holidays and security far above those enjoyed by people employed in the private sector. I refer particularly to the craftsmen, labourers and semi-skilled people, but it applies equally to people on the clerical side of private business.

The superannuation of those employed in local government is based on a superannuation scheme which in the inter-war years rested on the assumption of a comparable contribution of 5 per cent. by each side. That was in the days of unemployment and high interest rates. Nowadays local government superannuation schemes have to be founded, not on that basis of parity, but on great subvention from the public purse over and above the employers' contribution. Every local government body has a quinquennial revaluation. The result of the last quinquennial revaluation in the case of one authority with 40,000 people meant an addition of about a 4½d. rate.

With regard to teachers, the bare facts are that the Government are asking them to pay 6 per cent. of the 13½per cent. of their salary needed to fund their superannuation. In any case, what is the expectation at the end of the time of local government servants? Generally speaking, their superannuation is based on sixtieths of their salary during contributory years of service and the salary of the last five years, which in effect means that if they have had 40 years' service in local government they retire upon a pension of two-thirds of their income upon retirement. Teachers' superannuation, I believe, is based on eightieths, with a lump sum payment of up to one months' salary for every year, up to a maximum, I believe, of 18 years.

These are the rewards in the public sector. In the main, they are buttressed not only by contributions from the people themselves but by increasing contributions from the general body of ratepayers, many of whom—I believe the majority of whom—do not obtain those sorts of benefits when they reach retirement age.

There is much talk about extending the normal period of working life. That is all very well when applied to civil servants, but it cannot be applied to engineers in the heavy industries in the part of the country from which I come. In those industries most men, on reaching the age of 65, find that the steel has been drawn out and only the iron is left. When we talk of extending working lives, there must be a high degree of selection. We are all glad that the National Coal Board is giving a superannuation scheme for coal miners, and this provides the only exception to the argument which I have deployed. Coal miners in the future will not have to work until they drop, but they will be pensioned into dignified old age after making an outstanding contribution to the economy of the country.

Generally speaking, the public sector is cushioned by the private sector. The people employed in the private sector of industry, such as the engineers, are in the full blast of foreign competition. They are fighting for exports. In the private sector the pace is tougher and conditions are fiercer. Generally speaking, it is the people in the private sector who are maintaining improved conditions in the public sector, and it is on those people that the full effect of foreign competition and unemployment will fall. These are the places where men feel old earlier.

I was looking at some figures relating to my own trade union the other day, and I think that they show the position better than anything else that I could quote. In the engineering industry, something like 56,000 of the members of the Amalgamated Engineering Union are in road haulage, iron and steel, mining, gas, electricity, docks and inland waterways, railway passenger transport and civil air transport, and another 47,000 are in the dockyards, the Air Ministry, the War Office, the Ministry of Supply, and other Ministries. Broadly speaking, their rates are comparable with those of people in the private sector. All those trades that I have mentioned, with the exception of road haulage, enjoy sick pay and pensions schemes.

If we take the remaining 727,000 from the same trade union, in federated firms and in certain non-federate firms—in fact, in the private sector of industry generally—they enjoy no sick pay or pensions schemes of any extended duration. Under the Engineering Employees Federation there is a scheme by which men pay for their holidays by earning an hour for every week that they are in employment. But generally these A.E.U. figures definitely show that the workers in private industry are in a worse position, so far as old age and security are concerned, compared with the public sector. I do not want to weary the Committee with a long list of figures, as the noble Lord the Member for Dorset, South did, but broadly speaking the wage rates are comparable up and down the country.

It is reasonable that if my hon. Friends on these benches believe in a measure of Socialism and believe that the private sector will have to stay, we cannot have these two classes of people receiving these two sorts of treatment on retirement at 65. The people in the private sector of industry will want a better place in the sun and similar rewards in their old age to those received in the public sector.

If we have two men, one an engine fitter in a dockyard, and another an engine-fitter in a federated firm, on similar rates of pay, both serve their country to the end of their working lives equally usefully, though I have no doubt that the tempo is rather faster in the private industry than in public industry; but at the end of their lives they got different rewards. When we consider this question of pensions in the future, it must be agreed that we cannot continue with a system of society in this country in which one part of the population at the age of 65 is buttressed and cushioned and subsidised in their old age, and another sector receive the very minimum of public assistance at the age of 65.

I do not think that hon. Members opposite wish to draw a hard-and-fast line, but they do believe in private enterprise, and therefore they should give to private enterprise the same attractions as exist in public enterprise. The average fitter, turner and engineer will not go into private industry if he can get a job in public industry. If he can get a job with one of the corporations, or in local government, or in a nationalised industry, he will take it rather than get a job in private industry, for he knows full well that in the ebb and flow of trade he is far more secure in the public sector.

It seems to me that the case was made out well by Professor Titmuss, Professor of Social Administration at the University of London, when he wrote in "The Times": Moreover, the direction in which all these forces are moving inevitably raises the issue of social justice. Already it is possible to see here the problem of two nations in old age; of greater inequalities in living standards after work than in work. The generous provision which society is now earmarking for the future benefit of the professional, executive, and salaried classes, largely at the expense of direct and indirect taxation, is not thought of as a social service. The relatively meagre National Insurance pension, fast becoming the new Poor law for the aged, is called a social service. One system is based on the summit of occupational success, achieved or inherited, measured in money terms; the other on regularity of work attendance between the ages of 15 and 65. These contrasting systems of reward at the end of the working life express, in sharper form, what has gone before. It is no use we on these benches striving, as we have striven over the last 50 years, for better conditions for the people and espousing the cause of collective industry and nationalised industry, and then, when we find a large element which will have to remain private industry, tolerating two classes of society one of which will get a better crack of the whip at the end of the day. What I have said is not entirely irrelevant to the subject to which we are addressing ourselves today in so far as we are considering taxation and its effect on increased productivity and the economic state of the nation.

The hon. Member for Handsworth (Sir E. Boyle) rather twitted this side of the Committee on the varied criticism we had made of the Government. That is generally true. Even the Financial Secretary to the Treasury was not above giving a novel reason when he sat on these benches which was not in accord with the views of his own Front Bench from time to time.

I think it is true to say that this Budget follows quite consistently the line of policy which has been taken by the Government since they came into power and is in accord with the prophecies of certain of its members before they came into power. I see the hon. Member for Leominster (Mr. Baldwin) in his place. He is on record as having said in a speech at Aberystwyth in February, 1950, that his party were in favour of full employment, but believed that partial employment was both unavoidable and necessary.

Traditionally we associate the employing class with the party opposite and the Engineering Employers' Federation. Sir Allan Smith was the Conservative Member for Croydon in his day and Sir Alexander Ramsay was also a Conservative Member of Parliament. From their general reaction to my union, we might think that our traditional enemy was back in power. The hon. Member for Kidderminster (Mr. Nabarro), when he was a Parliamentary candidate, said that more work, harder work and longer work for everyone in Britain, without any wage increases, was inevitable. The hon. Member for Macclesfield (Air Commodore Harvey) said, in 1949, that instead of having the promise of more wages and less work and social service, the workers had to work harder.

That, of course, was the psychology that was created by hon. Members who were spokesmen on this side when we were in power. It was reasonable to expect that when they got into power difficult times would lie ahead for the trade union movement. I think that the Prime Minister was rather wiser than that. It is honestly believed on this side of the Committee that he appointed the present Minister of Labour because he was never known to be on record as having said an unkind thing about the trade union movement. Of course, the hon. and learned Gentleman who is now the Home Secretary had said unkind things from time to time.

But we have now to consider the economic situation not in the context of the hungry '30s but in the context of full employment. Therefore, we have the very curious situation that, broadly speaking, industrial power rests with the trade union movement and political power rests with the Tory Party.

The Deputy-Chairman

I hope that the hon. Member is going to connect his argument with the Budget Resolutions in some way.

Mr. Pannell

I find myself in great difficulty. I have sat here for the best part of three days and I have heard hon. Members opposite box the compass on a great variety of subjects. I am trying to address myself to the question of the trade union movement and its effect on productivity. The hon. Member for Stafford and Stone (Mr. H. Fraser) said that the workers would have to get up at 5 o'clock in the morning in future. I can imagine him being up until 5 o'clock but not getting up at 5 o'clock. If this debate has wandered, I hope that you will excuse me, Sir Rhys, if I come to a point I think you will agree is in order.

I think it is fair to say that the general history of this Government in the economic field has brought us to the financial situation with which we are faced today. This Government had been in power only for about a month when the announcement was made that they would increase the interest rates of the Public Works Loan Board. I said at the time that that would have the effect of putting up the rent of every council house by about 4s. 4d. a week. They have, in fact, increased the interest and money rates. In the present Budget the Government are giving increased allowances to stimulate investment, at the cost of the Exchequer. I should like to know why we cannot have cheaper money and cheaper interest rates, with a saving to the Exchequer. I do not see why the interest rate of the Public Works Loan Board cannot be brought down. That would have some effect on the cost of living. It would be a token of good faith.

All this started when the Government met the local authorities and gave them an increased Exchequer contribution to the housing subsidy. All that really happened was, of course, that the average person who was not a council tenant paid more as a taxpayer but less as a ratepayer. The hon. Member for Stafford and Stone insists that the local authorities are spending or taking too much money. In the earlier Budgets the Government had slashed subsidies, which of course affected the poorer classes. Income Tax reliefs were to give incentives, but what benefit did they give the labourer, the porter and the clerk who had never paid any Income Tax at all? There is a feeling on this side of the Committee that the Government look upon these classes as expendable. They thought it better to create a new middle class of supporters by giving those incentives to them rather than to those who are not an electoral advantage to them.

We find that the Government's policy has been all through to free economy and generally to stimulate profits and dividends. In the days of Sir Stafford Cripps there was a belief among the industrial workers that the Chancellor would attempt to keep the ring. The Government have wasted public money by denationalising road transport. In fact, we look upon that as a means to redeem the pledge by the party paymasters given at the Election. The Government have created a belief among the trade unions of this country that the traditional enemy is now in power. Sir Alan Smith and Sir Alexander Ramsay are in quite a different guise today.

This Government came in on a good wicket, whatever they may say. The terms of trade have been moving in favour of this country ever since they came into power. Taking 1951 as 100, the terms of trade had improved by 20 per cent. at the end of last year. The index for imported food and drink prices fell by 7 per cent. between mid-1952 and the end of 1953. There has been a lessening of international tension, which has stimulated the terms of trade in our favour, and we have had the end of the war in Korea. Far from coming in on a bad wicket, the Government came in on an extremely good one. All of us render lip-service to increased productivity. But everybody must get a fair deal. There must be an increasing standard of life for the workers as productivity increases. Present relative values simply cannot stand for ever.

I want to refer again to the Edinburgh, East by-election. I notice that the hon. Member for Edinburgh, South (Sir W. Darling) is present, and I know his interest in the subject. There was an assumption by the party opposite that the Edinburgh, East by-election was not a bad one for them, because redistribution had made it more difficult for the Labour Party. It is, therefore, an indication of the waning confidence of the country that on a poll of 13,000 fewer, 1,300 more votes were cast for the Labour Party, and in a division which had been greatly weakened for Labour.

That is what the country thinks of the Budget. What Edinburgh, East said last Thursday, I have no doubt Motherwell will say with increasing emphasis next Wednesday. The electoral climate has changed as a result of the Budget.

Mr. Archer Baldwin (Leominster)

On a point of order. What in the world have these by-elections to do with the Budget statement? There are many of us on this side who still wish to speak.

The Deputy-Chairman

I gathered the hon. Member was saying that that was the opinion of the country on the Budget.

Mr. Pannell

I should have thought that when we speak here, we are to a degree representing our constituents. When I look at some of the hon. Members opposite, although I do not like the look of them at all, I think of the 50,000, 60,000 or 70,000 people they are presumed to represent, all honest, decent men and women, and I think more kindly of them when I think of their constituencies.

That is what the country thought of the Budget. How deep it has gone can be shown by the attempt of the Press completely to swamp that by-election. Its result has ensured, as Motherwell also will ensure, that there will be no election this year on that sort of wicket.

The country has thought about the Budget, and things of this sort have sunk in. This long-continuing policy of the Government has brought them to the end of their tether. The people know that the traditional Tory leopard has not changed its spots, and when we go to the country next year I hope that a Labour Chancellor will bring in a Budget which is not called either a "grab" or a "drab" Budget.

8.23 p.m.

Colonel O. E. Crosthwaite-Eyre (New Forest)

Possibly the most interesting part of the speech of the hon. Member for Leeds, West (Mr. Pannell) was his analysis of the Edinburgh, East by-election, in which he blamed the Budget because it was a standstill Budget. The hon. Member is a man of a certain amount of political knowledge. Let him cast his mind back to the time when Sir Stafford Cripps produced exactly the same kind of Budget. If I remember aright, hon. Members opposite then stood up and said that political advantage should never stand in the way of political honesty.

Tonight the hon. Member has said something very different. He said that the Government came in on a good wicket. Who really came in on a good wicket? Was it not Members opposite in 1945, with the full spate of American aid, rather than we on this side, who came in in the middle of a crisis? Would hon. Members opposite prefer £1,000 million of American aid at their disposal, or the situation which we took over, in which American aid had been cut down to a comparative dribble?

I have listened today to practically every speech from hon. Members opposite. If I have ever heard a case of Satan rebuking sin, it has been in what hon. Members opposite have said.

Dr. H. Morgan (Warrington)

The hon. and gallant Member ought to know.

Colonel Crosthwaite-Eyre

I am speaking from this side. Both Satan and sin are on the other side.

This afternoon's debate opened with a speech by the right hon. Member for Battersea, North (Mr. Jay), who said that if my right hon. Friend the Chancellor cared to put down a Motion restoring E.P.L. and increasing company taxation to the sum of £340 million, he and his hon. Friends would give it their full support. The next speaker on the other side was the hon. Member for Ashton-under-Lyne (Mr. Rhodes), who stood exactly behind where the right hon. Member for Battersea, North had been speaking from. His case was that not only should we not introduce any further taxation on companies, but that we should do more for them. I was glad to see that at that stage the right hon. Member for Battersea, North "declared," assumed it was the tea interval, and walked out.

Then, we had the extraordinary speech of the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton), whom we know in the stilly watches of the night because of what he has said in the defence debates. He said that we on this side were to be considered guilty because we had run down the country's stocks, and, when I challenged him, particularly to narrow his argument, he said in grain. He then turned over the next page of his notes and tried to prove conclusively that we were at fault because we had allowed unlimited imports of Canadian grain and had permitted stocks to be built up.

The hon. and gallant Member then turned over two pages together and tried to attack the Ministry of Food for allowing both those things to happen at the same time and having to pay the British farmer. I was watching the hon. and gallant Member carefully, because I hoped he would put one foot over the red line so that he could be taken up on a point of order. Certainly one could take him up on a point of fact. He tried to abuse the Government for not having done something and then, on the other hand, for having done everything. On a third hand, he accused the Government of not meeting the position.

Dr. Morgan

And the hon. and gallant Member himself said nothing.

Colonel Crosthwaite-Eyre

Had the hon. Member been present, he would have heard my interruption.

We are drawing to the end of this debate. As some of my hon. Friends have said, hon. Members opposite have been forced back into the sterile occupation of bandying statistics from one side of the Committee to the other.

Mr. Pannell

The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) quoted more statistics in half an hour than all other Members have quoted in the previous three days. It must have been a record.

Colonel Crosthwaite-Eyre

I do not wish to argue with the hon. Gentleman, but if he had followed my noble Friend, he would have found that his figures were designed to alter the presentation of the Budget. I am talking about statistics in the Economic Survey or the national accounts of Income and Expenditure.

I have read the report of this debate so far, and it is extraordinary to find hon. Members on the other side of the Committee arguing about £10 million here or £10 million there; whether to take the third quarter of 1950 or the third quarter of 1952; whether it is the first quarter of 1947 or the first quarter of 1942; and whether the basic year should be 1938 or 1943. Of course, whatever is adopted, it can be used to deduce any argument to suit one's purpose.

I would suggest to hon. Members opposite that if they address their constituents as much as I do and try to make speeches based upon millions and basic years of their choice and things of that kind, their experience will probably be the experience which I have had. The audience begin looking at the clock, and then they are heard to say, "It is only half an hour before the pubs shut; let us close down the meeting." [Interruption.] I am sorry if the right hon. Gentleman the Member for Blyth (Mr. Robens) does not like it, but in the New Forest certainly that sort of argument produces a watching of the clock.

If we did not do anything in this Budget that would relieve us from the slinging of statistics, at least we have got rid of that mythical gentleman invented by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), the bachelor earning £1,000 a year. Thank heavens he has disappeared.

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

Unearned.

Colonel Crosthwaite-Eyre

Yes, unearned. We have heard various hon. Members speak about pensioners, but it is completely forgotten that the one great scheme of that kind in the private sector of industry, the co-partnership scheme in the gas industry, was the first to be scuppered by the party opposite. That scheme compared very favourably with any other scheme of the kind in the public or the private sector of industry either at that time or today.

Mr. Pannell

It was not superannuation; it was co-partnership.

Dr. Morgan

Leave the hon. and gallant Gentleman alone; he does not know a thing.

Colonel Crosthwaite-Eyre

I think I am correct in saying that that co-partnership scheme in the gas industry provided not only sickness benefits but superannuation benefits—

Mr. Pannell

Sickness and superannuation still exist.

Colonel Crosthwaite-Eyre

—superior to anything that is now available. I wish that hon. Members opposite, when they talk in these broad, general and vague terms in making comparisons between the private and the public sector of industry, would remember that they were the first people to suppress an outstanding pensions scheme which gave unrivalled benefits to those participating in it.

Hon. Members opposite have tried to pay tribute in varying degrees to the old-age pensioner and to his needs. There is no one in this Committee who has not got a great regard for the needs of old-age pensioners and who has not the hope that, no matter who may be in power, something more can be done for them. But when we are making a just appraisal of the situation, I think we should remember that the benefits we have given have not been swept away or swallowed up by inflation as happened when the Labour Government gave benefits to these pensioners. The 2s. 6d. we gave has not been swept away by inflation, whereas the Labour Government's increase was of no use for buying goods within a relatively few months after it was given.

I think I am entitled to ask my right hon. Friend what is behind this Budget particularly in regard to the United States of America. Hon. Members on both sides of the Committee have mentioned this issue, but I should like to ask this simple question. If I do not misquote my right hon. Friend, he said that the first part of this recession of trade in the United States has been taken up by inventory stocks. I believe I am right in saying that the inventory stocks are now higher than they were when the recession began; and are higher comparatively compared with a similar period in the 1949 recession. That is so according to the indices at my disposal. I want to ask about that because it is a much more dangerous situation if, in the case of the United States, the inventory stocks have not taken the first charge of this recession.

Now I want to ask two questions about the European Payments Union. I understand from what the Economic Secretary has said, and also the President of the Board of Trade, that there is no danger that through any present negotiations we shall lose further reserves of gold and hard currency. But whatever negotiations we may enter into, we should be certain that there is no further liability to which we are committed. We have done more than most nations to help the establishment of the European Payments Union. We started by accepting a great deficit, we have accepted that liability, and we have contributed, through our policy of liberalisation of trade, far more than any other country. In the present negotiations for the future of E.P.U., dating from next June, we should see that no further liability is placed upon us and, above all, we should see that the credit element in that system is maintained.

My information is that out of the 1,000 million dollar units available for credit, only 200 million remain. I hope that Her Majesty's Government will not find themselves in the position of making one-sided concessions to keep a system going of which we were one of the founders and which we have done more to support than any other country in Europe.

Behind the issues raised by my right hon. Friend in this debate are future claims which, no matter who is in power, some Government will have to face. We have heard about the Royal Commission on Taxation, although its final verdict has not yet been produced. We have the Philips Committee on the aged, whose report we shall have to study and whose recommendations we must consider. Also, at the moment the Government Actuary is working on the National Insurance Fund. I have no more knowledge than any other hon. Member, but it is a common rumour that the Fund is already around 5 per cent. in the red. If that be so, think of the burden that a future Government must meet, either from its own funds and other sources of taxation, or by putting up the contributions.

Dr. Morgan

What will the working-classes gain?

Colonel Crosthwaite-Eyre

The hon. Gentleman must listen. These are considerations that have to be met, and somebody has to meet them. It may be the taxpayer, the beer drinker or the tobacco smoker. As so many hon. Members on both sides of the Committee have said, no country can bear an extent of taxation which is equivalent to one-third of its total national income. It can go on for only a short time, and it means that people of initiative and enterprise will go elsewhere to live their lives. Hon. Gentlemen opposite must know, from their knowledge of their own divisions, of the numbers of young people who are going abroad to our Colonies and Dominions.

I would remind hon. Gentlemen opposite, who say that the point of taxation is to redistribute the national cake and to remove the old injustices, that this may be so, and no one on his side of the Committee has pretended that we want to go back to a pre-war level of division. What we have said on this side of the Committee is that, if we want to see an increase in national productivity and income, and if we want more resources to be taxed, we must give a fair reward to those who earn. It is no good pretending that for an unlimited period one can tax everybody who has money and think that whilst the ostrich has its head buried in the Chancellor's maw, it is still going to lay an egg for a future Chancellor.

Mr. Ivor Owen Thomas (The Wrekin)

The hon. and gallant Member referred to the increased number of people who are leaving this country to go to the Colonies, but is not that in line with the appeals and propaganda from the Colonial Office over the years? Why should the hon. and gallant Gentleman lament such a fact, when it happens to be in line with that appeal?

Colonel Crosthwaite-Eyre

If I gave that impression, I must apologise. All that I said was that if we have rates of taxation in this country so much above those of other countries where people can obtain equivalent jobs, we must not be surprised if people go to other countries.

In South Africa, under the latest Budget, the maximum tax that a person can pay has come down from 15s. 1d. in the £ to 10s. in the £, and in Germany, which is now our major competitor, the maximum tax has been reduced from 14s. to 10s. 6d.

Mr. Emrys Hughes (South Ayrshire)

No rearmament.

Colonel Crosthwaite-Eyre

The hon. Member should realise that their challenge to us is not in arms but in the commercial markets of the world.

There has been a great remission of death duties in Germany, and in South Africa everyone is free to leave up to £15,000 without paying death duties. It may well be said by hon. Members opposite that that is far too much and that that is something which they would not accept, but it does not alter the fact that we are levying on the proceeds of past wealth and on present earners at a rate far exceeding that of our creditors. It is time that we realised that the national cake is not a national soufflé; to be blown up by inflation. It is something which has to be earned before it can be divided. It is no use talking about increasing the national cake unless we allow those who make and bake it to have their fair share, though no more than their fair share of it.

I would remind the right hon. Member for Blyth that either he or one of his right hon. Friends at the Ministry of Fuel and Power once said, in relation to the appointment of people to the National Coal Board: The sums that we propose may seem large but in our view they are necessary to get people of the quality that we want. How true that is, not only for members of the National Coal Board but for anybody in industry or anywhere else. One cannot obtain anything in the world unless one is prepared to pay for it. Above all, one cannot get brains unless one is prepared to pay for them.

I come now to a point on which I am afraid I may not be altogether in line with the Chancellor. I have said that we should see that the people who earn for the country obtain a reasonable return, but there has grown up in the last two years, particularly in the Treasury, the theory that it is one thing to earn £1,990 but it is quite another to earn £2,006. Once one gets above this magical figure of £2,000 one becomes subject to every rigour that taxation can bring against one.

I have in my possession a letter from people who run a private group insurance scheme, the object of which is that everybody in a certain works pays a fixed sum and in return enjoys certain privileges if he or she becomes ill and must have an operation or must go to a nursing home. I should disclose that this letter was sent to the "Financial Times," of which I am a director. The Treasury have now decided under their powers that this scheme entitling people to free medical advice and health is perfectly all right so long as the individual concerned does not earn more than £2,000 a year. If he earns more than £2,000, it has to be returned for tax under Schedule E. I ask hon. Members of the Committee to think what that means. We are saying, in effect, that a particular sum can be treated as income for one class of people, but, once a purely arbitrary figure is reached, it has to become an emolument. I must say to the Chancellor that I doubt very much whether there is any basis in law for that.

Mr. Douglas Houghton (Sowerby)

May I remind the hon. and gallant Gentleman of Part IV of the Finance Act, 1948?

Colonel Crosthwaite-Eyre

No, it is not that Finance Act, but the Finance Act of 1952, Section 161 (1).

Mr. Ede (South Shields)

The hon. and gallant Member for New Forest (Colonel Crosthwaite-Eyre) said that he was on the point of drawing the attention of the Chair to the fact that my hon. and gallant Friend the Member for Brixton (Lieut.-Colonel Lipton) was speaking with his foot over the line. The hon. and gallant Member for New Forest has been speaking for some time with one foot in the Gangway. I ask if that is in order.

Colonel Crosthwaite-Eyre

I apologise, Sir Charles.

Is it really necessary, in the view of the Treasury, to chase directors of companies because they might have a free lunch? The Treasury are now spending so much time and money chasing people earning more than £2,000 a year. I wish to ask how much it costs the Treasury to chase all those people and what the Treasury get in return. It has reached a really stupid limit and has almost reached the level of the story of a business man in New York who put in the cost of a hair cut as part of his expenses. That story may be apocryphal. He was allowed the expense as it was "wholly and exclusively" because of his business, but he was then told that it was not "necessary" because he could see the customer with his hair uncut. I ask that this problem should be reviewed.

Much has been said about Government expenditure. As a member of the Public Accounts Committee, I see something of the work done by hon. Members in trying to control expenditure. Both the Public Accounts Committee and the Estimates Committee have a limited power because of the time at their disposal. Would it not be a good thing to set up a committee, which has been discussed, to consider the nationalised industries and to see that, as far as we can, we exercise more control over expenditure? I do not know what hon. Members opposite may feel about this, but, as one who sits in the Public Accounts Committee, I often feel that people are voted so much money and cannot be challenged on the way in which they have spent it because it was within their terms of reference. But they would have been just as well off if they had had only half that money. On the Front Bench we need not only a Financial Secretary and an Economic Secretary, but above all an "Economy Secretary" to look into Government expenditure and try to deal with these many points.

I am quite certain that it is useless for any country—ours or any other—to try to maintain a rate of expenditure on the level we sustain. That can only lead to disaster. Only by cutting down expenditure, encouraging enterprise and making a fair return to all who earn, shall we be able to meet the just burdens put upon us and the burdens that the world wishes us to bear in the cause of peace.

8.50 p.m.

Mr. Alfred Robens (Blyth)

The hon. and gallant Member for New Forest (Colonel Crosthwaite-Eyre) will, no doubt, read his speech in HANSARD tomorrow. If he does he will be then conscious, as were most of us this evening, of the strain of selfishness which appeared to run through it. It may not have sounded like it to him, but it was the kind of speech which causes so much distress among many millions of good, hard-working people who can never hope to have £2,000 a year, but who help to bake the national cake along with everyone else.

It is not a question of demanding that the whole of the cake should go to any one section of the community; it is right that it should be divided fairly. It may well be that some people will get a rather bigger portion than others, because they may have made a bigger contribution. But it is wrong if any citizens receive such a small piece that they can live only with great hardship. This Budget has been described in many ways and I do not wish to add to those descriptions. Nor do I wish to go over the ground which has been covered in the last four days. But after the speech of the hon. and gallant Member for New Forest I am constrained to say that the old-age pensioners have been sadly disappointed.

In a way I was surprised, because on the Saturday before the Chancellor opened his Budget I was speaking in North-East Lancashire, at a meeting at which there were a number of old-age pensioners. I was questioned about what was in the Budget, and I told them I could not anticipate the statement of the right hon. Gentleman. But branch officials of the local old-age pensioners' association assured me that they knew from what they had been told that it was all right, and that the Chancellor would do something for them.

The conversations which have taken place and the representations which have been made were faithfully described only the other day by my hon. Friend the Member for Ince (Mr. T. Brown). These officials persuaded me that the response to the representations had led them to believe that something would be done—not a lot, but something. I assure the right hon. Gentleman, because I know he is not unmindful of the position, that there is intense disappointment among the old-age pensioners. This is not necessarily a Budget matter and I beg of him to have another look at the position. We need not make party points about this, about giving way under pressure and that kind of thing. I do not think that that matters a bit. What does matter is that there should be fewer old-age pensioners, having to ask for National Assistance in order to live.

National Assistance was never created for that purpose. The idea of National Assistance was to aid difficult and odd cases. From the fact that we now have such a large proportion of old-age pensioners who receive National Assistance, it is clear that the original purpose of National Assistance is no longer being fulfilled.

When my hon. Friend the Member for Ince made his speech on 7th April, the Minister of Pensions and National Insurance was in his place. My hon. Friend said that the Minister had stated, six weeks ago, that It would be the duty of the Government to raise the pensions to the same spending value as they were in 1946."—[OFFICIAL REPORT, 7th April, 1954; Vol. 526, c. 426.] It is that kind of thing, which was not refuted at the time, that has led old-age pensioners to believe that something should be done. I say nothing more about that—so much has been said already— except to make a final plea to the Chancellor in the closing minutes of our four-day debate that he should look at the matter again. He is not bound to introduce a change during the Budget, but he should realise the importance of this matter and the fact that these people are suffering. If he did something he would earn their commendation. I am sure that everybody in the Committee would be glad if he could find a way.

I hope that the Chancellor is not holding back in this Budget. He described it as a carry-on Budget. There are few changes. Some reference has been made to a social evening arranged by the hon. Member for Maidstone (Sir A. Bossom), which was attended by a number of Members of the Government. Some very interesting things were reported by the "Evening Standard" night reporting corps. What interested me—quite apart from the Minister of Works, whose slogan, "Treat them mean and make them keen" seems to be inappropriate when talking about old-age pensioners—was the reference to the hon. Lady the Parliamentary Secretary to the Ministry of Health.

I agree—and I give her this—that it does say that by the time she had reached this party she had been to three other parties. I grant that right away. This is what she said, or what she is reported to have said: Rab"— which, I presume, are the initials of the Chancellor; at least, the reporter puts that in brackets at the side— had the air of a man who knows he will have another Budget before there is an election. The hon. Lady put her foot in it once before, and I had occasion to draw the attention of the House of Commons to the matter and she apologised. This really is a serious matter. This is a suggestion that the Budget is not very good for the Conservative Party, but that "Rab"—which is the right hon. Gentleman—had the air of a man who knows that he will produce another Budget before the next Election. Does that mean that there has been some discussion in the party opposite that it would be a good thing to produce a Budget in the autumn or a good Budget next year—a "give-away" Budget which might reverse the Edinburgh, East by-election result?

I hope not. I should not myself lay that at the door of the right hon. Gentleman, but he has some very strange friends whom we do not trust half as much. I warn the right hon. Gentleman and his friends that the British public is hardly likely to be taken in by that kind of vote-catching Budget. I mention that now in good time as a warning that we shall be watching the next Budget of the right hon. Gentleman.

By the end of a debate of this kind on a Budget which did very little one way or the other, I suppose that everything has been said. Indeed, when my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) finished his speech I thought that he bad said all that could be said upon the Budget, but we have had four days in which many matters have been discussed. A few comments have been repeated, and I do not want to repeat too often what has been said.

I want to come back to the Chancellor's description of this carry-on Budget. That was his own phrase. Is it a carry-on Budget? It can hardly be that, can it? The Chancellor dare not rely upon the continuity of the change in the terms of trade which he agreed has been most advantageous to us in the last two years. Indeed, my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes), in a very constructive and sincere speech today, warned the Chancellor, if such a warning was necessary, that commodity prices are today hardening and that there seems to be a movement now in the other direction. It can, therefore, hardly be a carry-on Budget in the sense that next year we can rely on import prices being down by 12 per cent. and export prices down by only 3 per cent. with another £200 million or £250 million being available with which the Chancellor really has had nothing to do.

It seems to me that from two things which he said the Chancellor himself knows that something very drastic indeed must be done by the Government if we are to meet the problems which this country has to meet in the years ahead. The Budget indicates the Chancellor's concern. In the first place, he has indicated that the Export Credits Guarantee Department is to make freer use of guarantees to the banks for major capital goods exports. I asked the President of the Board of Trade this afternoon whether or not that related merely to capital goods, and apparently that, is a matter which has still to be worked out. However, I gathered from the Chancellor of the Exchequer that it was major capital goods only. I am sure that industry would be glad of a word about that to let it know precisely where it will benefit in relation to exports.

The second thing which was an indication of the Chancellor's concern was his endeavour to give fresh encouragement to private industry to put money into productive investment. Private enterprise has let the Chancellor down very badly. Last year the Chancellor gave some incentives, but they have not produced anything worth while at all. It is one of the arguments for nationalisation that one has not necessarily to provide these incentives to profits all the time and that one can have a commercial undertaking run by people who have regard to the strength of the country's economy before they have regard to what the shareholders will get for the money which they have invested. That is one of the eternal arguments between the parties in relation to public ownership and private enterprise.

The Chancellor has proved beyond doubt that private enterprise will do nothing unless, first of all, it is bribed. That is precisely what the Chancellor has said, and if is exactly what the hon. and gallant Member for the New Forest said throughout his speech—that private enterprise has to be bribed in all sorts of ways before it is willing to do anything which is for the country's good. There has been the greatest condemnation of private enterprise during the last four days by hon. Members opposite, who have continually been saying that the rewards are not good enough for the investor and that that is why we are not getting investment in the private sector.

The concern that the Chancellor has for the economic future of the country is shared by everybody in the Committee. It transcends party differences and quarrels. Therefore, we must examine proposals in relation to investment, from whatever quarter they come, as objectively as possible. I welcome the new investment allowance which the Chancellor has proposed. We do not know how successful it will be. We hope it will be successful, but we shall have to wait to see whether or not we can get what is vitally necessary, which is a very big investment in the private sector of industry. It is a pity that last year's incentives failed, but they failed because the reward was not sufficient, and they were only successful in the nationalised sector of industry.

It seems to me that there are two overriding priorities. The first is to increase exports, and the second to increase investment. Increased exports, in my view, can only come from increased investment and increased efficiency in industry in this country. This afternoon, while I was talking about the problem of exports, I had passed to me a letter written by a man who is now in Canada selling only British goods. He has been in this country, and returned to Canada a few days ago, and I should like to read an extract from his letter. Referring to his visit to this country, he said: Wherever I went, I had practically to drag manufacturers to get merchandise for this country. That is, Canada. He goes on: All were told that Germany is selling similar merchandise to that which this country is selling, but at 20 to 30 per cent. cheaper than we can possible do it. We understand that, in Germany, they are willing to make merchandise to suit the Canadian markets, whereas, when we are in England, we have to take what they are willing to make. I spent three months in America, and returned only a few weeks ago. There was plenty of evidence that, if initiative is shown by manufacturers in this country, and if the Chancellor is liberal with dollars to enable it to be done, provided that there is first-class salesmanship and the right kind of merchandise, both in the United States and Canada, there is a vast field which can be covered, and that exports to the United States alone could be very much higher than they are at present. [An HON. MEMBER: "At the right price."] Of course, they must be at the right price. I am coming to that point in a moment, and I will show the hon. Gentleman that we cannot get goods at the right price unless we have the right machines in the workshops with which to produce them.

I am sorry that the President of the Board of Trade does not possess a little more imagination. My hon. Friend the Member for Dartford (Mr. Dodds) suggested recently to the right hon. Gentleman that, as it looks as though the British Industries Fair will be a comparative failure—[Interruption]. Well, one has only to read the Press reports about the difficulties of getting manufacturers to take space. I am sorry about that. As I was saying, my hon. Friend the Member for Dartford asked the President why, when the "Gothic" comes back to this country, he should not arrange to turn it into a floating workshop of Britain, a British "shop window," and send it round the world, but what did the right hon. Gentleman say to that? He said that it was of no interest, or that there were difficulties about it.

The President will have to have more imagination about selling British goods abroad, because it will require something of that kind to excite the imagination of people and bring them to look at British goods. If people will not come to the British Industries Fair, then let us take some part of the Fair to the people, and we shall get some results out of it.

There was a letter in this morning's "Daily Herald" on a report from Canberra that no British industrialist had submitted a tender for a £20 million contract for an Australian hydro-electric scheme. That is absolutely scandalous. The contractors who have been carrying out the Scottish hydro-electric schemes for many years are greatly experienced people, but here in Australia, part of the Commonwealth which hon. Gentlemen opposite pride themselves on upholding, we have an American firm walking in and securing a £20 million contract, while no British organisation submitted a tender. I think it is disgraceful, and that if should be the job of the President of the Board of Trade to find out why we are missing contracts of this kind, and to stimulate our people to greater efforts. I know that he cannot make them do it, but he must stimulate them into tendering for contracts of that nature.

I said that we shall not get prices right until we have completely re-equipped the industry of this country. It is quite impossible to stand up to modern manufacture such as one sees in the United States by expecting workers anywhere merely physically to work harder or to work for longer hours. We cannot beat the modern machine. It would not matter if the workers worked twice the number of hours; we should not get the results which can be obtained only by modernising equipment in industry. That is a job which has to be done.

The Chancellor of the Exchequer uttered a warning about our being priced out of markets. Referring to industry, he said: It must be restrained in the extent to which it loads the final price by its demands for wages and profits. We are near the point—and in some cases we may have passed it—where further increases in wages and profit margins will price us out of our export markets. All-round increases in wages have clearly played a large part in the upward movement of prices since 1945. Both stability at home and competitive power abroad require that wage increases should not outrun productivity; any improvement in productivity should show itself also in the form of lower prices."— [OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 213.] The right hon. Gentleman is anxious that increased wages should not outstrip productivity so that while there may be increased earnings there is no inflationary effect.

This is a strange Government. Consumer demand is something that is created. The Government, which do not want to create too high a consumer demand in this country are prepared to spend public money on commercial television designed for only one thing, not to give a second or third programme to listeners, but to create consumer demand. That is what it is for. The Chancellor of the Exchequer is to provide money from the public purse to establish an instrument for additional consumer demand. Then, having created that demand, he expects that workers everywhere will not require extra wages in order to satisfy the demand that he has created. It seems nonsensical.

If consumer demand is deliberately stimulated in that way there can be only one result; people will want the things that have been advertised, that have been pushed down their throats, helped by the Government, and they will want more money with which to buy them. Let us remember all the time that the worker in the factory is in no way responsible for and can in no way influence the capital invested in the industry in which he is working. Increased productivity can come only from increased investment. Better management and planning can help considerably, but new equipment is absolutely essential.

There is something else. The Government believe in competition. If we are to have a private sector in our economy, there must be competition in it, and that competition will have the effect of stimulating investment in industry. With the present arrangements of price rings that assure profits there is no incentive for improving the equipment within industry. In the United States of America one thing which has done more than most others to produce better equipment and more investment has been that competitive element when the price factor has been so important in relation to the final distribution of the goods which they have produced.

I will give one example. Some time ago there was a debate here on detergents. I was not present, but read something of it in the newspaper. There are three, four or rive different companies which make detergents. If one goes shopping and buys a packet of detergent the price will be 1s. 11d.—no matter who manufactures it. Is it really a fact that four or five different firms all have the same overhead charges, the same degree of efficiency of management and all produce a detergent that works out at just 1s. 11d. for the same article? [An HON. MEMBER: "And the Co-op."] The price is the same at the Co-op except that there one gets a dividend, so that the price is cheaper.

Here are a number of firms making a similar product and the strange thing is that it works out at 1s. 11d. I do not believe it. I believe that the 1s. 11d., to put it no higher, is an understanding that that is the selling price. After that has been done what do they do? They bribe the grocer or distributor with 1s. or 2s. a dozen or a case to have a special window display. They use the post to put coupons worth 3d., 4d. or 6d. through people's letter boxes. In other words, they use an enormous amount of money to get customers, not in the sense of competing to give the consumer better value for money but in the light of developing a consumer demand for their particular traded goods. I say that that is wrong. One must spend money on advertising and in telling people what one is selling, but it is wrong that there should be this kind of price ring.

The Monopolies Commission have had a number of cases sent to them. The British Motor Trades Association is a case in point. With a Government loan an ex-RA.F. man recently bought a garage. He sold two new tyres to a customer who asked whether there would be a rebate for the old cases. The man offered £2 for them, but he made a great mistake. It was not a real customer, but an inspector from that Association. The young man was hauled before the Association and fined £50. If he did not pay the £50 he could never sell another motor tyre.

That is not competition. That is not giving an opportunity to the man who is using his brains and initiative to give a better return to the consumer. In fact, in the field of private enterprise it is not private enterprise at all but private racketeering. It is wrong that that should exist. I therefore say to the Chancellor that if he wants to stimulate industry into really mechanising and re-equipping the factories on the basis that price is to count he must put a speedy end to the price rings and to the understandings taking place today.

Secondly, there is the problem which we shall face over the next few years in regard to exports. Germany and Japan have been mentioned. There is no doubt that we shall find our markets flooded with German and Japanese-made goods. In die next few years this country will probably face the hardest competitive battle of her long trading history. That problem is made worse for us because the traditional market for the Japanese—the vast Chinese market—is virtually closed to them because of the political situation. For the same reason, the whole of Eastern Europe is virtually closed to Western German products.

Because of the international political situation the exportable surpluses of those two countries will tend to enter markets hitherto regarded traditionally as British. Japan and Germany are two great industrial nations which, like us, depend on exports to live. Because they will throw the whole weight of their exportable surpluses into the remaining free areas of the world we shall have to face a very hard competitive battle.

We have sent 60 productivity teams to the United States since 1949. What is the one thread that runs through all the reports? It is that in America their productivity is from three to five times what it is here in Britain. Why is that? It is not because the American worker is more skilful. After all, it was British designers, backroom boys and workers who produced things like the jet engine, radar and penicillin, and it was British scientists who first split the atom and opened the way to developing atomic energy.

It is not because the American worker works longer hours. On an average, he works four hours a week fewer than we do. It is not because he works harder in the laborious sense, because he does not. In fact, one can go through industry after industry in the United States, and find that hard physical labour has entirely been taken out of the work. Indeed, where there is any hard physical labour, the first task that American management sets itself is to get rid of that hard labour. They believe in machines. A visit to United States factories and workshops is an eye opener even to those people who are used to seeing efficient industry in this country.

If our productivity was as high as it is in the United States, most of our domestic economic problems would be solved. I admit that the problems caused by world conditions would remain—such as our share of world trade, food supplies, and so on—but let us consider what the benefits of productivity as high as in the United States would give to us. I list eight of them. First, it would enable us to shoulder the present defence burden with ease. Secondly, our import and payments deficit with the world outside could be managed without crisis. Thirdly, taxation could be substantially reduced. Fourthly, earnings could be considerably increased. Fifthly, State welfare services could be expanded. Sixthly, hours of work could be reduced. Seventhly, the savings of persons and of businesses could be increased. Eighthly, investment at home and in the underdeveloped countries could be greatly increased.

As a nation we shall live as we deserve, but no workman can do a really good job unless he has got the right tools with which to do that job. All our efforts should be bent towards telling private industry that it is no use saying, as its representatives in this Committee have been saying during the past few days, that there is not the money to invest because so much is taken in high taxation. We cannot reduce taxation unless we have a very much smaller defence bill, and the Chancellor knows that; and every hon. Member, if he is honest, will admit it.

What is the good of an hon. Member— I believe it was the hon. Member for Stafford and Stone (Mr. H. Fraser)—talking about Government extravagance because they were spending £45,000 en an orphanage to cater for 30 orphans in his constituency? In the same way as the Budget has been described, this is chicken feed. It would not make the slightest difference to the result. The only way in which industry or anyone else can secure real reductions in taxation is by increasing the size of the national cake by increased productivity, and we can only do this by real investment or by a tremendous cut in the armaments programme.

Mr. H. Fraser

I am sorry to interrupt the right hon. Gentleman, but surely he will agree that if economies can be made on a huge scale in local and national expenditure it should achieve a tax reduction.

Mr. Robens

One should always make economies wherever one can. What I am saying is that it is no use talking in terms of saving a few thousand pounds on an orphanage. If a few thousand pounds can be saved on an orphanage it should be saved, but I am saying that it is not much use making the great point that that will save the country. It will not; nor can it. No matter how many times that is magnified in Government Departments—and I do not think that the Chancellor is so foolish that he is allowing profligate expenditure in any Government Department; I do not believe any Chancellor allows that—what we could save would make no difference at all to the national taxation, and it is no use pretending that it would.

We have to do this job by saying to private industry, "Whether you like it or not, this must be done. It may be that in the first few years you will not set back what you want and the incentive that is necessary, but it is a patriotic job that must be done for the country, and if it is not done we shall all be sunk; there is no hope for any of us."

Just as we talked of tightening our belts during the war, it means that the people with over £2,000 a year income, who have been talked about as badly treated, will have to pull in their belts, but it will not be half as hard for them to do so as for the old-age pensioners. This job has to be done, and I think that the Chancellor and his hon. Friends ought to make it clear to British industry that this investment task must be done. It must not wait until it is paid to do it: it must do it as a job for Britain.

The Chancellor made concessions last year on E.P.L., and so on—there were 250,000 Surtax payers with concessions—amounting in all to about £340 million. This failed to give us the investment which the country needs, and it is a disgrace and a scandal that that should be so. It failed to give us the necessary impetus last year, and the Budget has failed this year because the expectations of the people were raised by reasons of speeches made by hon. Members opposite to their constituents saying how well this country was doing. They have reduced the expectations of the people to bitter disappointment.

I hope that we can right the temporary disappointment of this Budget. I hope that all of us in this Committee will recognise that Britain is faced with an enormously difficult task, and that we can only overcome that task by dealing with the things that we know will do it. It is not some magic formula which the Americans have; we had it ourselves 50 years ago. Hon. Members opposite should go back to their industrial friends and tell them to do something for Britain.

9.29 p.m.

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

I am sure the Committee will have understood the tone which animated the greater part of the speech of the right hon. Member for Blyth (Mr. Robens). He was quite right to bring to the attention of the Committee and of the country the severe competition that we have to face in foreign markets, and he was perfectly right to say that the re-tooling and re-equipment of British industry must be our foremost consideration. I am sure that none of us disagrees with his appeal for less selfishness, harder work and greater striving in the markets of the world. I will not refer to his other more fruity ebullitions, because I think that, considering he was winding up the debate for his party, we must give him a little chance in that direction as well.

I have been impressed by the metaphors in this debate. I am always told by the right hon. Member for Leeds, South (Mr. Gaitskell) that my metaphors are rather odd, but I have never produced one of an ostrich with its head buried in my maw and laying an egg, as was produced by my hon. and gallant Friend the Member for New Forest (Colonel Crosthwaite-Eyre) in an otherwise perfect speech. We are also indebted for a further ornithological metaphor from the hon. Member for Gloucestershire, South (Mr. Crosland), who referred to the frozen penguins of the Treasury. If the sub-intellectual regions in which we live and work fall far below the standards to which the hon. Member is accustomed at Oxford University, we can afford, perhaps, a little more warmth than the hon. Member imagines.

The debate has been remarkable also for a series of other speeches. My right hon. Friend the Member for Blackburn, West (Mr. Assheton) gave a thoughtful address on the subject of expenditure, with which I shall be dealing in the midst of other observations. He was supported by my hon. Friend the Member for Langstone (Mr. Stevens,), with some of whose arguments I shall also endeavour to deal. I was impressed, as was the Committee, by the speech of the hon. Member for Ashton-under-Lyne (Mr. Rhodes), in which he referred to technical matters relating to buildings, which I will deal with, if I may, during the Finance Bill stages. I hope the hon. Member will notice the details of the investment allowance as published in the Finance Bill, which we hope will be available very soon to give the Committee the maximum time to put down the Amendments which we regard always as inevitable in our Finance Bill discussions.

I also welcome the speech by my hon. Friend the Member for Handsworth (Sir E. Boyle) and the speech by my hon. Friend the Member for Stafford and Stone (Mr. H. Fraser), which has been referred to already. I shall be referring in the course of my remarks to the speeches by the right hon. Member for Leeds, South and the right hon. Member for Battersea, North (Mr. Jay).

We are very well satisfied with the reception given to the Budget. There has been a wide appreciation in intelligent circles of the real objectives which this Budget had in mind. This has been reflected in an immediate continuance of the buoyancy which already existed in the markets, which have not sagged in the slightest owing to the alleged disappointment put about by right hon. and hon. Members opposite. It has been reflected very markedly in foreign opinion, which realises—this is in answer to what the right hon. Gentleman said about the possibilities of a political Budget—that it has been conceived solely and strictly in the interests of this country and of the financial health of this country. Had it been conceived in any other way, whatever the right hon. Gentleman may or may not pick up from the social columns of the "Evening Standard," it would have been thoroughly wrong.

Right hon. and hon. Members opposite have said a great deal about the alleged anticipation which, they declared, existed before the Budget. All I can say is that I went out of my way, in the weeks and months preceding the Budget, to make clear that I was holding out no hopes. In fact, several weeks before the Budget I took the unprecedented step, to which no reference has been made in any speech from the Opposition benches, of saying that there would be no alteration in Purchase Tax. I hoped that that little step alone would give an indication of what I had had in mind for some time: namely, that any honest man looking at the immense expenditure with which we are faced in the future, our liabilities and the probable course of trade, could not possibly take any liberties in this Budget and would have to be thoroughly stiff, ungracious and unpopular. That has been deliberately done and I believe it was the right thing to do. Not only did I take care to make very careful remarks before the Budget, but I think we published more papers this time than had ever been published before.

It is possible to read the Economic Survey in one of two ways, either as a very cheerful document or as containing warnings. Every single warning which I put in my Budget speech, quite candidly and openly, was also included, equally candidly and openly, in the Economic Survey. Any economist-—I underline the word "economist," because some hon. Members opposite are leaving their economic circles for the lower realms of political life—must have read only one answer: that a standstill Budget was the most likely thing on this occasion.

Incidentally when hon. and right hon. Gentlemen opposite complain of the amount of literature we publish, I would say that nearly the whole of their speeches and all their arguments are obtained from the documents which I so obligingly put before them. Without them the right hon. Gentleman the Member for Leeds, South could not speak over a period of an hour, or the right hon. Gentleman the Member for Batter-sea, North for the lesser period of half an hour or the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) for the time he took. Incidentally, I sympathise with him on the football result.

Mr. Hugh Dalton (Bishop Auckland)

They will do better next time.

Mr. Butler

I want to deal first with the question of expenditure because that is undoubtedly the most important topic with which I have to deal. I took the unprecedented step this year of setting out in my Budget speech, as probably its main feature, the very real difficulties with which not only I, but people more important than I am, namely, the country as a whole and this Committee in particular, have to deal in this very heavy expenditure and the menacing load upon the shoulders of the taxpayers.

I anticipated that, if I took that step and set out every detail and every hope with the quite clear indication that there was a great deal to be done in controlling that expenditure, I should be shot about in the course of the debate. I did it on purpose because I thought it was high time that this Committee and the country were more behind me than they have hitherto been in cutting this expenditure. If this is the only result of this four days' debate before we reach the Finance Bill, when we can go into more detail, I shall have done a service to the country by bringing before the people the heavy burden which is upon them.

The right hon. Gentleman the Member for Leeds, South in his broadcast used one expression with which I want to deal. He said that this year Government expenditure is £5,000 million, or £1,000 million more than it was in 1950. In the interests of accuracy, I think the Committee should be aware that if we compare the increase between 1950 and 1951 with the increase from 1950 to 1954, the right hon. Gentleman, in his one and only Budget, was responsible for nearly 80 per cent. of the increase in the defence expenditure and 67 per cent.— nearly 70 per cent.—of the increase for civil expenditure. I have the exact figures here in a table, and I think it would have been better to tell the country and this Committee what was, in fact, the true position.

I am bringing it home to hon. and right hon. Gentlemen opposite, but I am not bringing it home to prove that the right hon. Gentleman raised expenditure dishonestly. I am bringing it home to show that, in the case of defence at any rate, the obligations were undertaken by the late Government and were carried on by this Government. They were supported by this Government and they were supported by both sides of the Committee in the interests of the country. Therefore, it is not right to make statements in a broadcast which try to make out that it is because of us that expenditure has gone up.

Mr. Gaitskell

The right hon. Gentleman knows perfectly well that I admit, and have said so, that a large part of this was an increase in defence expenditure. He knows equally well, as does everybody, that we have supported that defence expenditure. What I also pointed out was that the Conservative Party, which presumably the right hon. Gentleman still represents, was, at any rate before the election, in favour of substantial cuts in civil expenditure, and that since their coming to power there have been substantial increases in civil expenditure.

Mr. Butler

I will now go on to consider the position of civil and defence expenditure, as has been suggested by hon. and right hon. Gentlemen opposite. The position about expenditure frankly is that we are all in it. The right hon. Gentleman the Member for Battersea, North gave us some reasons why expenditure had risen. One of his reasons for the increase in social expenditure was the rise in the number of old people. I want to ask right hon. and hon. Gentlemen opposite, when they criticise expenditure as they do whether they are willing to cut the education Estimates and whether they are willing to cut the old age pension. If not, what is the truth of their position?

The truth of their position is perhaps in a statement of the right hon. Gentleman the Member for Llanelly (Mr. J. Griffiths). In a speech which he made on 7th November, 1953, he said that expenditure on the social services would need to increase by £475 million by 1958, owing to a national rise of £235 million together with an addition, which he regarded as necessary, of £240 million.

When we examine whether that is an official view or not, we find that the right hon. Lady the Member for Fulham, West (Dr. Summerskill), who was the Minister of National Insurance, said that the National Executive Committee of the Labour Party examined the rise in social expenditure. They realised they would be committing their future Chancellor of the Exchequer to a very big expenditure of money, maybe in the region of £140 million, but nevertheless the National Executive were prepared to make this a priority on the revenue of the country.

That indicates that right hon. and hon. Gentlemen opposite, when they criticise the rising expenditure, are not doing so honestly because they themselves have envisaged such immense rises that their future Chancellor, whether he be a member of the Labour Party or not—and this is an answer to the right hon. Gentleman in his reference to me—will have an extremely difficult and anxious time. So I do not think that this question of expenditure can be dealt with unless we have a feeling that we are all in it. That is why I referred to hon. and right hon. Gentlemen opposite, because unless they face up to the commitments which they have promised the country, they will not be allies in this campaign and they will not support any methods we may have to use to control expenditure in the future.

I am not prepared at this time of night to add to the careful statements I made in the Budget in relation to defence, in relation to agriculture, or in relation to the social services. I shall simply say that it is clear, as the right hon. Member for Blyth said perfectly sincerely, that the present level of defence expenditure is quite as much as we can manage if we are to maintain the standard of living we are accustomed to, and the other services we have to carry. We are what a critic in the Sunday Press described as the armed welfare State, and we have to take care, in relation to our overseas commitments, the relationship of new weapons to the present existing weapons, or the need for administrative economy, that in defence, in the social services and in food and agriculture we obtain the best results for our money.

Mr. Jay

Surely the House ought to know whether the remark of the Chancellor about defence in the Budget speech meant that the defence Estimates for this year are to be revised or not?

Mr. Butler

The process of economy will continue and the Estimates have been published, so the right hon. Gentleman knows where he is about that point. For the future, I think the Committee will be with me when I say that what I said in the Budget speech is right, namely, that we should seek relief where our political and foreign commitments legitimately enable us to do so, and in accordance with the obvious burdens which we must carry until we have at last restored a proper front in Europe, so that our enemies cannot feel they can overturn us with impunity.

When I think of this question of expenditure, I am reminded of what Sir Stafford Cripps said no less than five years ago in his Budget speech. It shows that we do not alter very much as between one Chancellor and another, for he said: We must, therefore, regulate the speed of the development of our social services by the rate at which we can increase our national wealth."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2100.] That is why, whatever we do with expenditure, it is quite clear that we must not let it increase and that the increase in the national wealth must go into the investments which we all so ardently desire.

On the question of old-age pensioners, I should like to take up first the proposals of the right hon. Member for Bishop Auckland. He suggested that I should find the money for pensions by restoring the Profits Tax to the level at which it stood before he reduced it in order to make room for the Excess Profits Levy,…"[OFFICIAL REPORT, 8th April, 1954; Vol. 526, c. 569.] First, I congratulate the right hon. Gentleman on his arithmetic, which is perfectly correct. He came to the right conclusion. The additional burden on industry of his proposals for restoring the Profits Tax to the higher level, from which this Government rightly reduced it, would be no less than an extra £85 million. The more right the right hon. Gentleman's arithmetic is, the more wrong I think is his policy. This policy of putting another £85 million on the Profits Tax and hence on industry is precisely the way to counter the amiable and noble sentiments of the right hon. Member for Blyth. How on earth can we compete in foreign markets and increase our productivity if we replace a burden of £85 million on industry?

Mr. Dalton

Even if the tax falls in large part upon profits already distributed to shareholders and not ploughed back to reserve? Will the right hon. Gentleman do a deal with me? Will he put it back on distributed profits if I do not press for it on undistributed profits?

Mr. Butler

No, Sir. The right hon. Gentleman was proposing to put it back on undistributed profits which are ploughed back; he was proposing to raise the tax on undistributed profits from 2½ per cent., to which this Government reduced it, to 5.5 per cent.

I hope that the industry of this country will note the policy of right hon. Gentlemen opposite and the cant of their remarks that they believe in freeing industry from its shackles and letting it compete more lightly in the markets of the world. This idea for relieving old-age pensioners is not a very good one, as the right hon. Member for Bishop Auckland knows, because unfortunately I can get no relief, or at least practically no relief, from the Profits Tax this year. It falls a year late and so, technically, it would be impossible to use that method to help old-age pensioners. The method is bad in itself, and I do not think that it is a useful one, as it is too late in operation to help them. The right hon. Member for Blyth asked me to listen to a sincere appeal on behalf of old-age pensioners. I have done so and will continue to do so. He is quite right.

The right hon. Member for Battersea, North said that I said on television, which is a medium to which we are all trying to get accustomed, that this was not necessarily a matter for the Budget. That remains eternally true. I would say more than that. It is a wrong habit of modern times to imagine that the Budget is necessarily a collection of gifts or help to one section of the community or another. It has been in English history from ancient times a method of presenting the national account, and it must not be thought that because a particular reform is not in the Budget it is therefore not in the mind of the Government.

I can give no undertaking today either to old-age pensioners or to ex-Service men, in reply to my hon. Friend the Member for Morecambe and Lonsdale (Sir I. Fraser), who appealed to me, because to give any undertaking would not be honourable. I can only say that the position of the old-age pensioners is clearly a first priority for this or any other Government.

Right hon. Gentlemen opposite increased the pension from about 26s. to 30s. and in my Budget in 1952 it was increased to 32s. 6d. I will not insult the old-age pensioners by using statistics to prove that this or that sum is above or below this or that index. They are living far too near the margin to enjoy that sort of mathematics. But this is a year in which we are going most thoroughly into their problems. We are not only making the five-yearly examination of the Fund, the condition of which ought to afford all of us a good deal of anxious consideration and thought, but I would also remind hon. Members that, from being about one to nine of the working population in 1931, the old will be about one to five of the working population in 1964 and one to four in 1979. When we do take our decisions, therefore, let us take them with all the gravity that that means for the younger and working population. Let us also take them in humanity, realising what it means for the old people.

In this connection, I cannot help drawing the attention of the Committee to a remark by the hon. Member for Sowerby (Mr. Houghton) about contributions. Let us not dismiss the possibility that it may mean an increase in contributions as a whole. It would be deluding the working population if, in this compaign, which is being conducted with some warmth—perhaps quite naturally because of the humanity of the subject—we were to forget the obligation which must fall on others if the old are to be helped.

I wish to say a word to the hon. Member for Sowerby on the subject of equal pay. He endeavoured to show that I might be treating the Committee with some discourtesy by saying that on the subject of equal pay I was going to have conversations with the Staff Side of the Civil Service National Whitley Council. There is no question of treating the Committee with discourtesy. I can say nothing worth while to this Committee about the future of equal pay until I have ascertained from conversations with the Staff Side whether there is a basis on which a gradual scheme can be built. Those conversations will have to take place after I return from Europe. I have to go to the meeting of the O.E.E.C. about the European Payments Union and make a short visit to Western Germany at the invitation of Dr. Erhard. I have never before been to Western Germany. Having had those conversations, in absolute sincerity, if there is anything to report and I find a basis on which to work, I will report to the Committee and to the House of Commons.

Whilst mentioning the question of Europe, and as the matter of E.P.U. has been brought up, I wish to assure my hon. and gallant Friend the Member for New Forest that in any solution of the future of the European Payments Union we shall endeavour not to saddle this country with undue liabilities. We have tried to do our bit in the European Payments union and regard it as a most useful initiative and a most useful compartmental method of settling payments. I hope the big creditors who want to make the Union harder than we want will realise our position, and that a general accommodation may be reached on the matter.

Now I come to the main question which has been asked, the most difficult question, as to why, if the measures introduced in the 1953 Budget have not increased private investment, I think that the investment allowance in this Budget will help to do so. That was the question put by the right hon. Member for Blyth, by the hon. Member for Ashton-under-Lyme and by some of my right hon. and hon. Friends. It was also put, in a rather aggressive way, by the hon. Member for Islington, North (Mr. Fienburgh), but I will accept his arguments and not his aggression. The position was very nearly brought to a head when the right hon. Member for Bishop Auckland was speaking. He was asked to read a section of the Economic Survey. Unfortunately, he got the page number wrong.

Mr. Dalton

No.

Mr. Butler

He was asked to read at the bottom of page 24—I was listening with some fascination—and he read at the bottom of page 23.

Mr. Dalton

I was reading from page 22 and the hon. Member for Louth (Mr. Osborne) said, "Will you read the sentence at the bottom of the next page?" I did so.

Mr. Butler

The amiability of the demeanour of the right hon. Gentleman indicates that he did not mean to deceive the Committee. The point is that the right hon. Member, the hon. Member for Islington, North and many others attempted to make out that the nationalised basic industries have been doing entirely what they ought to do, and the private industries are not doing their bit. The answer is, why have the private industries themselves achieved such record production, in steel, which is at the bottom of page 24–17.61 million tons? Why has agriculture risen to nearly 60 per cent. above pre-war, 56 per cent.? Why have the textile and rayon industries reached such figures and why, throughout our whole national output has production risen to levels never before achieved in the history of our country?

The reason is that, although investment has gone down, one of the main reasons for investment declining was the withdrawal in the year of the right hon. Gentleman's Budget of the initial allowance, which operated late and did not have effect until the beginning of 1953. It is only now that we are beginning to see the result of the introduction of the benefits of 1953, and the re-introduction of the initial allowance which the right hon. Gentleman himself removed. That is the reason investment has lagged behind, and that is the reason I believe that there may well be a distinct improvement in investment as a result of the deliberate replacement of the initial allowance by the investment allowance which we have introduced in the Budget.

During the discussions on the Finance Bill, I will attempt to answer the right hon. Gentleman about the Estate Duty on family businesses. But if I may just say this to him shortly, the change will be, I hope, a very great encouragement to small businesses which are valued on what is called the assets basis for Estate Duty. The relief is coterminous with the assets basis. The concession is a pendant or addition on the Estate Duty side to what I am trying to do on the Income Tax side to give allowances for those who put back their money into investment and improve their equipment. We will go into the arguments about this during the discussions on the Finance Bill.

The right hon. Member for Leeds, South has said that this Budget is dull. If this Budget is dull, the same certainly could not be said for the Budget he introduced. Take the contents of that Budget and ask the country which they like the better. At that time all the rates of Income Tax were increased by 6d.; the Purchase Tax was doubled on cars, wireless sets and refrigerators; the tax on distributed profits was increased from 30 per cent. to 50 per cent.; initial allowances were suspended; the Petrol Duty was increased by 4½d. a gallon; the Entertainments Duty was increased on cinemas and racing; the National Health charge was introduced on spectacles and false teeth—

Mr. Gaitskell

Perhaps the right hon. Gentleman would just add, for the benefit of the Committee, that the Defence Estimates, which his hon. Friends supported, were increased by £500 million in that year.

Mr. Butler

And we have assumed almost equal additional liabilities.

I say, in conclusion, that this Budget has been conceived honestly to deal with the problems of the country. If it is dull, I do not mind. It will do its purpose. And I am convinced that if speeches are made like the right hon. Gentleman himself made, and they typify the world of labour and industry, we shall get through our troubles together, which is the only way we can get through them.

Question put, and agreed to.

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

To report Resolution, and ask leave to sit again.—[Mr. Kaberry.]

Resolution to be received Tomorrow.

Committee to sit again Tomorrow.