HC Deb 03 May 1954 vol 527 cc26-161

Order for Second Reading read.

3.15 p.m.

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

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

It is said of a certain provincial mayor that he undertook that in the conduct of his office he would steer between partiality, on the one hand, and impartiality, on the other hand, without actually falling into either. My task in moving the Second Reading of the Finance Bill presents analogous difficulties since, as I understand it, it is my duty to steer a course between the broad general sweep of the Budget debate and the more precise and detailed analysis which takes place at the Committee stage.

I think, therefore, that what the House would wish me to do in moving the Second Reading of the Bill is to explain certain important features of the Bill, particularly those which for one reason or another could not be, or were not, discussed during the Budget debate. Despite the fact that during last year's Committee stage the right hon. Member for Battersea, North (Mr. Jay) and some of his hon. Friends complained when we came to a particular Clause if reference had not been made to it on Second Reading, I shall avoid the temptation which a year ago the right hon. Member dangled before me to argue each and every Clause and will try to confine myself to some of the more important, and perhaps one or two of the more complicated, Clauses. It was said of a certain Cambridge historian that he took the view that all facts were born free and equal. That may be so, but while all Clauses of a Finance Bill are important, some are more important than others.

As modern Finance Bills go, this Bill is mercifully short. It has 31 Clauses and five Schedules, compared with a somewhat similar length last year, and is about half the length of the 1952 Act. A considerable amount of its physical bulk is made up of the changes in Purchase Tax law, which are embodied in Part II of the Bill, to which I shall refer presently, and the changes in the law of Estate Duty, which are contained in Part IV.

The investment allowances, which were, very properly, such a conspicuous part of the Budget debate, are all embodied in Clause 15, which is a somewhat massive Clause. The general structure and arrangement of the Bill are almost, perhaps, in conventional form. They certainly follow the form which has been found convenient for the House in recent years.

I shall deal quickly with some of the earlier Clauses. Clause 1 and the First Schedule, which is attached to it, are self-explanatory. If precedent is followed, it will be debated at reasonable length during the Committee stage, and I do not think I can be of much help to the House by saying anything about it now.

Clauses 2, 3, 4 and 5 are a group of Clauses dealing with import duties. Clause 2 relates to our old friend chicory, which gave so many hon. Members so much fun during the Budget debates. The Clause applies only to root chicory, which is used in coffee, and will therefore disappoint my hon. Friend the Economic Secretary who has, I understand, disclosed an interest in that he grows the other, or leaf, variety. Actually, this very small provision is simply one of the series of adjustments of the tariff upon horticultural goods which are being effected as a result of the successful negotiations of my right hon. Friend the President of the Board of Trade at G.A.T.T. All the other adjustments are being effected by Statutory Instrument, generally under the Import Duties Acts. It so happens that chicory, being tied up with what used to be called the breakfast table duties—tea, coffee and cocoa—requires amendment in a Finance Bill. And, therefore, chicory, which is perhaps not a major matter, requires for these technical reasons a complete Clause in the Finance Bill.

Clause 3 continues the Safeguarding of Industries Acts for a further five years, while Clauses 4 and 5 deal with quite minor matters. Clause 4 will be of some assistance to exports in that it allows for a complete repayment of the duty on silk or artificial silk when the drawback system is, for practical reasons, insufficient to compensate in the case of exports containing that product. Clause 5 deals with a little technical difficulty that arose in connection with the importation of works of art. As the House may be aware, a work of art generally can be imported duty-free if it is certified as a work of art by a director of a museum. Owing to the way in which the Clause was enacted, that could not be applied to lithographs. This provision enables that to be done.

Passing to another matter, perhaps the most important of the changes in the Purchase Tax law which this Bill effects are those effected by Clause 12. As the Clause did not require a Budget Resolution, it was not and could not be discussed during the Budget debates. It deals with the subject of Purchase Tax valuation and in particular with the topic of uplift. Uplift always strikes me as having a faintly theological ring about it, and it certainly lives up to that by the amount of passionate feeling which it seems capable of arousing on one side or the other.

There are two quite distinct views on the matter. There is the point of view that where a big store for one reason or another pays a low wholesale price, the tax should be assessed only on that low wholesale price and the retailer and subsequently the consumer should get the full advantage. That is a school of thought whose views are often expressed in this House by the hon. Lady the Member for Blackburn, East (Mrs. Castle).

There is the opposite school of thought which is based on the view that it is unfair for a tax differential to give an extra advantage to the competitive position of a large trader who, by reason of his size, can sometimes obtain special terms as compared with the smaller trader. There is very clearly a definite clash not only of view but of interest, and it was for that reason that my right hon. Friend some little time ago appointed a Committee under Mr. Frederick Grant, Q.C., to go into the whole matter. The Committee took a great deal of trouble, and I am sure the House will wish me to express our thanks to its members for their strenuous and helpful labours. Perhaps the right hon. Gentleman the Member for Battersea, North will be good enough to convey those thanks in particular to one of the members.

The Grant Committee produced a Report signed by all its members subject to a Minute of Dissent signed by the two ladies who were members of the Committee. These ladies accepted the majority Report, but desired to go further in the same direction as the majority desired to go in a slower way.

As Clause 12 indicates, the Government accept broadly the recommendations of the majority of the Grant Committee. The House will no doubt wish to reserve to the Committee stage the detailed discussions on the Clause, but it might be helpful if I said that its effect really comes to this. It proposes that sales to ordinary retailers should be taxed on the actual price paid by the retailer without uplift, whether he buys from a wholesaler or a manufacturer, but where the goods are sold to large retailers and other big buyers, who, by reason of their size and the size of their orders, can obtain specially low terms, uplift shall continue at a somewhat lower level than at present. Uplift, in those cases where it will continue to apply, will be based on the price which an ordinary retailer might be required to pay for the goods, taking into account the general pattern of distribution in the trades concerned.

The Clause, while not following the letter of the Grant Committee majority recommendations, seems to me to embody in legal form the substance of their recommendations, and the Government, therefore, like the Grant Committee, have taken the middle course between those who would abolish uplift and those who would retain it in full. We have come to the conclusion, after a great deal of thought, that the continuance of a measure of uplift is, in the words of paragraph 139 of the Grant Committee: … right and fair as between large and small retailers. As the House will see, these changes will not come into effect until 1st January, 1955, and after the Bill has become law there will necessarily be some discussions between the Customs and the trade associations concerned. As they will not come into effect until 1st January and as Purchase Tax is payable quarterly in arrear, these changes will not affect revenue in the current year, but in the next year they will result in a reduction of Purchase Tax of £5 million, which gives the measure of the reduction.

Clauses 6 and 11, that is, the whole of Part II of the Bill except Clause 12, with which I have attempted to deal, are all required to remedy defects in the Purchase Tax law, which, if not remedied, in some cases permit ingeniously-minded people to evade the payment of the tax.

I should like to preface this part of my remarks with one or two general observations. It is not altogether surprising that the structure of the Purchase Tax law, which was put together in the first place in the stormy summer of 1940, should not have proved over the years quite as watertight as have tax arrangements made in more leisurely and quieter times.

In any event, on top of this the more competitive conditions of today which result from the freer conditions of our economy have given an additional incentive to ingenious people to see whether it is possible to evade the payment of the tax. These provisions are required to close a number of these loopholes, and perhaps I might deal with them quite briefly. I am sure the House will agree, first of all, that it would be quite wrong and indeed an abdication of the responsibilities of the Government if we were to sit back and allow individuals to find ways of avoiding the payment of taxes which Parliament has decreed shall be paid.

I know perfectly well that Purchase Tax, whatever else may be said about it, is not likely to suffer from a surfeit of popularity. On the other hand, my right hon. Friend has budgeted to receive no less than £295 million from this source during the present financial year, which makes a substantial contribution to maintaining our heavy burden of expenditure, and while it continues I am sure the House will agree that it must be operated fairly.

Clause 6 deals with a means of avoidance which has only recently become apparent. As the House will see, it takes effect from last Saturday, and I can therefore reveal to the House the kind of evasion which, up to last Saturday, was legally possible. Purchase Tax prescribes that when a person ceases to be "required to be registered" he is no longer subject to the charging provisions of the law and can dispose of his stock without paying tax on it. That is the strict legal position which has been discovered by one or two intelligent people, and it was possible up to last Saturday for a manufacturer to cease in law to manufacture and, so I am advised, to cease to be required to be registered simply by a transfer of his plant and raw material to another associated company or firm perhaps formed for that purpose. He then ceased to be required to be registered and disposed of his stock of finished goods tax-free. Clause 6 (1) will prevent this by providing that the tax shall be due on chargeable goods belonging to a person ceasing to be registered.

On the other hand, it would obviously cause great hardship if immediate payment of a large sum in tax were required where someone is de-registered perhaps through no wish of his own. Provision is made, therefore, in subsection (2) for the actual payment to be deferred subject to reasonable safeguards and, in particular, for account to be taken for this purpose of the general way and speed at which goods can be disposed of in the trade concerned.

Clause 7 deals with another of these entertaining anomalies. Under the present law a firm or a person making chargeable goods, either for sale or for sale and hire, is liable to be registered and so to pay the tax if his sales and/or fairings exceed the normal £500 limit. But under the present law, if he makes goods only for the purpose of hiring out and for no other purpose, he is not liable to registration and for that reason escapes liability to tax, however large his output may be.

That loophole has been discovered by certain firms in the radio and television trade who manufacture solely for the purpose of renting sets out; indeed, reference to this has been made in the trade journal. It is clearly unfair that those who manufacture solely for the purpose of hire should be tax-free while those who manufacture either for sale or for sale and hire should be taxed. The Clause, therefore, provides that they shall be placed in the same position as those who manufacture for sale or for sale and hire; that is to say, shall be registrable and subject to tax if their total output exceeds the £500 limit. This is a very real threat to the Revenue because in respect of one firm alone, it has resulted in a loss of tax of £100,000.

I apologise for the complexity of Clause 8, which deals with registration for Purchase Tax. It permits what I am advised in strict law the present law does not in terms authorise, the issue of a Purchase Tax certificate of registration in respect of part of the business of a firm. The obvious example is the case of a firm which is partly a wholesaler and partly a manufacturer, which clearly requires to be registered as a manufacturer but which may not, looked at from its wholesale aspect, be appropriate for registration. Therefore, the new Clause provides that there may be done what has been assumed for some rime might be done; that is to say, that a certificate of registration should be issued in respect of part of a business.

As the House will see, however, the position of existing registrations is safeguarded by subsection (2), which provides that existing registrations shall not be affected except in so far as this Clause regularises what has been done in their particular case; that is to say, it confirms the part registration but it will nod enable registrations to be withdrawn in the case of a firm already registered in order that it may be given partial registration in the same way.

Clauses 9, 10 and 11 all deal with different aspects of the same problem. The problem, with which I know hon. Members will be familiar, is that of tax avoidance by altering goods after they have been assessed for tax and have passed the tax point. The essence of these provisions is that similar goods will bear the same tax whether they are delivered complete or delivered partially finished, with various bits and pieces added afterwards.

Clause 9 deals with operations which bring goods not liable to tax into a taxable class or change goods from one rate of tax to another. It follows logically from the somewhat similar, though limited, provisions with respect to medicines, which were enacted in Section 23 of the Finance Act, 1948. The other provisions, with which I do not think I need trouble the House, relate to the possibility of goods being delivered incomplete or of radical changes being made under the pretext of repair. An obvious example of the latter would be the delivery of a ring with quite cheap stones fitted, the ring then being subsequently returned to the manufacturer, tax having been paid on that setting, and more expensive stones fitted. It is to deal with those kinds of matters that it is felt that these powers should be taken. They will be exercised in the same way as changes in the rate, and will be subject to the control of this House by the affirmative Resolution where the effect of a change is to impose tax.

Clause 30 is interesting because it ends an era. It brings up to date the provision with respect to the service of the National Debt and, in particular, repeals Section 23 of the Finance Act, 1928. Under that Section the Budget was to set aside each year from revenue a fixed sum, actuarily determined, to provide for the interest and management of the National Debt, with a view to the complete abolition of the Debt in 50 years, that is, by 1978.

The charge after the first year was to be £355 million. Unhappily events, notably a world war, have dissipated the hope of abolishing the National Debt by 1978, and in this context it may interest the House to know that, whereas at the time that Section was enacted in 1928 the National Debt stood at £7,528 million, the latest figure we have today is £26,583 million. Consequently the 1928 provisions have become obsolete. Hon. Members will recall that for a great many years recently we have had in the Finance Bill a Clause solemnly providing for the suspension for one year of the 1928 provision and substituting some other figure, sometimes higher, sometimes lower, for the 1928 provision.

It is perfectly clear that the procedure is obsolete and it is desirable, therefore, to tidy it up, for not only is it obsolete, but it may be misleading. The House may remember how, on the Committee stage two years ago, so acute an hon. Gentleman as the hon. Member for Northfield (Mr. Chapman) was completely taken in by the form of the Clause in the then Finance Bill which effected the suspension to which I have just referred, so as to believe that the figure in the 1928 Act and that in the 1952 Act represented the difference between the provision of the Debt for 1952 and 1951. If so acute an hon. Member as the hon. Member for Northfield can be misled, the sooner we do away with the procedure the better.

The Clause also tidies up one other obsolete provision. It puts on a firm and permanent basis the suspension of the Sinking Fund Act, 1875, and therefore enables a Budget surplus to be used for paying off debt during the year without waiting until the end. Once again it is unnecessary to go through the farce, year after year, of solemnly suspending that provision, and therefore we propose its abolition.

Clauses 25–29, in Part IV of the Bill, to which I referred in passing a moment or two ago, deal with changes in the Estate Duty. Among other things, they embody the result of the careful review of the duty which, as my right hon. Friend indicated last year, he has since been undertaking. May I say on his behalf that he is most grateful to a considerable number of organisations and professional bodies outside who have helped us with their advice and views on this terribly complex subject.

The first Clause of this group, Clause 25, deals with the relief to family businesses. This question was discussed to some extent during the Budget debates, notably by the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton), but there are one or two points about it which are worth further consideration. In the first place, it is worth remembering that Estate Duty, which now runs up to very high rates indeed, does not fall directly on the business assets of a public company but that it does fall directly on the business assets of a family business, particularly within the scope of the class of cases to which Section 55 of the Finance Act, 1940, applies the assets basis, and the assets basis, combined with the high rates, can in our view operate somewhat severely on a family business. During the Budget debate the right hon. Member for Bishop Auckland challenged this, and relied for that purpose upon the July, 1951 White Paper. In particular, the right hon. Gentleman quoted the OFFICIAL REPORT as saying that … taking a sample, there were less than 2 per cent. of private businesses considered in which it was not possible to pay the whole of the duty due from non-trade assets, without trenching upon trade assets at all."—[OFFICIAL REPORT, 8th April, 1954; Vol. 526, c. 576.] The right hon. Gentleman therefore argued that it was unnecessary to take the step which my right hon. Friend is now taking. I should like to analyse that argument.

The first consideration which it is perhaps worth bearing in mind, is that the careful and thoughtful review on which that White Paper is based related to 1948 and therefore in many cases to the payment of Estate Duty on businesses built up long before 1939. That was a time when it was a good deal easier than it is now to accumulate reserves for the payment of tax or other purposes.

But there was a more fundamental misunderstanding on the right hon. Gentleman's part. In producing a White Paper of this sort, it is perfectly right and proper for statistical purposes to demonstrate to what extent it is possible to pay the duty out of other assets without trenching on business assets, but when one applies that in the real world one has to bear in mind one or two other considerations.

One consideration is that it is very often not humanly possible to realise other non-business assets in order to avoid touching business assets. One cannot always sell the widow's house over her head to clear the debt on a business. Therefore, when one translates statistical analysis into practical administration, one is faced with that difficulty.

There is another perhaps more serious consideration when one takes the right hon. Gentleman's percentages. The percentages, of course, are perfectly correct. The right hon. Gentleman quoted them over the whole field where entrenchment takes place as amounting to something between 0.5 per cent. and 1.6 per cent., but the percentages to which he referred are based on all cases in which trade assets exceed £1,000; that is to say, they include a large number of very small businesses indeed. If, however, we take cases where trade assets exceed £10,000—and, after all, that is not a very large business—the percentage where encroachment takes place rises to 25 per cent. That is an example of the fact that, if one looks at this very helpful analysis, it becomes clear that this problem is rather more serious than the right hon. Gentleman gave it credit.

There is the further consideration that the damage that can be done to these businesses by Estate Duty does not arise only when death takes place. As the years advance, prudent people are apt to make arrangements for the payment of death duties and to put by reserves for that purpose. It clearly must be the case that in quite a large number of businesses those responsible will put by for that purpose moneys which from many points of view could be more fruitfully and properly employed in re-equipment and expansion of the business. Therefore, it is not quite right to look at this matter solely from the point of view of what happens when death takes place. It is right to consider the position during the whole operation of the business.

Mr. J. T. Price (Westhoughton)

Does this Clause mean, in effect, that, quite apart from commercial undertakings which stand to benefit by the Government's proposals, this will also apply to landed estates not already converted into businesses, to fulfil the words of Gilbert and Sullivan and become "The Duke of Plaza Toro Ltd."? Does it mean that a landed estate will rank for benefit under the Bill?

Mr. Boyd-Carpenter

The hon. Member will remember that under the provisions of the Act of many years ago, which has been maintained and operated by successive Governments, including the one which he supported, exactly the same reduction in Estate Duty has been applied to agricultural land. This provision has a small additional effect in the agricultural sphere, but broadly it is concentrated upon industrial buildings and the plant and machinery of industry and commerce. It applies the same provision and exactly the same adjustments as have been operated for years in respect of agricultural land, and it does so to a considerable extent for the same reason.

It was thought by those who enacted the agricultural land provision some years ago that it was not in the national interest to take out of agriculture so large a sum of money at one time when death took place. That argument, which is generally accepted, is probably equally relevant in the case of the family businesses which we are now discussing. Therefore, having taken into account what happens when death takes place and the effect of this on the conduct of the business during the life of the principal proprietor, it seems that this is a sensible tiling to do. It also ties up with the main provisions in respect of encroachment on investment which throughout industry generally are provided by the investment allowance under Clause 15 of the Bill.

Sir John Crowder (Finchley)

Could the Financial Secretary make it clear that this provision applies only when one shareholder holds over 50 per cent. of the shares of the company?

Mr. Boyd-Carpenter

It applies in the conditions laid down by Section 55 of the Finance Act, 1940, to the assets basis. It is coterminous with the assets basis.

Clauses 26, 27 and 28 effect a number of minor modifications in Estate Duty law very largely by limiting the scope of cases in which the assets basis applies. I do not think that it is necessary to trouble the House with them in any detail. The first three of them, which are embodied in subsections (2), (3) and (4) of Clause 26, all have the same effect inasmuch as they prevent the assets basis from being brought in by temporary or accidental circumstances. They therefore provide that, where circumstances which would have caused the assets basis to apply have been of a temporary or accidental nature, then the assets basis shall not apply and the ordinary or market value shall apply instead. Similarly, Clause 27 (1) also excludes the assets basis when, subject to certain conditions, shares are sold. Subsection (2) cuts out the assets basis where, within five years of the death, shares in the company concerned are given as gifts to dependants or employees of the proprietor of the business.

Clause 29 is rather more important. Subsection (1) gives a relief which will prevent, in my own experience, one or two cases of real though perhaps occasional hardship. Under the existing law free estate is aggregated for Estate Duty purposes with settled estate where the free estate exceeds £2,000 in value. If one has a case of a very small free estate going to one set of people on a death which sends a settled estate of great size to somebody else, then one can have a state of affairs in which, for example, a free estate of £3,000 finds itself subjected to Estate Duty at the maximum rate of 80 per cent. What subsection (1) does is to prevent such free estate from being aggregated if it is less than £10,000 instead of less than £2,000, and a provision for marginal relief gives some relief up to about £48,000.

Subsection (2) is designed to deal with a method of tax avoidance which has been developing recently. Under the existing law, to which I refer with due diffidence in the presence of the right hon. and learned Member for Neepsend (Sir F. Soskice), if a man uses his capital to effect a policy on his own life, either in the name of a trustee or a beneficiary or expressly for the benefit of his wife or children under Section 11 of the Married Women's Property Act, 1882, the policy moneys payable on his death are free from aggregation with the rest of his estate. Further, they are each of them treated as a separate estate. To give an example of how that has in fact worked, in one past case a married man wished to provide £50,000 for his wife on his death. He took out 50 separate policies for £1,000 each on his life for his wife's benefit under Section 11 of the Married Women's Property Act. As each of those policies was an estate by itself, and as each was below the exemption limit of £2,000, that £50,000 passed, without payment of any duty at all.

It is perfectly clear now that that has happened that action must be taken, and subsection (2) deals with it by providing that where such policies pass on death they shall be aggregated not with the rest of the estate, as certain commentators have been misled into believing, but simply with each other. These insurance moneys will be aggregated with each other into a separate estate. Therefore, in the example which I gave the House, the policy holder would pay duty at the rate appropriate to an estate of £50,000, regardless of what the rest of the estate may have been.

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

Where there are several policies taken out for one person, obviously that is right, but where there are different people and a man takes out five policies for five children, will they all be aggregated under one heading?

Mr. Boyd-Carpenter

Yes, under the Clause as it stands the total of the moneys accruing from the insurance policies will be aggregated as one estate, separate from the other estate.

Clause 15 puts into legal form the investment allowances, which were very fully discussed during the Budget debate. All I need say of them now is that the long Clause—its length is due to the need to deal in separate subsections with different classes of asset, expenditure on which qualifies for the allowance—applies the investment allowance to all cases in which the initial allowance previously applied, except that new agricultural buildings and works, new scientific research building and plant, and new plant dealt with on the renewals basis, are added. They do not at present get the initial allowance but they will get the investment allowance. Second-hand plant and machinery and motor cars used for other than hire businesses will get the initial allowance but not the investment allowance. The Clause looks formidable because we have enacted all the several provisions in one Clause.

Subsection (8) provides for recovering the amount of the allowance where subsequent action by the business concerned makes it proper in our view to withdraw it. The main example under the Clause is where, within the period of three years, the asset in respect of which the allowance is paid is transferred abroad. That is necessary to avoid the obvious abuse under which an asset, from the beginning intended to be sent abroad, may be purchased by a firm in this country for the purpose of the firm drawing the investment allowance and then dispatched abroad. Similarly, the allowance will be withdrawn if plant intended for industrial use is put to private use—for example, a refrigerator purchased quite properly for business purposes and then used in the home of an individual concerned with the firm. In those circumstances the allowance would be withdrawn.

There is also the provision that in the event of a resale to an associated company, although the allowance itself will not be withdrawn, that associated company, which in the ordinary way would draw initial allowance, will not be able to do so. Otherwise, associated companies of the same group could be drawing investment allowance and initial allowance on the same assets.

Study of the Clause will make it clear to all concerned that this in a true sense is a tax remission and not in any sense—as suggested outside this House—a subsidy. It is perfectly clearly a reduction in taxation in respect of certain activities. It seems to me that there is all the difference in the world between making someone pay less tax as a result of certain action that he takes and paying that person a subsidy in respect of certain action that he takes. Not only is there a definite difference in principle, but a very practical difference in application. In the case of a subsidy, one gets it anyhow, but in the case of a tax concession, such as this, one gets it only if in fact one is liable to a tax. That seems to be the crucial answer to anyone outside who might describe this as a subsidy. It is important that that should be made clear, because certain people outside this country would be only too glad to describe it as a subsidy.

Finally, on the machinery of payment of post-war credits, I know that people will be anxious that we should proceed as speedily as possible. The House will see, from subsection (6) of Clause 14, that repayment is authorised after 9th August. The 9th August has been selected as being the first Monday after 5th August, the date by which this Bill has to become law to comply with the Provisional Collection of Taxes Act. We hope to deal with claims before that date, and it is hoped that claim forms will be available early in July. They will be available in tax offices, and my noble Friend the Postmaster-General has undertaken to arrange for them to be available at post offices, which will be of great assistance to a number of people.

We shall try to make the procedure as simple as possible, subject, of course, to its being our duty to pay the credits only where the original owner would have reached the necessary age and where the claimant is entitled to payment. It is not proposed to require applicants to produce a birth certificate of the deceased person, although if they happen to have the certificate by them and send it along, that will be helpful. If not, they are asked to state the date of the deceased's birth, if they know it, and, where appropriate, his or her National Insurance number, and an attempt will be made to check through the Departments concerned.

As to evidence of claims title, it is proposed to follow the procedure already applied in certain similar cases in which payment is made to someone over 65 years of age who had inherited the postwar credit belonging to someone who died before that age. We have, therefore, a certain experience on a limited scale of the working of the procedure, and it has worked fairly well. The easiest case will be the frequent one where credits have been re-issued and made out in the name of the present holder. In those cases very little difficulty should arise. Where the credits are in the original form there will be some need for evidence, the copy of a will and so on, to show that the person making the claim is entitled to the credit. But it is our intention to keep the matter as clear as possible in order that the not inconsiderable task of paying out some half a million credits, in addition to those paid under existing procedure in respect of those who have reached the age of 65, shall go through as quickly as possible.

Mr. Douglas Houghton (Sowerby)

To remove all possible doubt, will the right hon. Gentleman kindly confirm that the new provisions are an extension of the existing arrangements—not a substitution for them—and that holders to whom he old arrangements applied may still claim under them?

Mr. Boyd-Carpenter

Oh, yes. I am obliged to the hon. Member. This provision certainly does not take the place of the existing one which I think the hon. Member has in mind—the case of someone who has inherited the post-war credit of someone who is now dead, and who, under the existing law, has, and when the new system is in operation will still have, the right to claim payment on reaching the age of 65. I can give that assurance.

Mr. Eric Fletcher (Islington, East)

When will claim forms be available in the post offices?

Mr. Boyd-Carpenter

I did say that they would be available in early July, but I cannot give a precise date. We hope it will be some time in the first week of July.

Mr. Peter Remnant (Wokingham)

The Chancellor gave an assurance in his Budget speech that charities to which post-war credits have been be-queathed would be able to draw them under the new conditions. Is my right hon. Friend satisfied that the Clause, as worded, covers that point?

Mr. Boyd-Carpenter

Yes. They will be able to draw under this provision at the time when the original holder would have been 65 or 60 years old, because the determining factor will now be not solely the age of the present holder but the age of the original holder. The difficulty that faced charities previously was that they were not individuals and, therefore, did not attain the age of 65 or 60. I can give my hon. Friend that assurance.

Clause 16 will be generally welcomed. It is to deal with the abuse of the cessation provisions by the device of company reconstruction. The House will remember that this matter was discussed at some length last year, and the Chancellor gave an undertaking that he would watch the position, and, if necessary, take action. The Clause provides, quite simply, that the normal preceding year provision and not the cessation provision shall apply where, on a technical change of the legal person, there is no real change of ownership; and the basis of real change of ownership is the question whether, before and after the change, the same people own 75 per cent. of the company. I think that the House will commend that as a perfectly proper means of dealing with a device which was criticised, in my view quite rightly, during last year's debates.

Mr. Douglas Jay (Battersea, North)

Is the Financial Secretary not going to say one word about the rather interesting Clause 21? He has not yet said anything about it.

Mr. Boyd-Carpenter

I was not proposing to say anything about the group of Clauses, of which that is one, which embody the Millard-Tucker recommendations. That intention was not out of disrespect, but because, as I said at the beginning of my speech, there must be a limit to the time of the House which I should absorb. Those matters are perhaps essentially Committee points. While that will not inhibit the right hon. Gentleman from making any criticism he wishes to make, I hope he will forgive me if I do not touch on those Clauses.

I have addressed the House at some length already. I have thought it right, in view of last year's strictures, that I should endeavour to cover most of the ground. The Bill embodies both the major proposals and the minor rectifications of tax law needed to enact and embody my right hon. Friend's Budget proposals. As such it enacts and embodies a policy which has served, and is serving, this country well.

4.4 p.m.

Sir Frank Soskice (Sheffield, Neepsend)

I am sure that the House will desire an expression of gratitude to be made to the Financial Secretary for the clear and concise way in which he has exposed the purposes of the Bill. Since I have been a Member of the House, I have frequently heard hon. Members who are not lawyers get up and apologise for intruding into a lawyers' debate when the House engages upon legal discussions. At the moment, the position so far as I am concerned is very much the other way. I feel a considerable degree of trepidation in intruding into an economic debate in the presence opposite me of so many pundits of that recondite science and, sitting beside me, so many experts on my own side of the House.

I am encouraged by the reflection that the Financial Secretary and the Economic Secretary share with me the quality in which I speak, although they, of course, have the advantage of years of training and close association with the Treasury and those who are learned in these matters. I am emboldened to engage in the debate because we are now discussing not the general economic situation which we discussed when we debated the Chancellor's Budget statement: we are looking into the more technical machinery by which the Chancellor seeks to put into operation the purposes which he expressed in his Budget statement.

I am, of course, greatly tempted in that situation to take refuge in the legal subtleties which are obvious throughout the Bill, but I will, in conscience, seek to avoid doing that and try to address myself to those features which, although arising out of the legal drafting of the Clauses, nevertheless contain the matters of substance which the Bill embodies. Starting from that aspect, I do not propose to go through the various Clauses of the Bill in order of sequence, as the Financial Secretary very properly did, but to take those which seem to me to be the most important and make those observations and those criticisms which, it seems to me, should be made about them.

I should like to deal first with the Clause which creates investment allowances, about which so much time was occupied in the earlier debates. It is quite clear that the Chancellor was confronted with a serious problem in the failure of the private industry sector to invest sufficiently in order to maintain the strength of our economy in the face of growing competition from Germany and Japan and the growing and rapid development of the power of industry in the United States.

It is stated throughout the Economic Survey, which I have closely studied, that a feature of the year just past is that private industry—I quote from paragraph 69—has shown no marked increase in capital expenditure.… Speaking, as I do, from this side of the House, I am tempted to point to the contrast between the performance of private industry in that regard and the performance of the public sector of industry, where investment is very ample indeed. Faced with this situation in relation to investment in private industry, the Chancellor quite obviously felt that he had to take some step—a drastic step. We have, in Clause 15 of the Bill, his proposal to try to remedy that situation.

The criticism I would make of that Clause is that it will, I apprehend, have a somewhat limited effect. It is designed as an incentive. It has been described as a bribe; whether that is the correct terminological description I do not, for the moment, pause to ask. It is a device in order to stimulate investment, and it finds its place in the Budget. I do not criticise it because of that. We have long held the view that the Budget must be an instrument of financial and economic policy. The days when it was a simple statement of national accounts are long since over. It is not, in my view, a matter for any comment or criticism that the Chancellor should have resorted to this device—a somewhat desperate device —to try to encourage the private sector of industry to increase the scale of its investment.

I would, however, make the comment that if the situation were such that it was shortage of finance throughout industry which was a limiting factor in investment, a device of this sort might no doubt be much more effective. But the economic Survey makes it perfectly clear—the reference is on page 33—that shortage of finance, if one looks at industry generally, is not a limiting factor. Nor is shortage of material the limiting factor. Nor is shortage of steel the limiting factor. What, I suppose, has slowed down investment and prevented it from even exceeding last year's scale is that the wrong climate persists, and the Chancellor's endeavour is to change that climate by, in effect, giving to industry a monetary stimulus in the form of what has been described as a "bribe. "Sometimes it has been described as a "subsidy," but, whatever it is, it is a substantial remission of taxation not related—or not directly related—to the cost of the asset in respect of which it is given.

The Financial Secretary pointed out that a subsidy is something which can be said to be given irrespective of what has been the profit made or of the expenditure on a particular asset; whereas this subsidy—if it be the right term for it— is given to a trader or manufacturer who, in fact, embarks on expenditure in the creation of an industrial building, or on plant and machinery. It is, however, a tax remission which at the end of the day results in the trader or manufacturer receiving relief—in the case of industrial plant and machinery—on a sum which is 120 per cent. of the cost of the asset to him. In the case of buildings, it is 110 per cent. Again, I do not necessarily say it is wrong, but for that reason one must ask whether, in point of fact, it will achieve its purpose.

Looking at industry generally, if shortage of finance is not a limiting factor, although no doubt as an additional incentive it will have some effect, its effect, I should have thought, is bound to be limited, because it does not cure that which ex hypothesi is the obstacle in the way of investment, namely, a shortage of finance. It can contribute simply and solely as a monetary gift, a monetary bribe, or a monetary inducement.

It is no use the Financial Secretary saying that it does not so operate, though I do not think he went quite so far as that. It operates in this sense, that a trader may spend £100 and at the end of the day find he has tax relief on £120. As I have said, in the vast sector of industry which does not find shortage of finance a limiting factor, that inducement will have but a limited effect. That argument was dealt with by the Economic Secretary during the Budget debate, when he said that although it may be true of industry generally that finance was not the limiting factor, a very large number of individual concerns were short of money, and that prevented them from investing.

One might take in conjunction with that speech the example given in the striking speech of my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes). I am not saying that the speech of the Economic Secretary was not a striking speech, because obviously it was. But, in his very striking speech, my hon. Friend the Member for Ashton-under-Lyne referred to the cotton mills in Lancashire which were closing down. He said that was a case in which this particular inducement would have no effect—in the case of a concern which was short of funds.

I very much doubt—and I put this to the Chancellor and to the Financial Secretary—whether this inducement will really alter the position in any material sense. The trader who wishes to embark on an investment needs money in the first year in which he has to pay for it or, at the best, in the second year. But it is in the year in which he acquires the asset, the year in which he acquires the building or the machinery or whatever it may be, that he needs the necessary money in order to put down the cost of that asset. I am now talking about the case which the Economic Secretary and my hon. Friend had in mind of a concern which is short of funds and which, therefore, has not been able to invest.

If one asks oneself whether this provision will help them, one must ask exactly the same question as was asked by my hon. Friend the Member for Ashton-under-Lyne, who said that it would be no good at all to such firms. Supposing we take the case as the position results from Clause 15, of an industrial concern buying plant or buildings. Under the existing law, the initial allowance of 10 per cent. in the case of investment in buildings having been restored by the Chancellor in last year's Budget, the trader or the manufacturer who wishes to spend money on industrial buildings finds himself no better off by this inducement so far as the first year is concerned. Under the existing law, under the existing initial allowance system in year one, the would-be investor gets 10 per cent., and also 2 per cent. of the value of the building as an annual allowance. I think every hon. Member knows perfectly well what is the effect of the existing law. This 2 per cent. goes on annually for the next 45 years until the whole of the value of the assert has been written off.

The Chancellor has changed that. He has taken away the 10 per cent. initial allowance and replaced it by the 10 per cent. investment allowance. So far as the first year is concerned, under the Chancellor's proposal that manufacturer will get a 10 per cent. investment allowance. He will get the 2 per cent. annual allowance and he will go on as the years go by to continue to get that 2 per cent. His advantage will not come until the 45 years have gone by. His advantage consists in this, that whereas the 10 per cent. initial allowance under the existing law rates for the purpose of a balancing Charge or balancing allowance at the end of the life of the asset, this investment allowance does not. Therefore, the additional advantage which the Chancellor offers to the would-be investor is one which will not enure to him until 45 years in the case of a building.

That may be over-simplifying the matter but, broadly speaking, it is true of the generality of cases. Therefore, as my hon. Friend the Member for Ashton-under Lyne said, speaking of his own business, it would not be of the least use to him. If he wished to make an investment in buildings in the first year, he would find himself in exactly the same position as under the existing law. Therefore, I venture to put a question to the Chancellor and to the House about whether the investment allowance will be effective for any real purpose in the case of those concerns buying buildings which are short of money?

In the case of the great majority of concerns which are not short of money, it can operate only as an inducement, and will have some effect. In the case of those concerns inhibited by the shortage of money, it will not have the slightest effect. If they cannot afford to pay for the new buildings under the initial allowance system, no more will they be able to pay under this investment allowance system. So far as the first year is concerned, it leaves them in exactly the same position.

As I read the Clause, and it may be that I am mistaken—no doubt the Chan- cellor will correct me if I am wrong; he will agree that in a Clause so complicated one is quite capable of making a mistake—

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

The only ambiguity about the right hon. and learned Gentleman's remarks arises where he refers to plant and equipment. He is using general language which appears to relate to the whole of the Clause and which, I think, he intends to relate only to buildings.

Sir F. Soskice

I am obliged to the right hon. Gentleman. I did use the expression, "buildings" I was proposing to deal specifically with plant and machinery, and I agree that there should be a distinction between the two. Those are my comments with regard to buildings.

So far as I read it, the effect of the Clause, so far as plant and machinery is concerned, is the same. May I indicate it in this way? Under the existing law the investor gets a 20 per cent. initial allowance, and he gets, either under the normal or the alternative system as it is described in the Income Tax Act, 1952, the annual writing down allowance until the value of the plant or machinery has been written off, except I think for 10 per cent. at the end of its life or its useful life in the possession of that particular investor. As I read Clause 15 of this Bill, that situation is not altered. The investment allowance which the Chancellor has introduced in the case of plant and machinery is 20 per cent., and it takes the place of the initial allowance. The manufacturer gets that amount in one year. The question then arises, is the annual allowance in any sense altered?

I think that the Chancellor will agree that there is a little ambiguity in the wording of Clause 15. When we take it in conjunction with the relevant Sections of the Income Tax Act, 1952—Sections 281 and 283—the annual allowance is just the same as it would be if one were enjoying the initial allowance. If it is not the same it can be only very slightly raised, and it is only slightly raised if the investment allowance is to be disregarded for the purpose of calculating the annual payment. It is one or the other, but as I read it the annual allowance which the trader will get will be the same. If I am wrong, it can be only very slightly more.

Therefore, I make the same criticism in the case of plant and machinery as I made in the case of buildings. There I said that, to the extent that traders had sufficient money, it could operate only to a limited extent as an inducement. In the case referred to by the Economic Secretary of those traders who had not sufficient money, it really gives them no help.

The life of a machine is, generally speaking, much shorter than the life of a building. The question of whether a balancing allowance is to be made to the owner of the machine arises much sooner in point of time after the asset has first been bought. As I read the Clause and I hope that the Chancellor will correct me if I am wrong, it is true that, broadly speaking, the would-be investor gets no advantage—or if he gets any advantage is it only a very small advantage in a slightly enhanced annual allowance—until the machine has come to the end of its useful life. Therefore, again I say that, in the case of machinery, it is likely to have equally little effect. The Chancellor has shaken his head. Perhaps I am wrong.

Mr. Gerald Nabarro (Kidderminster)

Hear, hear.

Sir F. Soskice

I am quite sure that the hon. Member for Kidderminster (Mr. Nabarro) is not in a position to say whether or not I am wrong.

Mr. Nabarro

Will the right hon. and learned Gentleman allow me—

Sir F. Soskice

No. I must proceed. There are a number of remarks I want to make and I should like to imitate the Financial Secretary's example of brevity, which I very much admired.

We proposed last year that the 40 per cent. initial allowance should be restored. Whether the criticisms I have made are right or wrong, at least the 40 per cent. initial allowance in the first year certainly does not suffer from the disadvantage which the Chancellor's proposal suffers from. There the trader who is short of funds gets very substantial help in the first year when he wants to pay for the assets. Unfortunately, the proposal which we made last year was not one which found acceptance with the Chancellor.

So far as the device generally is concerned, a number of unkind things have been said about it. It has been called rude names. If it is a device that succeeds that should certainly go a long way to remove the basis of criticism levelled against it. It is certainly a new departure. I would say that the public at large, the taxpayers, should know what it is they are paying. The taxpayers who do not get the advantage should know what is the nature of the advantage which is going to those persons who do get it.

In that connection, the Chancellor said in his Budget Statement that in the year 1955–56 this investment allowance will cost £4 million. The Chancellor said that in subsequent years it would cost a considerable amount, although naturally he could not estimate it because it depends upon the measure of investment which results. I would simply point out that that £4 million and that considerable amount, whatever it may turn out to be, is represented in no sense by the cost of the asset. It is represented entirely, as I understand what the Chancellor said, in the case of plant and machinery by the 20 per cent. which the investor gets in excess of the cost to him of the asset, and in the case of the building by the 10 per cent. which the person who constructs the building gets by way of an allowance in excess of the cost to him of that asset.

Therefore, the £4 million and the considerable amount, whatever it may be, is the sum which will be granted by way of relief in actual hard cash loss to the Chancellor in excess of, or quite independent of, the actual cost of the asset to the person who invests in that asset. It represents 20 per cent. in the case of plant and machinery and 10 per cent. in the case of buildings. It is that which will cost the nation £4 million in the first year, 1955–56, and a considerable sum, which may perhaps be a growing sum, in the coming years.

For an expenditure of that sort to be incurred by the nation, if it succeeds in greatly expanding the scale of investment in the private sector of industry, well, so be it. If it does not succeed, then it is a particularly unfortunate mistake on the part of the Chancellor in a year when he cannot even afford anything for the old-age pensioners.

I want to make one remark about the investment allowance before passing from it, and it is this. Why does the Chancellor make it completely and absolutely indiscriminate, subject to the exclusion of private motor cars? He recognises that there are some forms of investment which should not qualify. Why should he have given it indiscriminately in the case of all buildings of an industrial character and all plant and machinery? Would not it have been very much better to put in a proviso about particular industries which are valuable from the point of view of building up the nation's economic strength and supporting its exports, saying that they should qualify for this form of inducement? The Chancellor could have done it by defining them in the Bill.

If he had taken the reports of the Anglo-American Productivity Council, the Chancellor could have seen the types of investment in respect of which we are behind the United States and other countries. In his Budget statement he himself called attention to the fact—I believe he used the word "thought"; he was not quite certain about it—that the United States, and I think Germany as well, are both outstripping us in the scale of their investment. I seriously press upon him that it is a great mistake to make this provision completely indiscriminate and to make no sort of selective test at all.

Therefore, to wind up the criticisms I make of this provision, which in a sense is the kernel of the Finance Bill—it is as important as anything else it contains—I say that it should have been selective, and it is not. It is doubtful how far it will achieve its purpose at all in that sector of industry which is not short of funds. It is most unlikely to have any real effect in the case of those concerns which might invest more but for the fact that they are inhibited by shortage of funds.

This is a new device, which is an entirely new departure. It is open to very serious doubt whether the Chancellor has made a serious mistake or not.

Mr. R. A. Butler

If the interpretation given by the right hon. and learned Gentleman on the plant and machinery aspect were correct, I should agree with him; but I will endeavour to answer him later in the debate.

Sir F. Soskice

I am obliged to the Chancellor for his courteous intervention. If I am not correct and if the investment allowance is in effect to be disregarded for the purpose of computing the annual allowance, I am sure that he will still agree—

Mr. Butler

That is another question.

Sir F. Soskice

I am sorry. I thought that that was the point on which I was incorrect. Assuming that I am incorrect on that, then still the only way in which what I have said is wrong is that the annual allowance would be slightly larger than it would be if the investment allowance is to be taken into account. That is the only difference. I am sure the House will agree with me that I did not take refuge in any mere legal technicalities.

The next point about the Chancellor's Finance Bill with which I wish to deal is his provision with regard to death duty, namely, Clause 25. That seems to be a provision which is very difficult to justify. The Financial Secretary tried to justify it on four grounds, but in spite of what he said, the broad fact remains that in 1951 the Board of Inland Revenue, as the Financial Secretary said, prepared a most careful report. That report was prepared in order, as appears on the face of it, to ascertain whether there was a case for this kind of relief. By the conclusions in their report, the Board clearly came to the conclusion that there was no case whatever for the relief. Does the Financial Secretary disagree with the Board? Does he go so far as to say that a board of experts who reported as recently as three years ago completely omitted to take account of the somewhat unsubstantial reasons which the Financial Secretary gave in seeking to justify the relief?

I want to call attention to one or two features of the report. As the Financial Secretary said, it related to 1948, which was not so long ago. I should not think that there has been much change since 1948. The Financial Secretary scarcely suggested that there was any real change. He said there had been a slight change. What does the report say? Of all the cases which were investigated—apparently, it investigated samples of the death duty returns in relation to 1948—only point seven per cent. were cases in which the death duty could not perfectly well be paid without having any recourse to trade assets. That is, under 1 per cent. The Financial Secretary mentioned 1.6 per cent. If he looks more closely he will see that the figure given on page 8 of the report in respect of 86 cases investigated was 7 per cent.

Mr. Boyd-Carpenter

The figure which I gave was quoted as the figure given by the right hon. and learned Gentleman's right hon. Friend the Member for Bishop Auckland (Mr. Dalton).

Sir F. Soskice

I agree. There are two views which can be taken. I thought that in winding up my right hon. Friend was very conservative in the argument which he put forward and took a figure which was much less favourable to his argument than the one which he might have taken. If one reads the report one sees that the real figure is 7 per cent., because that is the figure which relates to the companies and estates which come into this category. Let it be assumed that the figure is 1.6 per cent., for there is really not much difference. In the case of less than 1 per cent., or less than 2 per cent. of the cases of estates which were investigated, was it necessary to have recourse to trade assets. The report says that, in spite of the publicity given to the controversy which then arose about the question of relief, not one single case had been brought to light in which a family company had been broken up owing to the necessity of paying death duty.

There are one or two other figures which the House should bear in mind. Let us take small estates. After all, the Chancellor seeks to justify this provision by saying that it protects small family businesses built up by individuals and converted into private limited companies controlled, as they must be, by not more than five people to come within Section 55 of the Finance Act, 1940. In the case of all the estates investigated, ranging between £10,000 and £20,000, there was not one in which it was necessary to have recourse to trade assets. It was when one got to estates of between £20,000 and £50,000 that one got 30 out of 86 cases in which recourse had to be had to trade assets. In those cases it was not necessary to resort to those trade assets to an extent greater than 25 per cent. of those assets.

I submit to the House that that is absolutely shattering to this proposal. There were less than 1 per cent. or less than 2 per cent. of cases, and no small case was affected. No single case has been brought to light—I do not know whether the Chancellor is in a position to tell us of one now in 1954—in which a single family business—they are the concerns which he has in mind; he referred to them in his Budget statement—has had to be broken up or dismembered or in some other way seriously adversely affected because its members have had to pay death duties. If he can give oases, it will be interesting to hear of them.

At any rate, at the time of the report no such cases had been brought to light. The Report says: … it is worth noting that the public discussion has not so far resulted in the production, to either the Chancellor of the Exchequer or the Board, of any cases in which a business has in fact been broken up by the operation of the Death Duties. The Financial Secretary sought to depart somewhat from the report, although he did not go so far as to say that he was in disagreement with the findings of the Board. I should have thought that it would be very difficult indeed for any Financial Secretary to disagree with such a categoric and unqualified conclusion pronounced by such admitted experts in his own Department, and the Financial Secretary did not seek to do so.

Mr. John Maclay (Renfrew, West)

The right hon. and learned Gentleman is ignoring a most important part of the Financial Secretary's speech. The real damage is done to such businesses in view of what happens in anticipation of death. Rearrangements are made years in advance, and businesses which might go forward are thus held back because of the death duties.

Sir F. Soskice

A private individual has to make provision, and so has a private trader. There is no reason why a limited company under the control of not more than five persons, in which the deceased person exercised control, should be in a different position. A private individual has to sell his house and other assets to pay death duties. I do not see why this category should not be in that position.

Mr. Maclay

What we want to do is to preserve a very desirable form of business. What the right hon. and learned Gentleman is suggesting means that that type of business must be given up in advance of death.

Sir F. Soskice

There is not the slightest evidence before the House or in any document of which I am aware of any case where that could be said to be true. If the Financial Secretary is in a position to place any evidence before the House as a result of the researches that he and the Chancellor have no doubt made over the past year, it would be interesting to hear it. All we have had has been a vague and airy statement couched in the right hon. Gentleman's usual convincing fashion, and beyond that there is absolutely no evidence that any such business has been affected by a provision of this type made years in advance of death. It is a piece of pure speculation. If the Financial Secretary has such evidence, has it come into the possession of the Board of Inland Revenue since the report was issued? It is inconceivable that they would not have taken account of it if it had existed then. It is unlikely that cases of that sort have emerged since 1951 if they were not in existence at that time.

This is a shocking waste of money. What does it do? It takes death duties attributable to business assets, industrial plant and so on, whether in the form of actual assets in the hands of a private individual or in the form of what is called the "relevant portion" of his shareholding in the case of a deceased person who was in control of a one-man company, and in respect of those assets virtually halves the death duties. No kind of justification has been given for that. The Chancellor has said that it will cost him £500,000 this year and £1½ million in a full year. That is a mere gift to the 99 per cent. who are not affected, as the report shows.

I suppose that if we take £1½ million in any year, we can say that, as to 99 per cent., there is no conceivable justification for a tax remission to that extent, and I venture to say that the Chancellor made a bad mistake here. In any case, why did he not put a ceiling upon it? If it really is his desire to protect the small family company, why does he not provide that it shall not be available except in the case of businesses which do not extend beyond certain dimensions which may be specified in the Clause? He has not done that, and it will apply to any business, small or large.

There may be very large businesses of this sort, run by companies under the control of not more than five persons, in which the deceased had very large control, and perhaps this £1½ million, to be charged against the general taxpayer as the years go by, may go into the pockets of a very few inheritors of large estates who themselves, in point of fact, have no kind of moral claim to be the persons who will step into the shoes of the deceased person who ran the business himself. I venture to say that the Chancellor's Budget and this Finance Bill which we are considering today are open to very serious criticism in that respect, and that this is a sheer waste of £1½ million a year without a shadow of a case being made out to justify it.

To pass from that to a matter on which the Financial Secretary claimed that passion had been generated on both sides of the House, namely the question of "uplift," we on this side of the House are firmly of opinion that the view expressed in the Minority Report of the Grant Committee was the right view. The Financial Secretary explained very clearly the difference between the two views, but, as I read Clause 12, the provisions contained in it reject the view of the minority that there should be no uplift by reference to the fact that a large retailer can get advantageous prices or that he has other buying advantages.

Broadly speaking, the view that we hold is that, when an economy can be made, particularly in these days of very high costs, the housewife should, after all, get the benefit of it. Why should not the advantage of a lower price, accruing from the greater efficiency of a large retailer in distribution methods, enabling him to place larger orders, be passed on to the housewife? Broadly speaking, that is the view which animates the minority in their report, and we certainly underline that view and say that it seems to us that there are ample reasons for preferring the minority view to the majority view.

Uplift is not a question of revenue, as both sides of the House will agree. Its object is to try to produce equity between different classes of traders, but, as the Minority Report points out, there is really no unanimity at all amongst traders themselves as to where equity lies in this regard. It was not possible, listening to the evidence, as the Minority Report points out on page 33, to discover a majority view amongst the traders, because the evidence showed that there was a flat conflict between them on the use of the system of uplift.

It seems to me that the fact that the housewife can obtain articles more cheaply was a very compelling reason; and I should also have thought that, without going into the technicalities of the Minority Report, there are very strong reasons to support their view that the attempt to create uplift in the case of a large retailer buying on a large scale involves the supposition of a wholly notional standard of quantity. Beyond what size order is the uplift to operate? That really is the crux of the whole matter and there is a considerable degree of uncertainty which must result from assuming a notional standard of quantity and that uncertainty will be created in the minds of traders. For those reasons, among others which are stated in the Minority Report, we think that the Chancellor has made another mistake in Clause 12 in providing that there may be uplift in these two cases, and so coming down on the side of the Majority Report, instead of that of the Minority Report.

I now want to say a few words about post-war credits. The Chancellor said that what he has done will cost £19 million in the next year, and that, in succeeding years, it will involve an additional £2 million annually on top of the £17 million per annum which he at present pays out. Speaking for myself, I would have felt grateful for the step he has been able to take, and I will certainly not suggest that it should be opposed. Anybody representing a constituency knows from his own personal experience that what the Chancellor has done will bring relief in a large number of cases.

I am simply saying that it is, perhaps, somewhat haphazard to pay out post-war credits in the way he does. Let us take the case of a man who is 35, and whose father dies at the age of 62. Suddenly, he finds that, in three years' time, when he is 38, he will be entitled to the postwar credit. That is a minor criticism of what the Chancellor has proposed, and I certainly welcome what he has put in his Bill.

On the other hand, I am bound to point out that there is still £564 million outstanding of post-war credits, and it seems to me that to increase Ms annual bill by £2 million is really a bit mingy, especially when one bears in mind that, in last year's Budget, which it is legitimate to consider with this—since we are told that this is a "carry-over" or "standstill"Budget—the Chancellor gave away something like £340 million in his endeavour to carry out the policies which he then proposed.

Perhaps largely as the result of doing that, he finds himself in a position in which he can do no more in case of the post-war credits, and, what is more serious still, can do nothing whatever for the old-age pensioner. I am quite sure that he will realise the strength of feeling on that matter which exists throughout the country.

To deal strictly with the question of post-war credits, I want to ask the Chancellor this question. Does he not think that he can go a little bit further, at any rate, in some respects? Would he be able to say what it would cost to pay out the first year's post-war credits; that is, those attributable to the first year in which they were instituted? I do not know what the cost would be. Would it be prohibitive? Suppose that the Chancellor used the £1½ million which he is giving away by way of Estate Duty annually to double the rate of relief which he is proposing to give to post-war credits, so that the annual payment will be increased by £1½ million on top of the £2 million. He would be doing something much more useful than by paying out that £1½ million in respect of Estate Duty.

Mr. R. A. Butler

I am afraid I do not understand the right hon. and learned Gentleman's figure of £2 million. I thought that the post-war credits were to be shown below the line, to which we have to pay some attention, and not above it, and that the figure was about £19 million.

Sir F. Soskice

I have taken the figure from the Budget statement, and I understood the right hon. Gentleman to say that, in the first year, the amount would be £19 million, and that, in subsequent years, as matters stood at present, it would be £17 million, which he was proposing to increase by £2 million. I am simply saying that the £1½ million which he will lose on Estate Duty in circumstances which, if the view which I am propounding is correct, cannot be justified, could have been much more usefully used in paying out post-war credits, and, in effect, doubling the rate of the extra annual repayment in coming years.

If the Chancellor could not go the whole length and pay out in respect of the first year, could not the Chancellor pay out on death? I suppose he will say that he would then have to make retrospective provision for all the deaths which had occurred since the post-war credit system was instituted, but surely that would not impose very much more of a burden than paying out the £19 million extra that he is proposing to pay out under the system which he now proposes.

He would in any case by this £19 million cover himself in regard to a very large number of the deaths which have taken place up to date during the postwar credit system. I should not think it would cost him very much more. The criticism to which the Chancellor is open on post-war credits is that he was wrong to pay out so much last year in the way of large reliefs, leaving himself nothing for this year. If he can do anything more in the repayment of postwar credits, I hope he will give special consideration to the matter, upon which feelings in the country are very strong.

In regard to Entertainments Duty, the Chancellor is giving a relief to the cinema exhibitors. I gather that its effect on the Eady Fund will be only indirect. I would not for one moment advise my hon. Friends to oppose this proposal, but I would call attention to an extraordinary anomaly. The total yield from all forms of the tax is £44 million, of which cinemas account for no less than £37 million. I believe that if we took sport, apart from racing, out of the purview of Entertainments Duty, it would cost something like £2 million.

Mr. R. A. Butler

indicated dissent.

Sir F. Soskice

Perhaps I am wrong. At any rate, it cannot be more than £7 million, because that is all that is left of tile yield after we deduct the amount paid by the cinemas. I would urge upon the Chancellor that all sport, with the possible exception of racing of various sorts, should be taken out of the purview of Entertainments Duty. If the Chancellor cannot see his way to do that, it is wholly unjustifiable for him to continue the anomalous distinction between cricket and football. In the 1953 Finance Act, the Chancellor excluded cricket altogether. Why should football crowds now have to pay tax when no tax is payable in respect of cricket? I would like the Chancellor to give serious thought to this point in the course of our Committee discussions, and to see whether at long last he can put his pen through that utterly unjustifiable distinction. It could not cost very much.

I thank the Chancellor for what he has done in Clause 16 in relation to company reconstruction. I am sure that the House will feel also that a tribute is due to my hon. Friend the Member for Ashton-under-Lyne for the initiative that he took in this matter last year, and will be grateful to the Chancellor for including it in his Budget this year.

The rest of the Bill does not, in the scheme of my remarks, call for any particular comment. In Clauses 17 to 21 the Chancellor has implemented a number of recommendations of the Millard-Tucker Committee. We shall no doubt desire to look at this mattter in Committee, as well as at other things to which the Financial Secretary has referred and which I have passed by without any particular allusion.

The Chancellor has a touching concern with cemeteries and crematoria. It is very rare that I complain of the language used by the Parliamentary draftsman, but I think some of it might be looked at again in this connection. Clause 21 provides that to a person carrying on a trade which consists of or includes the carrying on of a cemetery there shall be allowed as a deduction

  1. "(a) any capital expenditure incurred by the person engaged in carrying on the trade in providing any land in the cemetery sold during that period for the purpose of interments; and
  2. (b) the appropriate fraction of the residue at the end of that period."
That language seems a little bit unfortunate, and I hope that it may be Changed. Read by itself, this provision conjures up certain disquieting reflections; but we gain some comfort by reading on and finding that it is the residue of expenditure which is referred to.

We can investigate the Bill much more fully during the Committee stage, as both the Chancellor and the Financial Secretary will no doubt expect. I have sought to call attention to features which raise points of substance on which I am sure that my hon. Friends will feel some disquiet and will feel in duty bound to voice criticisms of a more or less stringent character.

4.56 p.m.

Mr. Archer Baldwin (Leominster)

The main criticism of the Budget from the Opposition side is that old-age pensioners, ex-Service men and low-income groups are not catered for. We have heard that criticism repeated by the right hon. and learned Gentleman the Member for Neepsend (Sir F. Soskice). Increased payments of that sort can only come from increased taxation, because there is no money in the kitty, but increased taxation is altogether out of the question. We had too much taxation during the five or six years of the late Government. The only way to pay increased pensions to old-age and Service pensioners and to assist the low-income groups is by reducing expenditure.

Although criticism can be raised that all those very worthy people have not been recognised in the Budget, we must not forget that my right hon. Friend gave them very substantial recognition in the summer and autumn of 1952 and in the Budget of last year, by reductions of Income Tax. About 2 million people were exempted altogether, and something like 16 million people were assisted in their Income Tax payments. When my right hon. Friend made concessions last year, he said that the full effect would not be felt until this year. It would be unwise, therefore, to increase any allowance until my right hon. Friend can see exactly where he stands financially.

The Chancellor of the Exchequer called attention on several occasions during his Budget speech to the question of expenditure. I want to reinforce the points made by my right hon. Friend the Member for Blackburn, West (Mr. Assheton): Let us look at the Chancellor's case and see. He is rightly appalled by the continuing rise in expenditure and by the heavy taxation which this entails. He is unquestionably shocked at finding himself having to raise in taxes from the people of this country a greater sum than ever before, even at the height of the wae."—[OFFICIAL REPORT, 7th April, 1954; Vol. 526, c. 409.] He went on to say that he thought the spending machinery was not under the control of Ministers. I want to endorse that point. The spending machine has got completely out of the control of Ministers. I suggest that the Chancellor should take a leaf out of the London County Council's book. The L.C.C. said to their spending departments, of which there are 16, that they had to reduce their expenditure. One department has already budgeted to reduce its expenditure by over £10,000. If the other 15 do the same, it will make a very considerable difference to the ratepayers.

I suggest that the Chancellor should send out instructions to all Departments of State to cut their expenditures by 10 per cent. If my arithmetic is right, it would mean a saving of £450 million. Out of that saving he should have no difficulty in meeting the claims of old-age pensioners, ex-Service men, people with low incomes, and those who are not protected by trade unions. The Chancellor has said that this will be the first priority, and when he says it I know he means it.

It is not fully recognised that these allowances need not be dealt with in a Budget statement. They were previously dealt with in the summer and autumn of 1952, and when the Chancellor has a fair picture of his revenue position, I hope that he will do the same for these needy people as was done then. I am not saying that he can afford to meet all the claims that are made, because they are extravagant when one remembers that the cost of living has risen only by 1.6 per cent. in the last 18 months. A slight increase would suffice to put those people back into the position in which they were in 1946.

I suggest that the Chancellor's instruction to Departments to reduce expenditure by 10 per cent. should apply not only to the Civil Estimates but to the Service Estimates. When I read the report on the Service Estimates, I was forced to the conclusion that a great deal of unnecessary overhead expenditure was being Incurred. If some of the executives were cut out of each Department, work would go on much more efficiently, without any reduction in the service provided. If some of the dead wood were cut out, it would be all to the good. It would be better if some of the people who are now employed were paid to do nothing. My feeling in this matter was reinforced a short time ago, when I had to employ a man from the local employment exchange. When I asked one of my men how this man was getting on, he said, "It would be better for you to pay him to sit down and get out of my way. "Many Departments could do the same kind of thing. If they were to cut out some of the executives, they could carry on just as efficiently.

If I could not cut down 10 per cent. of the expenditure incurred by the Ministry of Agriculture, I should not think myself much of a business man. One form of expenditure incurred by county executive committees is completely unnecessary. I am not speaking of the National Advisory Service, which is doing good work, but of the unnecessary expense incurred by machinery pools. The Chancellor should instruct all county executive committees immediately to wind up their machinery pools.

Another unnecessary expense is caused by sending out supervisors to see that farmers are doing their jobs properly. These supervisors make one or two journeys a year and, so far as I know, nothing results. If a farmer does not know his job sufficiently well, he should get out of the business and make way for some of the young men who want farms. These expenses could quite easily be cut by 10 per cent. without any reduction in efficiency or production.

The Chancellor is rightly rather worried at the bill which he might be called upon to face in relation to deficiency payments. He has the difficult task of deciding whether it would be better to pay out a large sum in deficiency payments or to advise the Government that guaranteed prices should be cut. The effect of a cut would simply mean a decreased production, and I warn the Government that if they make another substantial cut in this direction there will undoubtedly be a drop in production, which we do not want at the moment; we want increased production.

I hope that the Chancellor will give some explanation of what he meant when he referred, in his Budget statement, to quantification. Agriculturists fear that that will mean a limitation of target. It does not make sense for one Department to urge farmers to raise production by 60 per cent. while another Department says that if deficiency payments amount to too large a figure they may have to be regulated by the imposition of a target. I hope that the Chancellor can explain the real position to agriculturists.

To meet the great expense with which the Chancellor may be afraid he will be faced, the Government should bring in a system of import levies. That may be against the terms of G.A.T.T., but if so, it is about time that G.A.T.T. was reconsidered and made more useful to us. At the present time we have two sections of the community, one that wants cheap food, and the other—consisting of the farmers—that wants guaranteed prices in order to maintain production. To ease the burden on the Chancellor in regard to deficiency payments, a pool should be established by a levy on imports, out of which those deficiency payments could be made.

This is nothing new. Wheat deficiency payments were made before the war, and they came out of a pool, the money for which was obtained from a levy, but because of the fear of accusations that we were taxing the people's food the system was not operated by means of a straightforward levy on imports but through a charge on every sack of flour milled in this country. From the sum collected a guaranteed price was paid to the farmers for a limited production of wheat. We want something of the same sort now. Otherwise, if these deficiency payments total too high a figure, the Chancellor will have to tell the Minister of Agriculture to reduce the guaranteed prices to farmers.

It will be fatal to our economy if anything is done to interfere with production. We have increased production very considerably, and we can go on doing so, but we must have confidence in the future, which we cannot have if we feel that we are returning to the situation which existed in 1921, when guaranteed prices were wiped out at a stroke of the pen. I know that this Government will not do that, but if they reduce the guaranteed price to less than the economic figure we shall have to find larger quantities of food from abroad, which will upset our economy.

I hope that the Chancellor will be able to get the Government to tackle this question of expenditure in a forthright way. I suggest that a leaf be taken out of the book of the Prime Minister who, when he wanted action during the war, used to end his memoranda with the words "For immediate action." The Chancellor should send instructions to all Departments to cut their expenditure by 10 per cent., and should make it clear to them that he requires them to take immediate action.

5.10 p.m.

Mr. J. T. Price (Westhoughton)

I had not intended to follow the hon. Member for Leominster (Mr. Baldwin), but in the last few minutes he has said certain things that would tempt anyone on this side of the House to pay him the compliment of making at least a few comments in reply. We on this side have often criticised proposals of the Government for removing controls which were considered of advantage to our community, proposals which were calculated to bring about a return of the conditions of a free economy, or of laissez faire as it used to be called in the days of Keynes. Some people have forgotten, by the way, that Keynes wrote a book on the end of laissez faire as long ago as 1926. However, it is rather paradoxical that today we should hear a Tory Member demanding that the Government should make an overall cut of 10 per cent. on all civil and defence expenditure—a pretty tall order— and yet claiming that controls and guaranteed prices and so on for the farming community should be maintained at the present or an even higher level.

I am not antagonistic to the promotion of a healthy agriculture in this country, but the hon. Gentleman cannot have it both ways, cannot have what even the May Committee failed to ensure many years ago, prior to 1923, and cannot have such a large cut in overall expenditure with the maintenance of the machinery of guaranteed prices the farming community so much desires. I wonder how the hon. Gentleman reconciles in his own mind these two conflicting demands.

Mr. Baldwin

I could not have made myself clear. What I was suggesting was that these huge deficiency payments that are anticipated in some quarters must not be paid by the taxpayers. I suggested that they should be paid through a levy on imports. That is a completely different thing. I am quite certain the taxpayers will not continue to pay £200 million a year in deficiency payments. I want to see them paid by the people who want to use our markets.

Mr. Price

I appreciate the hon. Gentleman's point. I shall not pursue it any further because that would take me along a line of argument I do not intend to follow today, but I ask the hon. Gentleman to explain on another occasion how on earth in the present state of our affairs he can hope for an overall cut of 10 per cent. of expenditure. Everybody in the House, regardless of party, is interested in effecting any reasonable economies that can be made to reduce the total of taxation, but in making this demand, what would the hon. Gentleman do about, for instance, education? The Minister of Education has recently been in very serious trouble with her supporters on the back benches opposite over a modest proposal for a cut of 10 per cent. on the services for adult education. It was a proposal she had to abandon. Is the hon. Gentleman proposing a cut of 10 per cent. in the National Health Service, or a cut of 10 per cent. in pensions?

The political analgesia that affects the thinking of some Tories is something we cannot have in present circumstances. I appeal to the hon. Gentleman to take a more reasonable view of these matters. We can all be as one in making reasonable economies, and I should not stand in the way of them, but for anyone in 1954 to tell the Chancellor of the Exchequer that he must effect a cut of these dimensions is to make an impossible suggestion.

I do not want to detain the House long, but I should like to deal with an aspect of the Bill that vitally concerns the part of Lancashire I have the honour to represent. My right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) dealt at some length and in great technical detail with the implications of the investment allowances now proposed. I am not sufficiently well grounded in these matters to express any worth-while opinion on the merits of some of the technical arguments that have been exchanged between the two Front Benches about them, but I do know that these incentives that are introduced by this Bill and are intended to encourage further investment and that healthy development of our industrial production to which we are all committed are quite undiscriminating.

In my part of Lancashire, in past generations the native population derived a good part of their livelihood from a coalfield that is now, in the natural course of things, becoming exhausted. Nothing is being put in its place as an alternative source of livelihood. It would be most instructive were we to have a survey of the drift of population in this country, showing, to draw an arbitrary line for the moment, how the population has drifted from North to South of the Trent in the last 50 or so years. It would be interesting if the statistics showed the changes at intervals of, say, 10 years.

The constant encouragement of industries that are unnecessary, that are unhelpful in our national economy, is detrimental to the production of those things that basically matter. London, for example, is the outstanding case in point. Without disrespect to hon. Members on both sides of the House who have an interest in Metropolitan affairs, I say that anything which fosters the unregulated growth of this great City of London is a national disaster. It is true to a lesser degree to say the same of the great conurbation in the Midlands, around Birmingham and Coventry, and, perhaps, of Manchester. These developments are linked directly with budgetary policy today.

Mr. Nabarro

Will the hon. Gentleman allow me?

Mr. Price

No, not yet. I know the hon. Gentleman represents a Midland constituency, and represents it quite well, if I may pay him that undeserved tribute, but he must realise that when whole communities are uprooted, as they are being, from what were the basic industries in days gone by, on which the prosperity of the country was built in days gone by, Lancashire Members—I, at any rate— cannot sit quietly by without a protest.

Mr. Nabarro


Mr. Price

No, I cannot give way. I want to press on. In Lancashire we have a Development Area which has not had any encouragement or support from the Government at all. We have seen our population drifting away. Not all, but many of the young and virile members of our population, a high proportion of our population, have drifted away to great centres such as London and the conurbation of the Midlands where light industries have been developed on a large scale.

I would add my voice to the protest that has been made on many occasions on behalf of the old-age pensioners. In my part of the country we have an unduly high proportion of people who are within the old-age pension limits. My constituency is a normal constituency of about 55.000 electors. I believe that at least 12½per cent. of the electorate are now in receipt of old-age pensions. There may be 7,000 or 8,000 of them out of 55,000, which is a very high proportion. We are entitled to add our voice of protest against a Budget which neglects the claims of these people who in days gone by have been left high and dry without alternative sources of employment.

I support my right hon. and learned Friend's plea about the tax on entertainments and, particularly, on football. The Chancellor has made some very small concessions to the football clubs. I must be very careful here, because last year he twitted me with having taken a leading part in demanding a concession to the cricket clubs. I was interested in that campaign, and the Chancellor gave way completely over the tax on cricket. I was grateful for that because I attached my name to a Motion which sought to achieve it and I am disappointed that in this Budget he has not seen fit at least to narrow the gap between the two types of sport to any substantial extent.

Rugby football is the principal game in my part of the world—soccer is not quite as popular—and I am informed that the new concession affects the admission money by only about a half-penny on each ticket, which will have no substantial effect on the coffers of many of these struggling clubs who are having a hard task to keep their heads above water. I add my voice to those hon. Members who have asked the Chancellor to see whether he can do something better for the football clubs. In particular I refer to the Rugby clubs, in which I confess I have no personal interest except that of a native of a Rugby-playing part of the country.

The Budget has pleased one member of the Opposition—myself—in tackling the scandal of tax evasion by some sections of the country, to which the Financial Secretary referred in his opening speech. When these tightening processes take place in order to stop abuses, I often wonder whether the Chancellor of the Exchequer of the day—whether he is a Conservative or a Socialist—is prepared to avail himself of the powers which he already possesses. In past Finance Acts which are still part of the statute law of this country, there are extensive powers for dealing with people who take part in transactions the main purpose of which is the evasion of tax. Those powers already exist.

At a time when the country faces great hardships, great perils and the risk of national bankruptcy, it is scandalous that there are so many professional people in this country, in the learned professions, who are prepared to aid and abet people who are seeking to evade taxes by one method or another. I thank the Chancellor for at least tightening up in the direction to which the Financial Secretary has referred and I hope his tightening up will be effective.

5.25 p.m.

Mr. J. Grimond (Orkney and Shetland)

I am very glad to hear that the hon. Member for Westhoughton (Mr. J. T. Price) has turned his persuasive powers from cricket to football and I hope he has equal success in his new campaign. Everybody will agree with him that we should have liked to see an increase in pensions, both war pensions and old-age pensions.

There are two other matters which, before the Budget, most people hoped might be included. One was a reduction of tax on fuel oil and petrol and the other was some repayment of post-war credits. Apparently, however, we have to accept the pure milk of Keynes. Only a slump can allow a reduction in taxation. All we have achieved is something in the case of post-war credits. There is an obligation on the Government to repay these credits, and that is sometimes forgotten. They cannot put off this obligation for ever.

I wish to concern myself largely with savings and investments and with the investment allowance mentioned in the Finance Bill. The right hon. and learned Member for Neepsend (Sir F. Soskice) wondered how far this allowance would be effective in increasing the amount of investment. I always listen to the right hon. and learned Gentleman with great pleasure because even on legal matters he is so clear that I begin to think that I understand them; and even when I do not understand them, he is so soothing that I begin to hope that one day I may. Perhaps that is a little dangerous, because when trying to carry on a conversation in French I always find that people who do not speak French very well are the easiest to understand.

When he came to deal in detail with the investment allowance I thought he was possibly a little mistaken, because as I understand it, there is an important distinction between this allowance and the initial allowances. This allowance is, to some extent, in the nature of a grant, as against a loan, and after the first year I believe there will be a substantial benefit on plant and machinery to people who are in a position to take advantage of the allowance.

But I agree with the right hon. and learned Gentleman in that I am doubtful whether this allowance alone will bring us the investment which we need. It seems to me that to do that we must be able to guarantee some stability to industry and we must reward enterprise. Unless we can do that, I doubt whether we shall succeed in keeping pace with the efficiency of other countries.

There are, obviously, two sides to this matter: there is the question of saving and the question of investment. It is true that there appears to have been an increase in savings during the last year. There are considerable liquid resources in the balance sheets of companies and there has been an increase in personal savings. But, taking it all over, there are still not enough savings. We have saved about one-eighth of our national income in about five years, and bearing in mind that we have large obligations for investment throughout the Commonwealth, I do not think that that is enough.

The most serious effect of the very high rate of taxation is that upon savings and investment. The Commission which has just issued another interim Report says that as far as it can tell the immediate effect of high taxation on the amount of energy being put into the job is not as serious as some people have thought, but I still think it has a serious effect on the accumulation of savings.

Another point about savings, now that most of the saving is done by companies, is that there is a great danger that they will be in the wrong place. There is not sufficient mobility of savings or sufficient channelling of them into new productive investment. Companies keep savings locked up in their own accounts when they may not need them for those purposes.

But even if the amount of saving is insufficient, we are still left with the question of why the existing amount does not appear to be fully invested. Surprise has been expressed about the lack of investment in the private sector of industry, but it does not seem to me very surprising that there is a certain reluctance among manufacturers to invest.

Before I turn to that, however, I should like to deal with the specific investment allowance which is designed as a bait to draw out this money and to ensure that it is put into new machinery, buildings and plant. I think that this allowance will help, but I do not think it will be enough. It is, of course, discriminatory. Some would like them to be more discriminatory and some like them to be less discriminatory.

At present, so far as I can tell, it will be discriminatory in favour of the medium-sized company, particularly those engaged in the engineering business, and shipping companies and shipbuilders will also benefit. I see, however, from some of the statements of directors of very big companies that this is not going to make very much difference to their investment programmes. It has also been pointed out that the very small struggling company, which is not liable for tax. will not benefit either.

I think that it would be difficult to make the allowance more discriminatory. I am not clear how that can be done. Some people have suggested that there ought to be discrimination in favour of export industries, shipbuilding, and so on. We may be very much concerned with the fall in the amount of British tonnage from a half to about one-fifth of world tonnage, and much concerned to increase our exports, but I am not convinced that a sharp discrimination in tax allowances is the best way to help shipping or exports. Nor am I very clear that a direct subsidy of certain industries would be any better.

Then there is the proposal Chat there should be various alternatives which industries can choose themselves. There may be something in that. I do not know whether the Financial Secretary has considered it. It is a revolutionary proposal but, as the hon. Member for Sowerby (Mr. Houghton) has pointed out, the allowance is a new feature in our tax system.

Another thing which we ought to consider about this allowance is how much it will eventually cost. The Economic Secretary said that it would not cost very much in the immediate future, and in the years to come he hoped that the productivity to which it would give rise would create so much new taxable wealth that we should never notice the cost. That seems to me to be a doubtful argument. We can say that about any remission or any tax—that we hope that it will increase the wealth of the country and, therefore, its taxable capacity, and that, therefore, the difference would not be noticed in the long run. The cost of the allowance in the years to come should be computed, and we ought to be given a better estimate as to how much it will be.

I return to the question of what is to be done to get people to invest. I do not think that it is so surprising that private industry should hesitate to invest. After all, it has to earn a profit on its investments. There has been some comment on the contrast between the public and private sectors of industry, but I do not think that a comparison of the public sector and the private sector of industry is altogether fair. The former does not have to show a profit on its trading. I am not saying whether this is right or wrong; but it is a fact. Further, from the White Paper it is difficult to find out how much new investment in private industry in this country actually took place. There is investment overseas, and there is some failure of investment, so to speak. The net figure for new home investment is not easy to discover.

During the last few years, the business man has had to face not only the hazards of the market in his investments, but also the vagaries of politicians and the alteration of taxation methods from year to year. Even now, we have no guarantee that this particular allowance will continue. It may go the way of E.P.L. But if it is not continued its benefit will be lost.

I think that one of the main advantages of this Budget and of the last Budget is that they were dull with no new taxation and comparatively small changes in the system of taxation. It seems to me that the fewer and duller Budgets we have the better. I rather deplore certain remarks of the Chancellor which led some people to fear an autumn Budget. I hope that we are not to have six-monthly or three-monthly Budgets.

If we are agreed that a large sector of the economy is to remain under private enterprise, then we must accept the implications of that; even the implication, for instance, that there shall not be continuing and rapid inflation and that there shall not be, in the next few years, radical changes in the system of taxation or the control of industry. I do not think that we shall get people to invest unless they have an assurance that radical changes of that sort are not likely to come along.

If the Left, so to speak, will be prepared to give that sort of assurance it seems to me that the Right have to give a guarantee to Labour that if there is a slump the burden of it will not fall on the working people. It is all very well to say that the capitalist investor loses his money, but he is not affected in the same way as the working people. To give an assurance which is completely watertight is, I know, a very difficult matter. But there is a fear of widespread unemployment and the breakdown of the welfare services. It is essential that action should be taken to avert that.

Another matter is that of redundancy —another form of this fear of unemployment. I am sure that that is one of the main factors leading to restrictive practices and a desire to spread out the work. I think that they are natural fears. If British industry is to be efficient, labour as well as savings have to be mobile. There, again, it is not easy to suggest a solution. Is it possible to have some sort of insurance scheme for payment for the loss of office to a skilled worker who may have given long service to his industry, but who finds that technical advance has made his skill useless?

Mr. Cyril Osborne (Louth)

If these guarantees are wanted when trade is bad, the companies who are to give them will not be in a position to do so or ensure them merely because trade is bad. If trade becomes so bad that companies go bankrupt, they cannot enter into the guarantee for which the hon. Member is asking.

Mr. Grimond

I appreciate that, but I think that the Government, by their financial internal policy, can and will do a good deal to ameliorate the worst features of depression of the old-fashioned sort. I am only asking whether some sort of further insurance is possible. It might not be possible, but I feel the question of redundancy is very important and has to be faced. The men are being asked to accept new conditions and new machines.

If we want people to invest they must have a reward. Whether it be a company or an individual, if we want them to put their money into industry with all the hazards that follow, then, if they are successful, they have to get something out of it. That has to be accepted if we are to continue to have any part of the economy run by private enterprise.

As I said, I do not think that the allowance by itself will be sufficient. I think that it may prove that what it will do is, in some cases, further to encourage companies which have more money than they can use to keep it to themselves. I think it is arguable that it is not necessary to give a big class of companies a further financial inducement. They have got the money. What they lack is some certainty as to the future and, possibly, some spirit of adventure. I think that the City of London has been so repressed over the last 10 years that it has forgotten the sort of investment that this country did. Look at what trust companies do today compared with 50 years ago. Then they invested all over the Commonwealth and Empire in new ventures, and now they invest in debentures and preference shares of established safe British concerns. I doubt whether the Capital Issues Committee should continue. I doubt whether the Chancellor should control the banks so tightly.

I regret that in this Finance Bill the restriction on the movement of companies abroad has not been removed. To encourage free enterprise to get its muscles working again should be an important part of the Chancellor's policy, and if that can be done by fostering political stability and economic stability of working conditions together with the spirit of adventure and enterprise in management then I think we may begin to see the investment which is so badly needed.

5.40 p.m.

Mr. Frederick Gough (Horsham)

As one who fully approved and supported my right hon. Friend's Budget I can be very brief, because there are only one or two points to which I should like to refer. I should not have referred to the Budget, as the hon. Member for Orkney and Shetland (Mr. Grimond) did, as a dull Budget, because it has given a great deal of assurance that what has already taken place during the first years of the present Government will continue.

The hon. Member for Westhoughton (Mr. J. T. Price) touched on the question of tax evasion. I was disappointed that there was no mention in this year's Finance Bill of the treatment of business expenses, and particularly of entertainment expenses, because the present situation is very unsatisfactory. I am quite certain that there is a very small percentage of people in the business world who are evading their responsibilities under this heading. Nevertheless, the present method of assessment of expenses, and particularly of entertainment expenses, is cumbrous in the extreme and is having a bad effect on the increase of our business, particularly of our exports overseas.

Without going into many details, I feel that the position has become almost ludicrous. A case was brought to my attention the other day of a man who had been to America to improve our new business over there and when he came back he was asked how many times he had had his hair cut in New York. There are many other cases like that. Undoubtedly, the present system under the 1948 Act will not catch the really black sheep, who will still get away with it. The position under that Act is creating a very depressing effect on those upon whom we rely more than anybody else to improve and increase our exports overseas.

It becomes almost paradoxical when, on the one hand, my right hon. Friend the President of the Board of Trade urges businesses of all sorts to go abroad and stresses in pamphlets the necessity for entertaining, whereas, on the other hand, when the wretched business executive carries out his duties in that way, he is confronted on his return to this country by the Inland Revenue, who put him through what, I admit, is entirely within the law, but what might well be described in some circumstances as being almost "third degree." I entreat my right hon. Friend to look into this matter, for I feel that the whole question of the treatment of business expenses and entertainment expenses should be revised. The present provisions under the 1948 Act simply do not work.

The hon. Member for Orkney and Shetland referred to the investment allowance as being discriminatory. There is another discriminatory feature within the Budget. Various sections of private industry are coming off in a very different way, and there is certainly discrimination between one type of private company and another. Consider, for instance, the private company—the family business— that has gone in for manufacturing, for engineering, and so on. That company is doing very well, and I am delighted to see it. But there is another type of private company—here I have an interest, because I happen to be interested in the insurance world—in insurance and shipping, and so on, which is extremely valuable from the point of view of invisible exports. This section of industry has come off rather badly in the Budget.

Companies were hoping that something might be forthcoming as a result of the Millard-Tucker Report. Those hopes can continue. But in the absence of any implementation of the Millard-Tucker Report, the only manner in which a partner or owner of one of that type of private companies could make provision for his wife and family was under the Married Women's Property Acts. While I welcome the fact that my right hon. Friend has closed up what was undoubtedly a loophole which had never been intended, nevertheless I suggest that perhaps he has gone a little too far.

I have stated my interest in this matter, but I should like to go further. It ought to be put on record—I think that my right hon. Friend the Financial Secretary will agree—that the loophole whereby a man is able to take out many different policies on his life has been known for a long time and there has been an honourable agreement between the Treasury, on the one side, and all the life insurance offices, on the other side, by which it has been largely overcome.

I believe I should be right in my guess that the case to which my right hon. Friend referred of a "clever gentleman" who took out 50 policies of £1,000 each for the benefit of his wife did so many years ago and that the fact has probably only just come to light. Nowadays, to my knowledge, no life office will issue more than one policy in any one year for any one beneficiary.

I should like to put to my right hon. Friend a case which came to my notice of a man who has a wife and three daughters. He has in the past made provision under the Married Women's Property Acts for these four dependants by taking out a policy year by year of £10,000 in each case, one for his wife and one for each daughter. As the law has stood so far, each of those policies was a separate estate and as such acquired merely an Estate Duty of 4 per cent. The man could, therefore, tell his wife and his three daughters that he had done the best he could for them and that on his death they would each receive £9,600.

The effect of Clause 29 is to put all those policies together. That might be what the House will approve, but we should appreciate that the Clause aggregates all those policies and that each of them, instead of paying 4 per cent., will pay 24 per cent. In other words, despite the provision which the man has made for his family many years ago and on which he has paid his premiums, at one stroke of the pen it is reduced by almost one-quarter.

the suggestion which I should like to make to my right hon. Friend—I was hopeful when he said, "As the Bill stands at present, that is what it means"—is that before the Committee stage he should consider whether immediate beneficiaries—that is, the spouse and the children of the marriage—should still be allowed to be treated as separate beneficiaries rather than be aggregated together; but that in regard to other types of policy, such as those taken out under covenant, what my right hon. Friend is doing is quite correct.

To revert for a final word to the treatment of business expenses, this is a matter in which we can tidy up something that is definitely in need of tidying up and, in the process, save a great deal of Government expenditure.

5.48 p.m.

Mr. M. Follick (Loughborough)

We have been listening to a very quiet, chatty debate on the Budget, but I am afraid that I shall introduce a controversial subject, and I regret that nothing was said about it in the Budget.

We are faced from now onwards not with the easy export markets of which we have enjoyed the benefit since the war. We have had practically the world to ourselves. Now, not only will we be faced with keen competition from Germany and Japan, but if a depression arises in the United States, to keep its factories going America will be seeking markets in those countries where we have held the markets since the war. I regret that no mention was made in the Budget of this subject, but that we prefer to go on with our old-fashioned monetary system. I am not going to bring up the question of the metric system. I discussed that something over a year ago in a debate in this House, and the then Secretary for Overseas Trade, in reply, said that a large part of the world still kept on with the old imperial weights and measures.

I want to bring before the House this afternoon the issue of a decimal currency. Nobody can say that a large part of the world does not use the decimal currency, because very few parts of the world keep to the old system of monetary denomination. There is not a single country in Europe—counting ourselves outside the Continent—which has not adopted the decimal currency and that includes such countries as Albania, Bulgaria and Yugoslavia. In the whole of Asia the only country that has not gone over to a decimal currency is India, and it is being discussed there. All the American countries have adopted a decimal currency and most of our own Dependencies are working it. On 1st August, 1951, all the British Caribbean countries adopted the dollar. East Africa, Zanzibar, Uganda, Tanganyika and Kenya have adopted a decimal currency based on the shilling. We could introduce that reform into this country without any change of coins.

Mr. Deputy-Speaker (Sir Charles MacAndrew)

None of the Budget Resolutions refers to that subject, and therefore I think the hon. Member is out of order in discussing it on this Second Reading.

Mr. Follick

I asked Mr. Speaker about this and he agreed that I could introduce it into the debate as not being in the Budget.

Mr. Deputy-Speaker

It is rather unfortunate for the hon. Gentleman that Mr. Speaker is not in the Chair at the moment, but I cannot allow it.

Mr. Follick

On what basis can I go on, because it is a very important subject for our overseas trade?

Mr. Deputy-Speaker

I can quite appreciate that it is very important, but I do not think it is covered in the Resolutions.

Mr. Follick

Would I be in order in drawing the attention of the House to the fact that in four British territories in East Africa there is a decimal currency based on the shilling which we could adopt in this country without requiring any new coins? Twenty-five cents in those territories make 3d., 50 cents 6d. and 100 cents a shilling. They interchange money from the United Kingdom with the money of those countries without any difference at all. If we could base our system as is done in the Colonies in Africa, we would have a system under which we could trade with the whole world without any question of differing from their systems.

Sir William Darling (Edinburgh, South)

Does that not mean that in Part III of the First Schedule the sum of 1s. would be 10d.?

Mr. Follick

It would not be 10d. There would be 100 cents to the shilling and the penny piece would still represent a penny piece.

If you, Mr. Deputy-Speaker, will not allow me to pursue that argument and explain to the House how beneficial that would be for our overseas trade, then I think I am within the rules of order if I speak of the benefit to our overseas trade of currency reform. We are going to face tremendous competition in exports from the great exporting countries, and all those countries have decimal currencies. We have to remember that our currency is very difficult for foreigners.

Mr. Nabarro

A much better one.

Mr. Follick

Not a much better one, and if the hon. Gentleman lived abroad he would know how easy it is to have decimal currency reckoning and how difficult it is to follow our reckoning. During the war, when I asked a taxi- driver why it was that he always preferred American G. Is. to British people, he replied that it was because they did not understand our currency. It is difficult, and—

Mr. Deputy-Speaker

They may not have understood our currency and I do not think the hon. Gentleman has understood my Ruling but he cannot deal with this matter. It does not deal with taxation.

Mr. Jay

In order to help my hon. Friend and with your permission, Mr. Deputy-Speaker, may I draw the attention of the House to the fact that Clause 13 of this Bill imposes Income Tax charges. Would it be in order for my hon. Friend to argue, rightly or wrongly, that the method of collection and calculation would be greatly facilitated by the system to which he has referred?

Mr. Deputy-Speaker

Perhaps the hon. Gentleman had better try it and we will see how he gets on.

Mr. Follick

I should like to point out that in all these other countries where there is a decimal system it is easier for their revenue officers, when dealing with Income Tax or any other source of taxation, to calculate on a decimal basis.

Mr. Houghton

The Income Tax officials in this country have no difficulty in collecting under the existing system.

Mr. Follick

It is not so much difficult in collecting, though I think they have considerable difficulty in that direction, but we are faced with this question of competition abroad. If we are to maintain our standards of living, we cannot overlook that we must import in order to export. In order to export—

Mr. Deputy-Speaker

Order. I have been very patient and have allowed the hon. Member 10 minutes in which to make his point. I hope he will bring his speech to a conclusion, because it has been out of order.

Mr. Follick

Very good, Mr. Deputy-Speaker. You have been generous to me. I have been watching the whole time and you have perhaps been overlooking some of my faults.

I shall end by referring to post-war credits. I have taken a considerable part in the debates on that question and I received an intimation from the Financial Secretary to the effect that it was intended to make some valuable alterations in the Budget. The Chancellor has done so, and I am grateful to him for doing so; but there is an argument for repaying post-war credits to those who are either dangerously ill or have a very short expectation of life. It would not add a great deal to the Budget but it would give relief, satisfaction, hope and some enjoyment to many people who have not much left to live for.

6.1 p.m.

Sir William Darling (Edinburgh, South)

Some time ago an acquaintance of mine, visiting the House of Commons on such an occasion as this, and seeing the empty benches, said, "If you do not improve the show, it will have to go." That is why I am glad that at this stage of the debate you, Mr. Deputy-Speaker, have called me after the hon. Gentleman the Member for Loughborough (Mr. Follick).

A debate such as this always starts with a certain amount of gravity, but towards the middle it is fitting that there should be a certain juiciness in the sandwich. If it is stale on the outside the public will stand for it, but in the middle, in the afternoon and early evening, it is right that the hon. Member for Loughborough and myself should travel lightly over what is always an interesting subject. It has been admitted by the Chancellor himself that this is a dull Budget and I am sure he will be grateful to the hon. Member and myself—when I have finished—for our contributions to lightness.

I personally deplore the absence of any public economy in this Budget. To increase our current expenditure by £1,000 million is not what I expected from a Conservative Chancellor of the Exchequer. I know that there are plenty who might be even more successful in that field if the country were foolish enough to give them an opportunity, but, none the less, it is regrettable that under a Conservative Administration we should be faced with this monstrous increase in our public expenditure without, apparently, even a little attempt being made to curtail it.

We have been engaged since the Budget speech in spending public money in many directions which the majority of the public, at any rate, would not accept as desirable. Last Thursday I was tempted to quote my right hon. Friend the Chancellor of the Exchequer, who said that he would expect more support for economy not only from hon. and right hon. Members of the House of Commons, but throughout the country. I have heard no support for the policy of economy from the other side of the House and, certainly, I have heard little in its support from this side. The Chancellor has told us that it is impossible to have public economy without a change in public policy. That is axiomatic, but there is something on a lower level in the way of public economy which can be achieved without even changing public policy.

Among other activities I conduct a number of businesses and in these we budget not in the sense that the Chancellor budgets. My right hon. Friend thinks of a number and hopes it will be achieved by the taxpayer during the year. We say to a department manager, "We will allow you £5,000 this year to run your department and £5,000 for re-equipment. You tell us what your policy is within that amount of expenditure." The manager who gets those instructions does so, and this happens in every business whether it is shopkeeping or engineering.

But that is not the way of the Chancellor of the Exchequer, and my right hon. Friend underestimates his capacity and that of his distinguished colleagues when he says that no public economy can be achieved. He has only to go to the permanent heads of the Departments and say, "Sir, this is what you will get to run your Department. This is the policy you have to follow out and this is the money we are providing." But the present method is to say, "What do you think it will cost you? What did it cost last year?" The answer usually is, "The cost of transport is up. There are two or three more increases in wages to come and, therefore, we shall have to provide £250,000 more."

That is the method of estimating as the Estimates show, which we follow in public affairs. I regret that the Chancellor underestimates his own capacity and the character of those who support him when he feels that he cannot reduce public expenditure without major changes in public policy. If he would tell the heads of Departments what they will have to run their Departments, then if they are unequal to the task the public will see that a salutary warning has been given to persons who cannot carry out their public duty.

I am bold enough to say that in the field of public policy I can think of a considerable change. I see the hon. Member for Sowerby (Mr. Houghton) before me. The hon. Gentleman represents one of the vested interests of this country, namely, tax collection. The number of persons engaged in this at one time despised but now lauded occupation, is great. None will deny the efficiency or the skill with which they extract from a reluctant population the moneys which Government demands as their due.

I do not go so far from the Bill as the hon. Member for Loughborough did in regard to the decimal system, but I go rather far from it when I say that we should abolish the Inland Revenue and the Customs and Excise and thereby save enormously in public morals, raise the standard of ethics, and get rid of a large number of tax collectors who are today surplus to the body politic.

I suggest a universal turn-over of tax of 1 per cent. paid through the banks. This, I am competently informed, would bring in not £4,900 million, but £10,000 million. There should be no other tax whatever. Beer costs 1s. 7d.—

Mr. Nabarro

It depends on how strong it is.

Sir W. Darling

—the tax on which is 8½d. Under a system of tax-paying which abolished the Inland Revenue and Customs and Excise. I would pay 10d. for my beer.

Mr. Follick

Five cents.

Sir W. Darling

Every other commodity would be in the same category. The elaborate, costly system of putting in Income Tax returns, the registration, collection, and so on, the expense of lawyers and chartered accountants, would all go by the board under this method. There would be only one figure. Everyone with £500 a year or more would register with a bank. I would have two accounts. One would be for Darling only and the other would be for Darling-Butler. If I get £100, I pay £99 into my own account and £1 into the Darling-Butler account.

Mr. Follick

On a point of order. Is this argument any more in order than my argument was, Mr. Deputy-Speaker?

Mr. Deputy-Speaker

I think it is getting out of order, but the hon. Member for Edinburgh, South (Sir W. Darling) has not had quite as long as did the hon. Member.

Sir W. Darling

I agree, Mr. Deputy-Speaker, that my argument is not as remote as that of the hon. Gentleman. I am basing it on Clause 13 of the Bill, where you will see that Income Tax for 1954–55 shall be charged at a particular rate. I am arguing that it need not be charged at any such rate. I am arguing that it is possible, if the Chancellor is ready and is prepared to act up to what he has said, to make a reduction in public expenditure by a change of policy. This is a revolutionary policy which I am recommending; and if it wants any support from the other side of the House, I will tell hon. Members opposite that it is the policy that is followed in the Soviet Union, because in the Soviet Union there can be no profits. They are not allowed to be made. Profiteers are wiped out.

This is a revolutionary proposal, I agree, and it is only on occasions like this that one can recommend it. I am as far off its realisation as the hon. Member for Lougborough is from the realisation of the duodenal system, or was it duodecimal? I seriously commend it to my right hon. Friend as an alternative to what is the admittedly heavy and punitive taxation of Customs and Excise and the Inland Revenue.

I know that there is an apprehensive look on the faces of those who think that they may follow me, but I am not finished yet. I want to make some observations, on Clause 13, about the diversification of Income Tax. This Clause lays down that the standard rate of Income Tax shall be 9s. in the £. That, of course, is universal for Great Britain and Northern Ireland, but I suggest to the Chancellor that there is something to be said for diversification. In the Isle of Man it is 5s. in the £ and in Jersey, 4s.

Has my right hon. Friend considered another change of policy in place of the expensive policy of subsidising distressed areas and new towns? Has he considered having a standard rate of Income Tax for the rest of the country, but not north of the Highland line? The effect of that would be to encourage industry to go there and persons who so desired to go to live there. That would save an enormous amount of money, running into millions of pounds, in the development artificially of places which should be allowed to die or to function on their own resources. My right hon. Friend agrees that there ought to be public economy and he has recognised that it is only by a change of policy that we can secure that economy, and this is another suggestion that I make to him.

My hon. Friend the Member for Horsham (Mr. Gough) has already referred to the next point that I want to make in relation to Estate Duty. I have to confess that this is a matter in which I am severely and personally affected. When one reaches my time of life one feels that life has been a little futile and one wants to leave behind something by which those who have been associated with one may remember. That being so, some years ago I tried to set aside part of my estate for the benefit of relatives and others but my right hon. Friend, in the Clause dealing with aggregation, has struck out this generous instinct on my part.

The example was given by the Financial Secretary of a gentleman—and he would be a gentleman—who provided, for 50 widows, 50 single policies of £1,000 each. This, I regret to say was looked upon as somewhat discreditable. My hon. Friend the Financial Secretary thought that this practice was being abused. Is he right? Is it right to discourage saving in any form? Is saving such a common and unnecessary virtue that we should go out of our way to make it more difficult for those who are making provision honestly from savings or earnings month by month not for a wicked project, not to maintain some immoral or improper thing, but for the benefit of a widow or children?

Does my hon. Friend think chat this yielding to the almost paranoic passion of the Opposition for pursuing rich men is quite worthy? Is he not doing a real disservice to the national economy by discouraging in any way whatsoever the rather rare but most important desire for thrift? I think that my hon. Friend is wrong. I remember reading a passage in St. Paul's First Epistle to Timothy, which I recommend to the Godless in this Chamber, where it is stated: But if any provide not for his own, and specially for those of his own house, he hath denied the faith, and is worse than an infidel. I hope that the Chancellor will change his policy in this respect and give effect to my faith.

6.15 p.m.

Mr. W. A. Wilkins (Bristol, South)

The House has come to expect a rather light-hearted contribution from the hon. Member for Edinburgh, South (Sir W. Darling), and I certainly do not intend to follow him. I want to detain the House for a few minutes on one specific and rather serious point. I listened to the opening speeches of the Financial Secretary and of my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) and, not being a financier or economist, I was left in rather a maze by the time both had finished their orations.

I want to put before the House what I believe to be a very human problem. I shall have to retail a story so that the background of what I have in mind shall be more readily understood. I have been a Member of Parliament for nine years and I have never heard this point discussed in the House, although I am advised that it has been within the considerations of the Treasury from time to time when the Finance Bill was being prepared. I make the details of my story rather vague so that the identity of the person concerned cannot be established.

Some time go I met in the street a man whom I knew had been recently bereaved. Before her death his wife had been in and out of hospital many, many times. She had had a number of serious operations and had been left completely paralysed from the waist down. There was a tremendous struggle to maintain the work of the home. At that time there was a very young child who is now only 15 years of age and has just started work.

I said to the man, "I am very sorry to hear about your bereavement. How are you getting on?" He then told me something which made me think very seriously about the problems of people who find themselves in circumstances such as his. This man had to the uttermost fulfilled his marriage vows. He had loved and cherished his wife and he had fulfilled completely the duties required of him. He had nursed her and cared for her and wheeled her about for many years. He said, "Now I am in the position of being taxed as a single man." He has a house on which the mortgage still continues and he has the assistance of a woman to do a little work. His daughter, who is only 15, manages the house after she returns from work each evening. He said, "I shall have to sell my house and go into lodgings, because I cannot keep up my family commitments on a single man's taxable income."

the man did not think for one moment when he spoke to me that this was something in which I should become interested and would bring to the notice of this House. Here is something which we should think about. This was the first married home of this man and his wife. He had lived there through some very difficult times. It is a good home and he does not want to part with it. He wants to stay there and bring up his child there and I think that it is a reasonable assumption that he wants neither a housekeeper nor another wife. Yet he will have to contemplate the possibility of selling the home and living somewhere else.

I am told that the Treasury find it difficult to define the difference between the responsibilities of the bachelor and those of a man in the circumstances that I have quoted who is still a householder but, nevertheless, is regarded as a single man. I know it may be suggested that some adjustment is made with regard to the wife's allowance. The wife has gone and the marriage allowance dies with her, but I do hope that we may have an opportunity of talking about this matter again during the Committee stage.

I do not subscribe to any idea that it is beyond the wit of the Treasury officials or the Inland Revenue to devise some means by which some sort of equity might be brought about in a case like this. It might be possible to give consideration to an allowance for a widower who continues with his own home and makes no claim to the housekeeper allowance because he does not employ a housekeeper. I am only suggesting something for the purpose of argument. For consideration, it might perhaps be half the present marriage allowance for the wife.

I should like to have said much more about my favourite theme of football, but I wanted to make this one point for the consideration of the Financial Secretary. I am sure that, whatever happens, he will give this question consideration as he has considered suggestions made to him on other occasions, and, if it is possible to offer some alleviation in such a case, I hope he will do so. I should feel very hurt if this man had to go out of his house. He had no intention whatever of putting thoughts in my mind for ventilation in the House of Commons. That is the strength of our democracy, that such problems can be ventilated here.

6.22 p.m.

Mr. J. B. Godber (Grantham)

I am sure that all hon. Members have listened with sympathy and respect to the very calm and reasoned way in which the hon. Member for Bristol, South (Mr. Wilkins) has put his case. I have had similar problems brought by constituents and it seems that extremely hard cases like these are not at present covered. I know the difficulties of the Treasury in this matter, but I certainly support what the hon. Member has said in this case.

The hon. Member certainly brought the debate back to some sense of reality after the rather enjoyable exchanges we had between the two hon. Members who spoke earlier. I see that one of those hon. Members, my hon. Friend the hon. Member for Edinburgh, South (Sir W. Darling) is still here, but the hon. Member for Loughborough (Mr. Follick) has left the Chamber. I was interested in the points he raised about the decimal system and the encouragement its use might give to our overseas trade. That may be a debatable point, but it struck me forcibly that hon. Members of the party opposite should be advocating some means of improving our financial system by some arithmetical process rather than the methods followed by the party on this side of the House of regaining some feeling of security in the £ sterling. What has happened in the last two and a half years is that the £ sterling has come to be respected in the markets of the world. That is what matters, however interesting the theories of the hon. Member for Loughborough might be.

There is some advantage in having failed to have caught the eye of the Chairman of Ways and Means in the Budget debate and having a little more time in which to assess the effect of and reaction to the Budget and to make comments on that. I have been very much impressed, particularly in the Chamber this afternoon, by seeing how very weak has been the opposition of hon. Members opposite to the Budget proposals as embodied in this Bill. That shows that the Budget was a very good Budget, in spite of all the condemnations we heard of it as being so dull. I sometimes feel that there is a misunderstanding about continuing a defined position, as this Budget did. When we have a good position, why change it? The suggestion that we should do so seems to be the fallacy in the remarks made by hon. Members opposite in the Budget debate. One gets mixed up, as I always used to do at school when I attempted to do elementary calculus and got mixed up between velocity and acceleration. If we achieve the right velocity, there is no point in achieving an additional amount of acceleration which might upset it. From that point of view we might well continue with the level achieved in last year's Budget when it can be seen what real benefits have flowed from it.

One thing I must say in criticism, which has been mentioned by many hon. Members on both sides of the House, is on the question of the old-age pensioners. I cannot let that go by without registering my regret at the fact that the Chancellor could not find himself able to do something at this time for the old-age pensioners. I studied very closely what my right hon. Friend said in his closing remarks in the Budget debate, and I sincerely hope that we shall have something for these people before the year is out. This is a special case and one which needs special treatment. I do not give so much credence to the demands from the party opposite for something to be done, because when they were in office and gave an increase, it was quickly overtaken by the rise in the cost of living and did not help very much.

Mr. Wilkins

May I remind the hon. Member that the first increase was approximately 150 per cent.?

Mr. Godber

That may be so, but I am fortified in my remarks by what the right hon. Member for Leeds, South (Mr. Gaitskell) said in the debate on the Budget on Wednesday, 7th April. He said: We put up the pensions in 1951 and I fully admit that even before the necessary Bill, which takes time to pass, had come into force, the rise in prices had gone beyond them, so that they were no longer back at the 1946 value.—[OFFICIAL REPORT, 7th April, 1954; Vol. 526, c. 382.] The rise in the cost of living was so rapid at that time that the increases the Labour Government gave were of little effect. What my right hon. Friend has sought to do is to stabilise the cost of living and then improve the position, as I hope he will be able to do during the current year.

I wish to make a passing comment about a very small matter which evoked a lot of hilarity during the Budget debate —Clause 2, which refers to the duty on chicory. I think the concession got less praise than it deserved. It may be a very small thing in itself, but, as my right hon. Friend said this afternoon, it was the final step in implementing the promises which ad been made to give some additional safeguard to home horticulture. I must confess some slight interest here because I am a horticulturist, although not a chicory grower. In the six years in which hon. Members opposite were in power we had many promises of what they would do to assist horticulture, but very little action. I know that the industry will benefit very much from the steps taken by the President of the Board of Trade, the cycle of which has been completed by this operation. I think that the step which has been taken should be commended.

My hon. Friend the Member for Leominster (Mr. Baldwin) raised various important points regarding agriculture, and I do not wish again to go over the ground which he covered, and covered adequately, except to reinforce his remarks about an alternative source for the Exchequer guarantees to agriculture. I consider it important that the Chancellor should look once more, as I have previously urged him in this House to do, at the provisions of the Wheat Act before the war, at least as one way of finding some source for safeguarding the financial aspect of the guarantees to agriculture.

My right hon. Friend has given a pledge, as the Government have done collectively, that the agricultural community shall be maintained, and I accept that pledge, but I believe it will be of help in the future if we could have a reversion to the type of financial implementation of that policy such as occurred under the Wheat Act. I beg my right hon. Friend to look at that point again. I am merely trying to assist him in raising revenue, and I am sure that any Chancellor should be grateful for that.

I wish to turn briefly to one aspect of the economic situation of this country which did not seem to get any notice in the earlier Budget debate. I have today been indulging in a little light reading by reading the speeches of the right hon. Member for Leeds, South in the Budget debates of the last four years. Most of it was rather depressing reading, but the encouraging feature was that all his prognostications seemed to be proved wrong in each succeeding year, however dismal they were, except in the first of those four years—1951—when he introduced the Budget himself. Then they proved to be dismally right.

In looking through his speech last year, I find a large number of columns of HANSARD occupied by the right hon. Gentleman's discussion of the position of manpower. He very much deplored the change in the manpower situation whereby a large number of employees had shifted from the manufacturing industries, whereas there had been an increase in employment in the distributive industries. The right hon. Gentleman deplored that very much, and said it was all the fault of the Chancellor, as, in his view, many other things were. Strangely enough, this year I see, looking at the Economic Survey, that the whole position has been completely transformed; yet the right hon. Member for Leeds, South did not make any comment on it in his speech.

Let me remind the House that, according to the Economic Survey, during the past year there was an increase of employed persons in manufacturing industries of 234,000, an extremely satisfactory result, I should have thought, far outweighing the decrease that took place in the previous 12 months. If the manpower position was worthy of mention last year, I should have thought it at least worthy of a passing reference this year. I can understand why the right hon. Gentleman did not wish to mention it, because he said that last year's Budget would not produce that result at all, and he was wrong.

It is important not only to get manpower into the right industries; if we are really to make progress in our export markets it is also important that that manpower should be used in the most efficient way possible. We have to meet the challenge to our exports which always exists—and today is the day on which the British Industries Fair is opening. So much depends on our exports that we must watch the position not only of manpower but of the production of that manpower, and indeed the productivity of those industries which are engaged in the export market.

I hope that we shall continue to give all the assistance and encouragement in our power to the British Productivity Council, which I believe is doing so much good in this field. I should like to see some further encouragement given to it in any way possible so that our exports can continue to compete successfully in the markets of the world. After all, all the hopes that have been put forward for the old-age pensioners, for example, rest on very little if we cannot maintain our way there. We cannot maintain an adequate pension for old-age pensioners, and indeed assistance to many of our social services, if we lose our export markets and have mass unemployment. It is really the first essential that we should have that efficiency and productivity if anything else is to matter.

I turn to the question of post-war credits, which has been touched upon by a number of speakers today already. I make no apology for referring to it again because the question of repayment is rather an intricate business. As one hon. Member opposite has said, it is the duty of the Government at some stage or other to see that post-war credits are repaid. I cannot accept some of the suggestions put forward, I think by the right hon. and learned Member for Neepsend (Sir F. Soskice), who suggested that the Chancellor could afford to repay all the first year's post-war credits in one block.

I appreciate the step which is now being taken for the repayment of postwar credits in certain cases to the relatives of those who have died, but in my view that does not really meet the most needy cases—those who are getting near the age at which repayment is made. Those people, largely those from 60 to 65 years old, are in so many cases the people who need the money most. I would rather have seen those people get repayment than the relatives of those who have died. I do not see how really we are helping a holder of a post-war credit once he is dead.

I realise that the step which is being taken may be necessary to clear the decks, as it were, for further action. I hope and pray that next year we shall have a determined effort to try to bring down the age level at which post-war credits are paid. I agree that it must be done gradually, by degrees, but I should like to see a start made. I believe that those cases are the most pressing. I look on this matter purely as a means of alleviating hardship. When a man has a post-war credit to his name and is in great difficulty, it seems extremely hard that he is unable to get the benefit of it. I beg the Chancellor to review this matter again and see whether he cannot do something in that respect next year, if not this year.

All in all, this Budget, however dull it may be, is a thoroughly good one, and I believe it will be shown to be so in the country in the ensuing months. I should like to congratulate my right hon. Friend; and, reverting in my last few words to the old-age pensioners, I would say that if he can do something to help them he will have dealt with the whole field extremely well.

6.39 p.m.

Mr. Douglas Houghton (Sowerby)

I welcome the reference which the hon. Member for Grantham (Mr. Godber) has made to the British Productivity Council. I am sure that he would not wish to leave the House or the country under the impression that the work of that body and its membership is confined to his hon. Friends and to the employing side of industry.

Mr. Godber


Mr. Houghton

I will make at once the point that Mr. Tom Williamson, a prominent trade union leader, is Chairman of the Productivity Council, and that the work of the Council receives the active co-operation as well as the warm support of the whole trade union movement.

I was not in such agreement with the hon. Member's reference to our attack on this Budget. He seems to have rather a poor opinion of our attack on it. I suggest to him that the attack on this Budget from this side of the House was made in the speeches made from this side of the House on last year's Budget. That is where the criticism of this year's Budget can be found.

Mr. Godber

I am so glad to hear the hon. Member say that, because I found the speeches on last year's Budget mainly critical of the Budget of the year before. Hon. Members opposite cannot really have it in both directions; they can only have it one way or the other.

Mr. Houghton

Our criticism is of the financial and economic policy of the Government as a whole, and naturally we have to look at each Budget as an instalment in the general strategy of the party opposite in the economic affairs of the nation.

When the hon. Member for Grantham pleads for something for the old-age pensioners, he must realise that the reason the Chancellor has been unable to do more—or anything at all—this year for the old-age pensioners is that he gave it all to the Income Tax-payers last year. At all events, we can see this year's Budget more clearly in the context of what the Chancellor did last year. He wanted to give industry a boost last year and so he made substantial reductions in company and personal taxation. He was hopeful that out of it a new spirit of enthusiasm and adventure would spread throughout the land, and that we would forge ahead. This House has many times listened with admiration to the moving terms in which the right hon. Gentleman can expound that theme.

Last year the Chancellor certainly gave a boost to consumer spending. He certainly gave a boost to higher production for consumer use. But he did not give anything like such a boost to exports, and he gave still less of a boost to industrial investment. So notwithstanding the limitations by which he is handicapped this year, he must squeeze something out of the Budget for industrial investment, because he says he must give such an incentive.

The incentive was given last year, if only industry had taken it. My hon. Friends and I wish to know where the Chancellor will stop in this giving of incentives to a laggardly and undutiful private industry. What he has done this year, as I said in the speech which I was privileged to make during the Budget debate, is to use Income Tax for a quite revolutionary purpose.

The Financial Secretary was at pains to assert that this new investment allowance is not a subsidy, it is a tax relief. I appreciate the anxiety of the right hon. Gentleman to avoid allegations in other lands that we are subsidising industry, and therefore subsidising our export prices. But let us be frank with each other in this House, even at the risk of some misinterpretation overseas. If we give a depreciation allowance which exceeds the amount spent, then surely the excess represents something more than a tax relief. This year the Chancellor has given an additional depreciation allowance on plant and equipment over the 100 per cent. expenditure of 20 per cent., and for buildings of 10 per cent.

Once having gone over the 100 per cent. expenditure, by which I mean the allowance on that expenditure, the amount that can henceforth be allowed for depreciation is just as long as the Chancellor's foot. Why stop at 120 per cent.? He could make it 130 per cent., 140 per cent.—200 per cent. If the Chancellor says that private industry is not responding to these annual boosts, and that he must go on with the incentive, he can continue giving away the taxpayers' money in depreciation allowances as incentives to industry to invest what should be invested as a matter of business prudence and national duty.

Mr. Nabarro

May I ask the hon. Member—

Mr. Houghton

I am sure the hon. Member for Kidderminster (Mr. Nabarro) will have an opportunity of putting his point of view. I do not wish to detain the House unduly, and I have a few things I wish to say.

When this grant or allowance is made, it might be open to misuse by Chancellors of the Exchequer—if I may use that term without disrespect—because they could use a fiscal device for a purpose which is not the purpose of taxation. I noticed that in the "Financial Times "Mr. Roy Harrod, although giving a generally favourable verdict on the Budget by saying that it is a wise Budget, said: Some objection to this recipe should be stated frankly. It involves a hand-out at the expense of the taxpayer. He went on: If one is to use public money to secure an objective which is nationally important, it should be arranged to have the benefit concentrated at the points where it will have the desired result. In the present instance the objective is to stimulate laggard or overcautious firms to make capital outlay that will reduce production costs. Surely Mr. Harrod is right in saying that if that is the objective then a different method should be employed to achieve it.

Following Mr. Roy Harrod's article in the "Financial Times," there were a number of letters joining in the argument as to whether or not this additional allowance is a subsidy. One correspondent suggested that this was only a kind of instalment towards revalorisation of the capital value of assets. I hope the House will read carefully what the Millard-Tucker Committee had to say on the subject in paragraphs 94 onwards in its First Report.

The Committee rejected revalorisation. It rejected the doctrine of having a depreciation allowance to meet the higher cost of replacement instead of a depreciation allowance limited to the value of the historical cost of the equipment. It had a positive proposal to make, which hon. Gentlemen opposite will find in paragraph 124, which goes some way, surely, to meeting the criticism of this allowance made by Mr. Roy Harrod when giving his own recipe for the situation.

Hon. Members will notice that the Millard-Tucker Committee never suggested allowing more than 100 per cent. of the cost of new plant and equipment or of industrial buildings. It limited its consideration to the use of the initial allowance. The hon. Member for Orkney and Shetland (Mr. Grimond) has already referred to the more revolutionary proposition of Mr. Roy Harrod in that regard, that of allowing industry to choose its own basis of depreciation. But in paragraph 124 the Millard-Tucker Committee recommended that a minimum rate of initial allowance should be prescribed; that any association which represents a particular industry should be entitled to apply for a rate of initial allowance in excess of the minimum; and that the authority responsible for determining these applications should be entitled to take into account both the price level of the plant and machinery in question and also the importance of the particular industry to the national economy. In order to put this admittedly difficult job into reasonably competent hands the Committee suggested that it should not rest with the Revenue but that it should be handed over to a special committee, on the lines of the Capital Issues Committee, to consider applications under that recommendation. Difficult as undoubtedly that would be, surely it would be more sensible than determining an allowance over the whole field of capital investment, whether nationally important or not. A new ice-cream mixer in an ice-cream business is capital equipment just as is the installation of the latest machine tool to help us in our export drive. There is no discrimination between the useful and the useless capital equipment in this connection.

One of my hon. Friends asked what this would cost eventually. We do not know what it will cost eventually because we do not know the rate and the total of capital investment, but in general terms it surely means that the cost will be equivalent to tax on one-fifth of national capital formation in this field. That is what it is bound to be, and if that is not a subsidy I really do not know what is. In Committee we shall have to subject this proposal to a closer examination and criticism. It is a revolutionary proposal and, as it has been made for the first time, we want to know where it may lead us and whether this is the only way, or even the most desirable way, of providing this additional incentive to capital investment. As to whether it will be effective, only time can tell.

I see that another writer on financial and industrial affairs, Mr. Harold Wincott, says that he doubts whether this kind of boost for industrial investment will be effective. He has another remedy. He says that we must work our plant harder, we must wear it out quicker and replace it sooner; but his proposals involve double-shift working and probably working round the clock in certain types of industry. He is quite right when he says that that would require the very close consideration of the trade unions and would project the whole subject into a much wider economic content. However, we may have to work our machines harder, wear them out quicker and replace them sooner if we are to compete in world markets. I do not think that this distribution of incentive over the whole field without any regard to the worth of it will be the effective way of meeting the challenge.

In what I said during the debate on the Budget statement I referred to the Chancellor's proposals about post-war credits. I have been looking at the various alternatives which were not only mentioned but costed when my hon. Friend the Member for Southampton, Itchen (Mr. Morley) asked some Questions on 6th December, 1951. I notice that what the Chancellor has now proposed is the last in the list, the least favourable and the least costly of all the proposals examined In the reply given by the Financial Secretary to the Treasury.

My right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) asked what it would cost to repay the first year's post-war credits all at once. The answer, given in response to the Questions to which I have referred, was that it would cost £107 million to repay the first year, 1941–42. That may be a large sum to repay all at once, even though the expenditure is below the line, but our main criticism of the Chancellor in this connection is that he leaves the major decisions still unsettled. He has really evaded the main issue. People are looking for some programme—something that they can reckon on.

When will post-war credits be repaid? There have been many suggestions. Some people would be quite happy if the Chancellor would say, "I will stick to existing arrangements but I will add interest on credits year by year." Others, however, would not be satisfied with that. There are many suggestions which no doubt the Chancellor has considered.

There seems to be a growing opinion in favour of making post-war credits negotiable, which, of course, would not cost the Treasury one penny, but we should have to look closely at what might be the consequences of making them negotiable. Where would the discount brokers come into the operation? Would people who were in need of ready cash be tempted to sell their post-war credits for very much below their face value? It might be possible to introduce safeguards to ensure that proper prices were paid if post-war credits were negotiable.

However, I do not advocate that as the solution. I merely suggest to the Chancellor that accelerated repayment, adding interest, making the credits negotiable, conversion into voluntary saving and any other ideas, good and bad, which may be expressed, must leave the Chancellor under the impression that he cannot leave aside very much longer a major decision on this issue.

In response to an intervention I made when he was speaking, the Financial Secretary removed one point of some doubt, which has been put to me from different quarters, about whether the new arrangements were an extension of existing arrangements for repayment or whether they were in substitution for them. I am sure that we are all glad to know that the new arrangements extend the existing provision and no one will be worse off. They can only be better off under the Bill, and that is very welcome.

With regard to Clause 16, where the Chancellor proposes to check the abuse of the cessation provisions in order to get the benefit of taxation on the current year's profits instead of the previous year's, I think that when the Chancellor closes a gap like this he ought to reveal the extent of the ravages of the evaders. We ought to know how many millions had to go down the drain before the right hon. Gentleman decided to do something about it. Last year he said that he was watching the position closely and, if need be, he would act. Now he has acted.

I wonder whether it is not a case of closing the stable door after the horse has gone. We know that the crop of these transactions came at a time of falling profit when companies wished to get the advantage of paying taxes on the current year's profits which were considerably lower, and in many cases very much lower, than the profits of the preceding year.

The Millard - Tucker Committee discussed in its First Report whether to alter the base year for taxation purposes. There is a great deal to be said, from many points of view, for trying to get tax on current year's profits and not on the preceding year's. That would have got rid of all this racket that has been going on in the manipulation of the cessation provisions.

Finally, I wish to say something about Clause 25, which contains the main Estate Duty concession. Here I think that the Chancellor should have told the House something of his reasons for setting aside the conclusions reached in the White Paper, Cmd. 8295, published in July, 1951, when the Inland Revenue, at the request of the then Chancellor, undertook some researches into the matter. In his Budget statement the Chancellor said: … I think that business assets are a type of property on which the Estate Duty can bear with special severity, particularly in the case of family businesses, whose traditional activities mean so much for the stability of our social and industrial life. He went on: This is a reform which hon. Members have often pressed on me in Finance Bill debates."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 223.] With great respect, I think we expected a little more from the Chancellor after the White Paper had been published reaching these conclusions. In face of this White Paper, we expected to hear more reasons from him for giving the concession than merely the statement, This is a reform which hon. Members have often pressed on me…. We are all pressing things on the Chancellor at different times, but he does not give way in every case. He does not litter his Budget statement with concessions given because hon. Members have pressed for them. Indeed, generally he gives abundant reasons why he cannot give concessions for which hon. Members have pressed.

But this concession he seemed to toss away lightly; he gave it away because hon. Members had pressed for it and he did not even refer to the fact—as far as I can see from reading his speech—that he had a White Paper standing very much against the concession which he proposed to make. We shall certainly have to examine this matter more closely in Committee.

There is no limit on the concession to be made. It is compared with a concession already given in the case of agricultural land, but surely there is an important distinction between the capital value of agricultural land in relation to the yield of income and the capital value of industrial estates and their yield of income. One of the reasons for this concession in the case of agricultural land, so I have always understood, is that generally the income from agricultural land is disproportionately small in relation to the capital valuation of the land. We all know the reason for that. After in many cases having undertaken good estate management over many years, kept rents low and allowed farmers to reap considerable profits on rentals which were quite uneconomic to many landlords, it bore hardly on the estate if Estate Duty were charged on the full valuation of that agricultural land, in all cases not based on rental value but on realisable value.

The position is quite different in the case of industrial estates, where the yield is generally greater and is usually more responsive to the investment than in the case of agricultural land. I do not think the Chancellor or the Financial Secretary can ride away on the comparison with agricultural land by saying, "Well, we gave it to agricultural land; this is very much the same thing, and that provides the justification for the concession."

May not this become a racket? May not this provide restraint on some businesses, acting against expansion and against conversion into a public company which might be necessary in order to get the additional capital required for the expansion of the firm or business? There will be a vested interest in keeping the business in the control of the proprietor, and that may not be a good thing.

I know that some people say that when provision has to be made for Estate Duty in the case of these businesses, very often it is damaging to the interest of the business long before the death of the proprietor; but that cannot be so in many cases. The prudent business man must have a reasonable expectation of dying one day, and he ought to make provision for it. He ought to assume that it is coming sooner rather than later, because usually people who expect to live long die young. There are ways and means which are quite unobjectionable under the existing law for provision to be made against this event. I sincerely hope that the Chancellor will be ready to reconsider some limitation on the concession, which I think he has too freely given.

I appeal to the Chancellor to bring into the Finance Bill some of the smaller and more immediately practicable recommendations of the Radcliffe Commission on personal taxation. I will simply refer hon. Members to page 70 of the Second Report of the Radcliffe Commission where they will see proposals about the position of apprentices on child allowances, the tapering of child allowances where the income is just beyond the £85 mark and other quite small changes, on matters which bear hardly in particular cases, to which effect could now be given.

The right hon. Gentleman will remember that when we pressed these matters in Committee debates during the last two years, the stock answer was, "Let us await the Report of the Royal Commission." Now he has the Report. What is he waiting for? I agree that he will need time to consider some of the more drastic changes in the Report, but a number of these changes could be made at very small cost indeed and they would remove hardship in many cases. My hon. Friend the Member for Bristol, South (Mr. Wilkins), who made a moving contribution a few moments ago, was talking of a case which falls to be dealt with under this review of personal allowances. The Radcliffe Commission has recommendations to make about the housekeeper allowance, some of which are favourable and some of which are not, and we may have to balance them later, but some of these recommended changes could undoubtedly be made without further ado, and I sincerely hope that the Chancellor will make it possible for us to give consideration to those small changes which it would be a pity to leave for another year.

7.8 p.m.

Major D. McCallum (Argyll)

I intervene in the debate for only a few minutes, because in the normal course of events I would not dream of trying to cross swords with any of the financial and economic pundits of the House. There are, however, two points in the speech of the hon. Member for Sowerby (Mr. Houghton) to which I wish to refer. Towards the end of his remarks he referred to the Chancellor's concession on Estate Duty on family businesses. Since the Budget debate I have been in towns in my constituency and have been approached by owners and members of families running family businesses—which are vital to us, especially in the Highlands of Scotland—who have universally said that they are very glad that at last a Chancellor of the Exchequer has seen his way to do something to try to ensure the continuation of these businesses.

The hon. Member for Sowerby began his speech on a line which has been adapted by the Opposition generally during the Budget debates—that last year's Budget was a failure and, therefore, this Budget is likely to be a failure, too. I have relatives living abroad in hard currency areas, and all of them have been telling me, in correspondence and on visits to this country, how remarkable has been the growth in the confidence in the £ sterling in the last year or two. That confidence must have grown for some reason, and presumably the financial policy of the Government and the Chancellor's budgeting has lead to it. I cannot believe that the criticism of the Opposition led to confidence in sterling.

I should like to raise this point with the Chancellor. I hope he will forgive me if I press this matter again, for this is one of the few opportunities I have of doing so. A few weeks ago I led a deputation to see the Financial Secretary—a deputation of a number of Highland gentlemen who were pleading the case of the Highland Games and the great burden which the Entertainments Duty imposes on those Games. It is quite true that we did not receive much sympathy from the Financial Secretary, but now that we have the Chancellor here, I want to remind him that he knows about these Highland Games, because I have met him at some of them, particularly some of the small ones, about which I want to speak tonight.

The Chancellor knows that there is a village in my constituency called Taynuilt, and I want to tell him that I was approached last week by the committee which organises these Games to ask whether there is any possibility of the Entertainments Duty being reduced, even if it cannot be abolished, so that these Games may be held this year. If not, and if they have to pay the full increased duty this year, these Games will have to go by the board, because the committee cannot afford it. I know that my right hon. Friend understands the point that I am making about these small villages.

I have also been approached by the organisers of the bigger Games such as are held at Oban, Braemar, Aboyne, and other places, which are social and cultural events in our Highland life. We feel very strongly about this matter, because the Chancellor last year gave exemption or some concession to amateur athletics and cricket, and many hon. Members hoped that he would extend it to football as well. However, I am only pleading for a very small section of the community, and I am informed that the total cost of this concession will be £6,000, which is not very much, but will enable these Games to be carried on, particularly in the smaller centres like Taynuilt, Tobermory, Fort William, and so on.

Mr. Nabarro

Is my hon. and gallant Friend aware that, if he arranges with the organisers to incorporate a cricket match in the games, they would be free of Entertainments Duty altogether?

Major McCallum

It is not as easy as that. In fact, in what are called the Argyllshire games at Oban, there are included amateur athletics, Highland dancing and Highland piping. Probably many hon. Members of this House would not enjoy Highland piping, but it is part of the cultural life of the Highlands. In some of these Games, the piping competition takes place on a separate day, and, because it is described as being cultural, it secures exemption, while, at other Games in another part of my constituency, at Dunoon, the piping takes place while the athletic events are going on, and in that case it is not described as cultural and has to pay Entertainments Duty.

The whole thing is such an anomaly, and its removal involves such a very small cost, that I beg my right hon. Friend to do something this year for these small Highland Games, and so earn the gratitude, at least, of the village of Taynuilt.

7.13 p.m.

Mr. Roy Jenkins (Birmingham, Stetchford)

I am even more diffident about joining issue with the hon. and gallant Member for Argyll (Major McCallum) on the subject of the Highland Games than he himself modestly said he would be on economic and financial matters, but it is not impossible that during the Committee stage there will be an Amendment submitted from this side which the hon. and gallant Gentleman will have the opportunity of supporting and which will certainly cover the point he has just made.

Major McCallum

There will also certainly be an Amendment submitted from this side of the House.

Mr. Jenkins

We are glad to hear that, and we only wonder whether the Amendment to be submitted from that side will be carried to a Division.

I want to make one or two comments on what was said by the hon. and gallant Gentleman, but before doing so I wish to turn briefly to the very entertaining speech delivered by his fellow-Scotsman, the hon. Member for Edinburgh, South (Sir W. Darling), who told us that he was going to put a revolutionary proposal before the Chancellor. Indeed, the hon. Gentleman did so, and he told us that the solution of all our fiscal problems was to abolish the Income Tax and Excise Duties and substitute in their place a turnover tax or sales tax—I forget which he called it. I know that this idea is an old favourite of the hon. Gentleman, and one about which he has been thinking for some time, and I was glad to hear him deploy it in the House, though it seemed to me that part of his argument was difficult to follow.

I understood the hon. Gentleman to say that a 1 per cent. tax of this kind would result in a yield of £10,000 million, and I wondered how he estimated that yield. If it is correct, it means that the annual turnover is 100 times £10,000 million, which, if my arithmetic is right, is £1,000,000 million.

Sir W. Darling

The hon. Gentleman will appreciate that in my proposal the tax would begin at every level. For instance, the tax would be paid on mined copper, refined copper, copper in strip, copper in bars and copper in certain machinery. It would operate at every level in every transaction.

Mr. Jenkins

It is a little difficult to grasp all the implications of this proposal, but if, with a national income of £14,000 million, a tax revenue of £10,000 million will be produced, it seems to me to be a tax that would be fairly heavy in its total incidence, wherever it fell individually. I am not sure whether the hon. Gentleman himself was aware of its full effects. Even if he could satisfy himself as far as the amount of money is concerned, there would still be the enormous disadvantage that it would mean that we were not only going back to a proportional tax, as opposed to a progressive tax—as was the position with Income Tax throughout the 19th century, when it was proportional and not in any way progressive—but that this proposal would be more the other way than a proportional tax, and presumably the well-to-do, who would save more, would pay a smaller proportion of their income than would be the case with the rest.

It would not only have the effect of completely undoing all the egalitarian effects of our present taxation, but, if carried out, would have a most stultifying effect upon our whole economy, because almost all living economic thinkers, with the possible exception of the hon. Member for Edinburgh, South, take the view that a measure of redistribution of income is needed to keep the wheels of our economy actively going. If that were not so, the level of demand would not be sufficient and we would have considerable unemployment.

Sir W. Darling

In the U.S.S.R. the wheels of economic activity are kept going pretty well, or so we are informed, and they have that system of taxation there.

Mr. Jenkins

If the hon. Member is proposing to implement his fiscal proposals with the proposal that we should have the economic and political system of the U.S.S.R., I find it even more surprising, and in some ways even more objectionable, than are the former standing on their own.

I want to say a word further about the investment allowance. I think the Financial Secretary made an important point when he said that it was important not to refer to it too freely as a subsidy, because there are many people outside who would say that this was a subsidy to industry and use that as an excuse for certain practices far less desirable and more reprehensible than these allowances.

It is deplorable that the level of investment in private industry is such that it is necessary to contemplate a device of this sort which, if it is not a subsidy, is a very substantial relief of taxation. In view of the investment record in the last year or so, I will not turn my face against any measure which might be designed to produce a stimulus to investment, but it is a pity that the device has not been made more selective.

A point of difficulty which was touched on by my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) is that this proposal will not help a great number of companies, and particularly the smaller companies which might be short of finance even though the generality of companies are not. We hear a lot about these small companies in connection with Estate Duty on family businesses. They will not be helped in any way by the investment allowance to have extra cash, whereas an initial allowance of 40 per cent. would have helped them in that way.

I fully admit that, in the case of many bigger companies and the more established public companies, finance, as the overall figures show, is no particular obstacle to investment. The investment allowance will give them added incentive in that direction. In the case of a com- pany which is held up by shortage of finance and not by a lack of desire to invest, the investment allowance will not help in any way, whereas increased initial allowances would have done so.

On the subject of Estate Duty upon family businesses, the Financial Secretary presented a closely-knit argument to which I listened with great interest. He would have done more to meet our objections if he had not taken it as axiomatic that it was absolutely right to preserve family businesses. I would not be prepared to accept that.

Mr. Osborne

Why not?

Mr. Jenkins

It is no good the hon. Member for Louth (Mr. Osborne) asking "Why not?" in that shocked way, as though it followed that it was the duty of anyone with the interests of this country's economy at heart to say that we must preserve family businesses at all costs.

Mr. Osborne

It happens that I have had a lot to do with running family businesses, so I am talking not from books but from experience. Family businesses are usually not large units, so the men who run them know the people who are working for them. Between the directors of the family business and the people employed there is a contact which we never get in the large-scale big business. Therefore, from the social and from the national point of view it is in the highest interests of the nation that we should keep family businesses together.

Mr. Jenkins

That is an argument in favour of the small business rather than in favour of the family business. One of the arguments presented today is that the damage done to family businesses by the existing state of affairs is not so much that the business breaks up when the owner dies, as that it prevents it from growing rapidly while the owner is still alive. Hon. Gentlemen opposite cannot have it both ways. If the great thing about these businesses is that they are small units where everybody knows everybody else, and that they are closely-knit bodies with a great sense of unity, one cannot also argue that it is the duty of the Chancellor of the Exchequer to make sure that those businesses grow as rapidly as they can to get out of the very circumstances which characterise the family business.

I would not set my face against family businesses and say that they are necessarily bad. It is desirable that people who have gifts and abilities to build up particular businesses should be allowed to do so, but I would not think it the duty of the Chancellor of the Exchequer to ensure at all costs that control over those businesses is handed down from generation to generation without any real regard for efficient management, or for the people who take control over the businesses being the best equipped. That would be nepotism run absolutely mad.

Mr. Osborne

If the family business is not run efficiently it goes out of existence altogether; it goes bankrupt. It is no good talking about nepotism run mad and businesses being conducted irrespective of efficiency. Such a business can survive only if it is as efficient as its competitor.

Mr. Jenkins

Is the hon. Member telling me that there are not instances of family businesses which have been in existence for a number of generations in this country with a very low level of efficiency? If so, I shall be very surprised.

Major McCallum

Would the hon. Gentleman maintain that there are not public businesses that are inefficient?

Mr. Jenkins

Of course there are, but that remark is irrelevant, because we are considering whether it is the duty of the Chancellor of the Exchequer to make provision to preserve a particular type of business. It is no argument in favour of that to say that there are other businesses which are inefficient too. There are branches of industry in this country where the family business is more prevalent than in others, such as in some of the cotton and woollen textile trades, and it would be very difficult for hon. Members to claim that the generality of businesses in those trades were examples of efficiency.

We cannot assume automatically that because the present rate of Estate Duty imposes hardship on the man who pays it so that he is always presented with the choice of selling his house and other assets or, on the other hand, with allowing some other financial interest to come in, it is therefore the duty of the Chancellor of the Exchequer, in the interests of the national economy, not to allow these businesses to be depleted in any way. If people running a family business are in peril when the man who built it up dies because they have to pay death duties, but are efficient managers and able to carry on the business, then financial interests which may come in will be only too anxious to keep them on as managers.

Are hon. Gentlemen opposite arguing that the financial interests in the City of London and elsewhere would deliberately go out of their way to turn out highly efficient managers of businesses they take over and put in new managements? They must have a very low view of the financial interests of this country to believe that. In the great majority of cases, if the sons were efficient to carry on the business after their father died, the financial interests which came in would keep them on as managers. If they were not efficient, they would be put out, and that would be a very good thing.

The onus of proof is on those who believe that family businesses must be preserved at all costs, and unless the Government approach the matter from that point of view when defending the Clause, they will fail to meet many of the objections which we on this side of the House have to it.

There has been some complaint from the other side of the House that our general criticism of the Budget this year is directed too much to last year's Budget and not enough to this year's Budget. But last year's Budget is in a sense the villain of the piece. This comes out if one asks onself why it is assumed that the Chancellor is right in his general estimates about what he ought to do about steering between inflation and deflation—which I am not quite prepared to assume, but which can be assumed for the purposes of this argument.

Why is it that in a year in which there are no great additional burdens of public expenditure to be borne—because we are now on a plateau so far as the defence programme is concerned—and in which production, admittedly after a bad year last year, is now going up at a reasonable rate and shows some prospect of continuing to go up, the Chancellor of the Exchequer has nothing at all to give away?

Surely in a year in which public expenditure in real terms is more or less stationary and the national income is increasing, because production is increasing, there ought to be a little, even if not very much, to give away; and yet this year there was nothing to give away. This is a slight problem about the Budget which at first sight did not seem easy to answer.

The answer, I think, must lie in the fact that last year the Chancellor made these substantial direct taxation concessions. The point about direct taxation concessions, as we all know from remembering how they are announced in the Budget speech each year, is that they cost £x in the current year and £x plus £y in full years in future, beginning with the next year but one. That is exactly the position at present. We are up against the fact that it is only in this year that the full effect of the Chancellor's concessions, many of which we thought were misplaced last year, are having their full effect. Consequently, despite rising national production, despite the fact that the Chancellor is on a plateau from the point of view of the defence programme, he has not been able to meet these vital needs.

Therefore it is natural that, not merely in putting forward a series of quite impossible claims, but in levelling constructive criticisms of the Budget and asking how else the financial affairs of the country ought to have been directed over the last few years, we should take into account what was done last year and the Chancellor's generous policy 12 months ago, in many cases in unnecessary directions, which is only now having its full effect. It is inevitable that we should take that into full account and level our criticisms against last year's Budget and not merely against this year's Budget.

7.33 p.m.

Mr. Gerald Nabarro (Kidderminster)

I am glad to be one of the first of the Government supporters to say to my right hon. Friend that I approve the emphasis he has given in his Budget to industrial stimuli, not only in the case of Clause 15 of the Bill, dealing with the investment allowances, but also in the case of the measures dealt with in Clauses 25 to 29: namely, the abatement of Estate Duty on family businesses.

I believe that the most important single thing which my right hon. Friend the Chancellor of the Exchequer should do in present economic and industrial circumstances is to try to encourage a very much increased rate of investment in the fixed assets of businesses of every description. A good deal of play has been made by Opposition speakers, commencing with the right hon. Member for Bishop Auckland (Mr. Dalton), during the Budget debates, followed by the right hon. and learned Member for Neepsend (Sir F. Soskice) today, followed by the hon. Member for Sowerby (Mr. Houghton), who have thought it desirable to say to private industry that it has been laggardly in its investment arrangements.

There is no statistical evidence of any kind to support that view. If an examination is made of the figures presented on page 23 of the Economic Survey—I allude to Table 13, "Gross fixed investment by Industries"—it is extraordinarily difficult to draw any accurate conclusion from those figures that the rate of investment in the publicly-owned sector of industry—namely, the nationalised industries—has proceeded at any higher rate than in the private industries.

The right hon. Member for Bishop Auckland, for instance, during the Budget debates referred to the investment figure for mining and said dogmatically, "Mining—nationalised."The right hon. Member did not qualify that. He was thinking only of the National Coal Board. He made no reference to the metalliferous mining industry, and no reference to the fact that the Economic Survey, for instance, includes in that general figure of mining the whole of the investment in all types of mining which are privately owned other than coal mining and, in addition, the whole of the quarrying industry.

Mr. Hugh Gaitskell (Leads, South)

How much?

Mr. Nabarro

I will give the right hon. Member an approximate calculation derived from Government publications. The mining industry as a whole invested in 1953 a figure of £61 million. Out of that, the National Coal Board's investment contribution was £46 million; certainly a large part of it; but not all of it.

I am endeavouring to say that it is extremely dangerous to make a generalised statement, derived from the brief summary in the Economic Survey, to the effect that private industrial investment is laggardly, to use the term of the hon. Member for Sowerby, and that investment by the nationalised sector of industry is proceeding at a good deal higher rate. Even if people make assertions of that kind, they ought also to have regard to the fact that the stock of nationalised industries is generally subject to a Treasury guarantee and carries no sort of element of risk that is generally associated with investment in private industry, notably in the smaller companies.

I regard figures which are of much greater importance, in justifying the investment allowance proposals of my right hon. Friend, to be investment rates in industry of every description, nationalised and privately-owned, in the United Kingdom, with the comparable rates of investment in Western Germany, the U.S.A., Sweden and France. I name these countries because they are some of the principal industrial competitors that we have in overseas markets.

It is, again, difficult to be accurate or precise in making a comparison of this kind. Obviously, prices in respect of capital equipment, which form the subject of investment in various countries, must vary slightly. Obviously, there are differing local or national conditions. I have, therefore, been at great pains to try to reduce this comparison in figures to a common denominator which would place the United Kingdom's scale of investment in proper perspective in relation to our principal overseas industrial competitors.

The way to do that, I believe, is on the basis of the investment in £ sterling per worker employed in each of these countries. In the United Kingdom, the investment in 1953 per worker employed was £102. In Western Germany, the figure was a good deal higher at £178, and in France it was very much higher at £344. In the United States of America it was £386, and in Sweden, the most incredible figure of all, it was £1,086 per worker employed. The sources of these figures are the United Nations Statistical Bureau and the International Labour Office, the Ministry of Labour Gazette and the Embassies in London of the United States, France and Sweden. It demonstrates in very clear, if over-simplified, form that the rate of industrial investment in the United Kingdom, in respect of the publicly-owned or nationalised sector, aggregated to the privately-owned sector is less than one-third of the U.S.A. and less than two-thirds of Western Germany, although I readily confess that in the case of Western Germany there is a large element in that country in respect of war damage reconstruction.

Mr. Roy Jenkins

I do not dispute the general trend which the hon. Member's figures portray and which I agree with him are extremely disturbing. I thought that the result indicated by the figures did suggest that they were not very reliable and that to give a definition of the work of men employed must be very different in each case. It is difficult to believe that the real rate of investment in France is equivalent to that of the United States, or that in Sweden it is three times that rate.

Mr. Nabarro

The hon. Gentleman would readily discover, if he investigated the figures of French investment in the course of the last five years, that the greatest emphasis has been placed on hydro-electric generation facilities and transport system and that hundreds of millions have been poured into those two basic industries. That has been largely a cause of the unbalanced state of the French economy today.

I will give one example. In the High Alps recently at Tignes, I went to see a hydro-electric works the cost of which was approximately £84 million. That was one works built, not an an extravagant scale, but on a gigantic scale, and such major and long-term assets can be a cause of the high level of French investment. I quote these comparative foreign investment figures in an effort to justify the need for the quite revolutionary method which the Chancellor has decided upon under Clause 15 of this Bill to stimulate investment in British industry.

The right hon. and learned Member for Neepsend—and I must confess at once that I have rarely known him to have such little knowledge of his subject as he displayed this afternoon—seemed to consider that there is very little to pick and choose from an indus- trial investor's point of view between the initial allowance system introduced in the Finance Act, 1944, and the fact that we have in this Finance Bill before us today the new investment allowance proposed under Clause 15.

I hope that the right hon. and learned Gentleman will not accuse me of being discourteous. I might say to him that I have observed this particular problem from very close quarters inside industry, gauging its effect year by year from my own practical experience of buying machine tools, putting up buildings and having to find the money for them. In direct opposition to the triumvirate opposite—the hon. Member for Gloucester, South (Mr. Crosland), the hon. Member for Stetchford (Mr. Roy Jenkins) and the hon. Member for Edmonton (Mr. Albu), who have argued in opposition to my views about the initial allowances in every Finance Bill since 1950—I am pleased that the Chancellor of the Exchequer in his Budget statement and the Financial Secretary today confirmed precisely the view that I have always expressed about the merit or otherwise of this initial allowance. In former years I have been a lone voice, except for the hon. Member for Edinburgh, South (Sir W. Darling), who has taken my view.

I have always said that this initial allowance represented little value to a business undertaking, as it could be only a temporary or ephemeral advantage derived from the increased rate of wear and tear on the fixed assets given in the year of installation and purchase of the asset. It is only an interest-free loan and a weighting forward of the wear-and-tear allowance.

May I express it in greatly oversimplified terms to the right hon. and learned Member for Neepsend, because I am sure he did not take this point in his speech this afternoon? Under the system of initial allowances and wear and tear, the aggregate of all wear and tear allowances which is granted during the length of life of the fixed asset for the machinery or building, when added to the obsolescence allowance granted by the Inland Revenue for that machinery or building, equalled the historical cost of the asset. That is a simple equation. What my right hon. Friend has proposed under Clause 15 under this Bill does not make an equation. What he is proposing, in addition to the 100 per cent. rate of wear-and-tear allowance over the years of the length of life of the plant, including the obsolescence allowance, is to give an additional 20 per cent. investment allowance in the year of purchase of the asset in the case of plant or machinery, or 10 per cent. in the case of a building which is a direct reduction of taxation.

That is a reduction in taxation and a very great advance on the old system of initial allowance. I believe that it is a great incentive and stimulus to industry to instal additional plant, equipment and buildings, and of value at least as great to the nationalised industries as to private industry.

I am sorry that the hon. Member for Sowerby has apparently left his place. He dealt only with the question of the private sector of industry. Let me apply this investment allowance under Clause 15 to the nationalised industries. The British Electricity Authority last year invested £164 million on plant and building. In 1954, from 6th April, the British Electricity Authority will get on every powerhouse generator a 20 per cent. investment allowance. On every power-house building they will get a 10 per cent. investment allowance, and if we estimate 20 per cent. for plant and 10 per cent. for buildings as applied to the whole investment programme of the British Electricity Authority, it would represent approximately a reduction of £24 million in the full year upon any assessment of Income Tax which might be made upon the Authority's surplus or profits.

In the case of the National Coal Board there is an investment this year of £50 million for new mines and fixed assets. It will all rank for either a 20 per cent. or a 10 per cent. investment allowance. In the case of the Gas Council and of the gas boards the aggregate investment this year approaches £50 million. That will all rank for investment allowances. The theme of the hon. Member for Stechford was that it would not be possible to estimate what this investment allowance would cost; on the contrary, if one takes the figures of gross fixed investment by industry as published in the Economic Survey, or elsewhere, and the cost to each one of the nationalised industries and breaks it down as between building and plant, and takes the comparable figures for the whole of private industry, it should be possible to work out approximately what this investment allowance will cost in the years ahead, in the same way as it has been with initial allowances.

The point which I am making is that investment allowances are of at least as great a benefit to the nationalised industries as to private industry. It should help the N.C.B. They certainly need help at the present time. They have just bumped their prices for coal again by 5s. a ton to 17s. a ton, not on account of miner's wages but to offset potential losses. This is a serious matter for the whole of dependent industry. This investment allowance ought to act as a stabilising influence on the prices for the products of nationalised industries and at least so far as the nationalised electricity, gas and transport industries are concerned, it should enable them to resist the temptation to put up their prices on account of higher coal cost. At least they will have the compensating advantages to be derived as a result of Clause 15, which the Chancellor, in his wisdom, has not applied only to private industry but to nationalised industries as well.

Dr. H. Morgan (Warrington)

A very good point.

Mr. Nabarro

I am grateful to the hon. Member. I should not make the point unless it was a very good one. I dislike hon. Members opposite suggesting that only private industry is being catered for under the Bill. I hope that as a result of what I have said the right hon. and learned Member for Neepsend will be a little clearer as to the merits and demerits of a system of initial allowances as compared with the proposed system of investment allowances.

I have an important point which should be raised on the Second Reading, and I readily commend it to the Parliamentary Secretary to the Ministry of Labour. According to Clause 15, an investment allowance equal to one-tenth of the expenditure is to be made instead of an initial allowance, and this will be applicable to "an industrial building or structure." Initial allowances were withheld in the case of certain industrial buildings, namely industrial canteens, industrial surgeries and industrial offices. I believe it would be a great mistake to withhold investment allowances in the same way as initial allowances from any part of an industrial hereditament which is so important as an industrial canteen. Production levels in industry are adversely or otherwise affected by the capacity of an undertaking to serve good hot meals, snacks and beverages at intervals during the day. The late Mr. Ernest Bevin recognised that early in the war when he made an order which provided that every industrial concern employing more than 250 persons should have an approved canteen. I should like to see that applied to any firm employing more than 100 people.

It is important to industrial production that we should encourage the installation of works canteens. The buildings have been excluded from initial allowances, and unless special provision is made on the committee stage of this Bill industrial canteen buildings and canteen equipment will be excluded from investment allowances. The same principle applies to industrial surgeries, which can do so much in assuring continued attendance at work and the prevention, notably, of poisoning of fingers and limbs as a result of minor industrial injuries by means of prompt dressing and the presence of trained medical personnel on the works premises. We should encourage the installation of industrial surgeries and provide for them an investment allowance, which will not be done under the present proposals.

The same thing applies to industrial offices, for there must be an administrative centre in every factory. However, I would limit the granting of investment allowances in the case of works' offices by saying that the office accommodation provided should comprise not more than 10 per cent. of the superficial area of the entire factory if the cost of new office buildings is to rank for an investment allowance.

I want also to refer to Clauses 25–29 and to Estate Duty on family businesses. This is a complicated matter to argue, being capable of interpretation in many different ways. It is difficult to generalise The hon. Member for Stechford tried to generalise. All the arguments about family businesses are generally arguments which should logically apply to small businesses. The hon. Member said that at one point, but the difficulty is that not all family businesses are small and not all small businesses are family businesses.

I know many businesses owned by families which are large enough to be public companies, and due to long tradition, and particularly to the point made by my hon. Friend the Member for Louth (Mr. Osborne), long family tradition and association between the management and the work people, there is a happy and amicable atmosphere in the business which is conducive to a high rate of industrial productivity and efficiency. I can be totally impartial in this regard for at no time have I worked for a family business or owned any part of one.

I would ask the right hon. and learned Member for Neepsend whether he has seen the admirable and impartial survey of the need for the dispensation which the Chancellor is proposing under Clauses 25 to 29—if he has any difficulty in obtaining it, I will send it to him—carried out by the "Economist" Investigation Unit last year on behalf of the National Union of Manufacturers. It was submitted to the Chancellor at the time of the Committee stage of the Finance Bill in 1953 when my hon. Friend the Member for St. Marylebone (Sir W. Wake-field), I and many other hon. Members were pleading for a relief of death duties of this kind, for the purpose of avoiding the break-up of family businesses. The document compiled by the "Economist" Investigation Unit ran to 100 foolscap pages or so. It was an impartial survey. It investigated the incidence of Estate Duty, particularly under the onerous provisions of the Finance Act, 1940, and it worked out in close detail the effect of that incidence on very many and diverse kinds of family businesses, showing how readily they could be broken up in view of the present state of the finance law upon Death Duties.

I agree that the proposal in Clauses 25 to 29 is extremely discriminatory in character. I welcome that, for I regard it as a great social benefit to prevent the break-up of these businesses.

I should declare my interest here. I am the vice-president of one of the largest provincial branches on Merseyside of the National Union of Manufacturers, and I sit on the national executive of the National Union of Manufacturers in London. I am delighted that the painstaking efforts made by the National Union over many years to secure this dispensation on behalf of family businesses has been brought to fruition by a Conservative Chancellor of the Exchequer.

I welcome the industrial applications of this important Finance Bill. I believe with conviction that the somewhat revolutionary character of the proposals under Clause 15 will stimulate industrial investment and take up the slack in the capital goods industries to a sufficiently great extent not only to enable full employment to be maintained and industrial productivity to continue to rise, but also—which is of supreme importance in present circumstances—to ensure that British goods in every category and description are capable of maintaining and retaining their competitive power upon the markets of the world.

7.59 p.m.

Mr. Frederick Lee (Newton)

Much of the debate has, naturally, been concentrated upon the investment allowance and the rate of investment in British industry compared with that in other nations which compete with us industrially. I agree with what was said by the hon. Member for Kidderminster (Mr. Nabarro). I was a little alarmed at the figures which he gave of investment per worker in a number of nations which compete with us, but, as he said, it was an approximate estimate, and one might be able to riddle the argument if one had more information. Nevertheless, it has been proved that the rate of investment in our own industries is disappointing. In his Budget speech, the Chancellor stressed his disappointment about this after the two Budgets which he has presented with the object of encouraging more investment in industry. My hon. Friend the Member for Sowerby (Mr. Houghton) mentioned Mr. Wincott's remark that we must work our plaint harder and replace it sooner. I agree with Mr. Wincott in what he said about replacing it sooner.

The Parliamentary Secretary to the Ministry of Labour may not agree with what I am going to say now, because he has great experience of the machine tool industry, just as I have; but I believe there is something to be said for our machine tool industry looking at its methods of production and not being quite so concerned that its products should last quite so long.

The Parliamentary Secretary to the Ministry of Labour (Mr. Harold Watkinson)

I agree with the hon. Member.

Mr. Lee

The hon. Gentleman and I know that there are engineering shops in Britain where British machine tools, which were put down about the turn of the century, are still in first-class condition, which is to the credit of the industry. Their quality is extremely high but their performance cannot compare with the modern machine tools. Therefore, we have the position—strange paradox as it may seem—where the quality of our machine tools is a detriment to an increase in our productivity in that the feeds, speeds and all that type of thing are far too low and the construction is obsolete. Good men are employed upon them and, given modern tools, they would produce at a much greater pace than they can on these older machine tools.

One has to be careful in one's assessment of this problem. I think the American assessment is more to the point, that because in five or six years' time the machines themselves will be obsolete we might as well drive the guts out of them and during that period get as much production as we can. Therefore, greatly as I admire the quality of the products of our machine tool industry, I think we may have to think again on this question of replacement and timing, because it is not to our advantage that such a large percentage of the manufacturing sections of the engineering industry should use machine tools which are so old and which cannot be compared with modern American machine tools when it comes to the rate of production.

I want to say something about investment allowances. We have been asked not to call them a subsidy, but I should like to know what is the attitude of the Government towards one fact. It is now established that subsidies in various forms are being meted out to various foreign competitors by their Governments. I am extremely concerned about the position of the locomotive industry. We all know that Indian orders have gone to Western Germany and other nations. I represent a constituency in which there are two or three very important railway firms, including Vulcan's and places of that type, and I am concerned about the effects upon our em- ployment levels if more orders like the Indian one are lost to overseas competitors.

The Government must make up their mind on this subject. If they desire this industry to maintain this particular type of product, then they will have to do what is possible in the way of granting export credits and so on, because this industry, along with others, is suffering through unfair competition from comparable industries abroad. Perhaps the Financial Secretary could tell us what is the Government's attitude in this matter. Do they accept as a fact, as I believe it is, that some of our engineering industries are suffering from unfair competition because of subsidies in various forms granted to rival industries in other countries in order to give them a better opportunity to compete in world markets?

the Government may believe that it does not matter a lot if some sections of our engineering industry suffer because we are busy in others. They may well believe, for instance, that engineers employed in locomotive production can now be switched to employment of another kind in the same industry. If that is what they believe, they should say so, because it is not quite so simple to transfer workers who have been employed on locomotive building to another part of the engineering industry.

In some parts of the country, despite the Development Area policy of which we are all so rightly proud, there are some small towns which are dependent upon two or three relatively large firms, some of which may well be in the locomotive industry. I hope, therefore, that the Financial Secretary will make it clear to the House that the Government are not convinced that the workers in such an industry must be transferred to some other branch of engineering and thereby release labour for it.

If we look at the amount of money per ton which we get for exports, the jet aircraft brings in much more than we get for locomotives and for other types of engineering products. I realise that if we are to live in this world today we must continue to switch our industries in order to produce types of products which will enable us to maintain our position in the export markets and relieve our balance of payments problem, but I hope that the Government will not be higgledy-piggledy about this. I hope they realise the necessity for planning that sort of thing, because unless they do we may find ourselves in difficulties and be unable to compete in some of the foreign markets, in which we are accustomed to trade.

I return now to the question of investment allowances. I want to encourage British industry to invest, but I hope we are not going to encourage only employers. We should realise that when we get these new machines there will have to be people to work them. We talk about depreciation and the necessity to compensate employers for that depreciation, but I have never yet found any employer who would give an appreciation of the piece-work rate comparable to the depreciation he was claiming on his own machinery.

Mr. John McKay (Wallsend)

That is very different.

Mr. Lee

I had some experience of this when I was a shop steward. I recall that when two or three new machines came into a department the directors wanted a cut in our piece work price. I said I would gladly agree to that provided that they agreed to an appreciation of the piece work price on that machinery for which they claimed depreciation. There was nothing doing.

We want increased production, and all our hopes are centred on that; but unless we take steps to show the employee that he has a stake in this and that Government policy will be aimed at giving him, not only an easier chance to produce more work because better machines are available, but an opportunity to increase the amount in his pay packet, then we shall not get full co-operation from the workers.

I affirm that the increased levels of production, especially in engineering, are factors of which those of us connected with that industry can be proud. Nevertheless, I believe it is possible to get still higher levels of production. Whilst, however, the Government concern themselves with giving better conditions to employers, as demonstrated by the investment allowance, without any corresponding improvement in the conditions enjoyed by the worker, that will not be possible.

In the course of a recent debate on industry, I mentioned that as from January of this year the Chancellor eliminated the Excess Profits Levy without proposing to substitute for it any other tax. As far as I can recall, he has not even asked industry to refrain from distributing the moneys which would have gone to the Exchequer. He has made, as it were, a free bonus issue to industry by refusing to put anything in the place of the levy. As long as that kind of thing goes on, it is naïve to expect that workers will feel they are getting a square deal from the Chancellor.

The feeling exists in industry now that the intentions of this Government are to recreate the pre-war pattern of wealth distribution. Whilst it is true that this Bill does nothing much in that respect, it continues the policy followed by the Chancellor in his two previous Budgets of redistributing the national income in favour of those in the higher income group.

I hope the right hon. Gentleman will realise that we are poised in a rather delicate position. Last year there were many applications for increased wages, the negotiations for some of which have gone on for 10 months; indeed, some of them have only just been concluded. I ask the Chancellor to appreciate that the executive committees of many of the great unions are now meeting, or are about to meet, to consider the position and to decide upon their policy for the coming year. Indeed, the national committee of my own union, the A.E.U., began its meeting today. At these national committees there will be discussions about their approach, as to whether they feel that the Government are making every attempt to keep down the cost of living or taking active measures to reduce it. If they feel that within the Finance Bill and by the general economic policies of the Government no attempt is being made to reduce the cost of living, that instead the policies of the Government are decided by those who would like to see the distribution pattern of pre-war days, it is certain that more and more wage applications will be made.

It is obvious that all sensible people, whether connected with the trade unions or with the employers' organisations, would far rather see our money become more valuable than merely increase the amount going into a wage or salary packet. Therefore, at this stage, when the great trade unions have not yet made up their minds as to what their policies shall be, is a vital one, because the next two or three months will determine whether or not another round of wage applications will be submitted.

In those conditions, I should have thought that the Chancellor ought to be assuring the trade unions that his policies will be directed to reducing the cost of living. He should make clear—and he has not done so in this Finance Bill—that his Budget will give a square deal, and a better deal as our economic position improves, to the lower-paid sections of our community, instead of merely trying to make the rich richer and the poor poorer. At least one hon. Gentleman opposite, speaking on the Budget last year, told us that it made the rich richer and the poor poorer.

This Budget has done nothing to alleviate that position. It has merely perpetuated it for another 12 months, and all the eloquence which members of the Government may be able to summon to their command to ask industry to restrain itself, to understand the perilous condition that we are still in, will avail them nothing unless they can prove that their policies are directed to continuing the creation of national wealth, a policy which the Labour Government pursued for six years. Unless they can do that, their words will have no effect in conditioning the trade unions to agree not to pursue claims for increased wages.

I believe we are in a difficult position because so much will depend upon what happens in the next two or three months in regard to the policy decisions, not only of individual unions, but of confederations of unions whose members total many millions. As yet I have heard nothing from the Chancellor which would convince me, as an ordinary member of a trade union, that I should refrain from asking for better conditions of employment. Therefore, I ask the Chancellor again, before this Finance Bill becomes an Act, to bend his energies and his intellect towards appreciating the delicate position of the country and, instead of pursuing a policy which we on these benches have criticised adversely and will continue to criticise, to realise that party advantage, even when in Government, is short-lived if it brings rancour, hostility and bitterness throughout British industry.

8.19 p.m.

Mr. G. B. Drayson (Skipton)

I want to comment on one or two remarks of the hon. Member for Newton (Mr. Lee), who seemed to say that if the powerful trade union which he represents is not satisfied that the policy of the Chancellor will ultimately lead to a reduction in the cost of living, it will be impossible for him or his colleagues to recommend to the union that they should exercise restraint in their demands for increased wages. Bearing in mind their political complexion, I do not think that they are likely to come to the conclusion as the bulk of the country really believes that the policy of my right hon. Friend will lead to a reduction in the cost of living in the near future. What it has done is to iron out the steep rise which we inherited from the previous Administration.

Mr. Lee

Would the hon. Gentleman outline to the House which policies have had the effect of ironing out the rise in the cost of living?

Mr. Drayson

Yes, particularly the sound financial policy followed by the Chancellor of the Exchequer. I want to know what would have been the attitude of the hon. Member, and of his union, if in this Budget my right hon. Friend had found it possible to give a certain amount of tax relief. I am sure that then he would have said, "There is so much money about that the Chancellor is able to reduce taxation and therefore this is the time when the unions should press a larger claim." But I do not think that hon. Members opposite can expect to have it both ways.

The hon. Member commented on the locomotive industry, about which he knows so much. We all know the difficulties with which locomotive manufacturers are faced at the present time in selling their products overseas, products which we know are the best in the world. It would have been a great help to the locomotive industry if, when the nationalisation of the railways took place, our private locomotive manufacturers, who had done so well in the past, had been given the opportunity of supplying locomotives to our nationalised railways and nationalised undertakings had not been made entirely responsible for locomotive production for our railways. I believe that the private locomotive industry in the United Kingdom depends entirely for its work on the overseas market. That is not altogether a healthy position. It would have been a good thing if the former Administration had sought to put that right in some degree and had given a proportion of orders for locomotives required by the nationalised railways to private undertakings.

This Bill seeks to put into operation the wise and prudent proposals of the Chancellor's Budget. I particularly welcome those provisions which are calculated to help small family businesses. Many of my constituents have told me how helpful those provisions will be.

When discussing financial matters, we all have in mind the position of the old-age pensioners, but I think that the House will agree that it is not through Clauses in the Finance Bill that the rates to old-age pensioners are increased. We know that the Chancellor, with the Minister of Pensions and National Insurance, is looking into this matter, and we hope that in the near future he will find it possible to do something to help. But the Budget itself safeguards the position of the old-age pensioners by maintaining the revenue and seeing to it that, when we are in a position to assist them, we shall have the necessary finance to do so.

As the Financial Secretary said, Clause 4 deals with a comparatively minor matter, but its provisions help the export trade in the textile industry. This Clause re-introduces the draw-back on imported artificial silk. The position of the supply of artificial silk to the textile industry of this country became acute in 1941, and on 14th January of that year the duty, which is 9d. per lb., was suspended altogether so that foreign imports could come freely into this country to satisfy the demands of our mills. I have correspondence from manufacturers showing that they were losing orders and having to turn off workers at that time because, unfortunately, the home production was not able to keep up with the demand.

This matter was soon put right, and after a period of six months, on 1st January, 1952, the duty was re-introduced, but no draw-back facilities were provided at that time. That placed manufacturers at a disadvantage, in that in dealing with overseas orders they were not able to import foreign staple fibre, even though the price of that fibre might have been cheaper. The home-produced staple fibre is virtually a monopoly of one of our leading rayon manufacturers, and acetate fibre is the monopoly of another large concern. The home price of staple fibre is 24d. per lb. and the overseas price is 23d., so up to the moment there is little advantage, though there is some, in importing the foreign variety. Until this draw-back facility is re-granted, as it is in this Bill, the spinners to some extent are held to ransom by the home producer, but now they will be in a position to bargain and they will not suffer any longer by not being able to obtain a cheaper commodity from overseas.

This matter has aroused a great deal of interest, and I saw in the "Observer" this week a letter on the subject in which the writer asked why our home rayon industry requires such a very high degree of protection—to the extent of 9d. per lb. This was a key industry duty years ago when we were establishing this industry, but I think that now the duty should be brought to a level at which at least it would allow an element of competition, which would not affect our overseas market and would not unnecessarily add to the cost of living in this country by maintaining a high price for rayon goods in our shops. I am glad that Clause 4 puts the matter right, at least as regards the draw-back.

Clause 14 deals with post-war credits. I, no doubt amongst many others, proposed to the Chancellor some years ago that although post-war credits should remain repayable on the date at which the original owner became of age for repayment, the certificates should be negotiable instruments. I cannot see why the Chancellor cannot concede that one point. It is done to a certain amount in Clause 14, and the Financial Secretary reminded us that evidence of title such as a will or some other document must be produced by the new owner in order to claim repayment.

I wonder if he could give us a little more information on the position with regard to charities. Would it be possible, for example, for some charitably-minded individual to approach another who had a post-war credit repayable in 15, 20 years, or less, and say, "I will acquire this post-war credit from you at such and such a discount if you will enter into a solemn undertaking that you will leave this credit to a particular charity of my nomination"? That would be a very pleasant way of assisting charities. It would help the individual who for some reason or other wished to dispose of his post-war credit before it became due for repayment. In this case there would be three-sided satisfaction, the charity, the person who wished to be charitable, and the holder of the postwar credit who was anxious to receive repayment.

With other hon. Members, I welcome Clause 15, giving investment allowances to industry. Anything we can do to help industry to re-equip with modern machinery so as to be more competitive with overseas countries is to be welcomed. Hon. Members opposite have been mistaken in suggesting that the Chancellor is here giving something away. He is merely refraining from taking out quite so much, and that is a different matter. No company will be able to benefit from these investment allowances unless it is itself trading at a profit. It is the profit which will be offset against the allowance given and not any direct benefit received from the Chancellor or any other taxpayer.

In welcoming this Bill, which I am satisfied will have an unopposed Second Reading, I hope the Chancellor will be able to do more for the holders of postwar credits on a future occasion and that the provision of investment allowances will be continued.

8.31 p.m.

Mr. Arthur Holt (Bolton, West)

There has been a great deal of talk this afternoon about family and small businesses. It seems that the House has to clear its mind on what is the real problem. My hon. Friend the Member for Stechford (Mr. Roy Jenkins) spoke of people who want to preserve family businesses at all costs and said that they must justify why they should want to keep them in being in preference to other types of business. It is not a question of preserving. If the economy were a proper free economy with a proper taxation system these family businesses would be able to exist, but our economy has become so distorted that it is a discouragement to family businesses and small businesses to continue.

I do not want to labour the point, but, to give an example, if a family own a business it is far more in their interest from a short-term point of view to sell that business to an amalgamation and make a capital profit out of it than to make profits each year, which, if they are paid away, are subject not only to ordinary Income Tax, but to such rate of Surtax as that for which those concerned might be liable. At present, for such a business there is a safeguard in what is called the "Cripps pledge," but that may not go on for ever.

Anyone with a family business these days has very little to look forward to in a continuing way except that he can say, "My job is more secure because I am working for myself." If he sells that business, whether in the textile industry, in printing, the paper trade, or any other, to a big amalgamation he can sell all his shares at a profit and there is no tax on it. It is that sort of temptation that needs examining to see why such sales are brought about. The first reason why they are brought about is that there is no taxation which has been thought desirable, or even workable, on such capital profits, but on any money made annually in a revenue form there is heavy taxation. There is no question whatever that if this interference of the Government were removed from small and family businesses, in the large scope of British industry, with few exceptions, the small efficient firm would knock out the amalgamation.

Take the cotton trade as an example. There is not the slightest doubt that people who are supporters of the present insidious minimum price scheme ruling throughout the whole cotton spinning industry are the big amalgamations. That is because they know that if it was removed they would be knocked for six and have to close down half their mills. Let us have no idea that these little businesses are poor delicate concerns which cannot stand on their own feet. What amazes me is that in spite of all the disincentives and all the hits— "Knock private enterprise for six" seems to be the attitude of many people—such private enterprise goes on being enterprising at all.

Then there is the kind of thing we heard from the hon. Member for Newton (Mr. Lee), who is most concerned how the workers are treated. So am I, I should not like it to go on record that in any way I am not, but the employers must be treated in exactly the same fashion. Why the distinction, that every interest of the workers must be carefully considered but that when it is a firm that is concerned, knock it for six, knock it this way and that, tax it almost out of existence, and then talk about it being laggardly if it does not spend all the money it has got in carrying out capital investment which it does not think is wise.

Mr. Lee

That is not what I said.

Mr. Holt

I am not one of those who would go to the stake for the investment allowance. I accept it for the time being because the Chancellor cannot correct what is really wrong. He has done something to ameliorate the effect of something which is wrong by a step which he can probably get away with, and which will help, but which does not correct the real trouble.

Having said that about what has gone before, I wish to make one or two mild protests about the first part of the Bill. The hon. Member for Skipton (Mr. Drayson) has mentioned the question of the artificial silk duties. I have carried out a minor campaign on this matter for the last 12 or 18 months. I have pointed out that by the artificial silk duties this Parliament is giving protection to complete and absolute monopolies in this country. We talk about the Monopolies Commission, and none of us are in favour of monopoly, but a firm which the Chancellor knows very well, Messrs. Courtaulds, have the benefit of a 38 per cent. duty, an out-and-out duty on their production of rayon staple fibre.

This is a very serious matter. I am sure it is one which the Chancellor is concerned about. I accept that he has done something about it in relation to the export trade, but it does not alter the position that this firm—and there are many other firms, if one cares to go through industry, which are in similar positions, but few which have quite as much an advantage as this one—has a monopoly—

Mr. Osborne

That is not correct.

Mr. Holt

It has a complete monopoly of rayon staple fibre, there is no question about it. The hon. Member must get his facts right. Courtaulds have a complete monopoly in this country of rayon staple fibre. I said no more than that.

It is utterly wrong that a firm of that strength, capability and efficiency should require such a protection, and I am not at all satisfied with the endeavour to get round the difficulties by just introducing this drawback. Drawback is a very difficult matter in a factory. If one brings some goods from abroad one has to trace them right through the process in one's factory because one only gets the drawback on those actual imports. It is not sufficient to say "Imports worth £1,000 have come in, I will claim on my £1,000 when they go out." One has to trace the goods through the factory, and the disturbance to production and interference with efficiency makes the drawback unliked in factories. Therefore, although that step ameliorates the position to some extent, I hope that the Chancellor will look further into the matter in the early future.

I do not wish to labour the question of the chicory duty; it is a kind of comical little matter in the Budget. It is part of the reprehensible vegetable duties. The same applies to Clause 3 and the five years' extension of the key industry duty. The Chancellor of the Exchequer has been lauded by the right hon. and learned Member for Montgomery (Mr. C. Davies) as being a new Peel, but the right hon. Gentleman has to go a long way before I should be satisfied about that. The right hon. Gentleman has spoken of the desirability of freer trade and has done a considerable amount towards it. One would not deny that for a moment. But, as competition increases, he will be faced with the fact that we have not yet discarded those reactionary and defensive ideas which grew up quite naturally in the difficult years of the 1930's.

Now we are in quite different conditions. There is an expanding situation with little unemployed. There is no question that this country cannot afford to misuse its resources and it is a complete waste of time for us to make things which may be made more efficiently by other people. We should use our resources to produce those things which we can produce better and cheaper than other people. That is the real problem which we shall have to face in the future. I suggest that the Government would be well advised to make it clear that, circumstances being what they are, they will not consider any advances in tariffs. We may still have those wretched vegetable duties, but the Government should indicate that in future there will be no more advances in tariffs.

The engineering industry is always lauded to the skies. Engineering products are exported all over the world, and yet much of the industry is protected by a 33⅓ per cent. duty. What is the need for that? If our engineering industry can compete all over the world why is it necessary to have a 33⅓ per cent. duty in the home market? Surely it is easier and cheaper to sell in the home market than to ship articles to Australia or South America. What is needed is a protective duty for them in South America and not in this country.

These duties are quite unnecessary, and we should be well advised to focus attention on that fact. People are watching the Japanese situation, and before long representatives of the cotton industry will be asking for more protection against Japan. I suggest that the Government would save themselves a lot of trouble if they made clear now that they will not put up any tariffs.

The second step which the Government should take is to start to lower instead of renewing these tariffs. This wretched Safeguarding of Industries Act is a lot of rubbish. Surely the world will not tumble down if we do not make such things as beakers, flasks, burettes, hosiery latch needles, ignition magnetos and permanent magnets. An interesting sidelight on this Act is that it is stated that Part I shall come into force on the first clay of October nineteen hundred and twenty-one, and shall continue in force until the expiration of five years from the passing of this Act and no longer. It has been in force all the time, and it is to be renewed for another five years.

If the Chancellor requires more time to consider his policy regarding freer trade, he might start by renewing this Act for 12 months, or even two years, and indicate to industry that the policy of this Government is to reduce tariffs. He could start by reducing the high one of 38 per cent. and bring them all down to a common 20 per cent., and then 10 per cent. We should make progress by removing these quite unnecessary restrictions on industry, and the whole community would benefit.

8.45 p.m.

Mr. F. H. Hayman (Falmouth and Camborne)

I have listened closely to the hon. Member for Bolton, West (Mr. Holt) and I am rather concerned at what appears to be a division in the ranks of his party. I am sorry that he does not support his leader. I am sure that his right hon. and learned Friend is in need of all the support that he can get.

The Chancellor has said that he intends to reduce Entertainments Duty for cinemas by £3,500,000. The time has come for him to consider the position of the very small cinemas which comprise the majority of the cinemas in the country and which are finding it difficult to continue in existence. It may well be that the payment of this duty on any scale is sufficient to make just the difference between profit and loss in the working of some cinemas. That is especially so in Cornwall and, as yet, Cornwall has not got the benefit of television. I hope that something more will be done for the small cinemas.

The Chancellor is making a concession of £450,000 to football clubs by a slight reduction in the rate of Entertainments Duty. Again, many small clubs pay large sums in taxation. In a large Budget of this kind, with the granting of big concessions to family businesses, industry, and so on, surely a full concession could be granted to the small football clubs. I also suggest that that concession could be extended to operatic societies. They get a certain small benefit now, but the time has come when the Chancellor should consider granting to the small country societies complete exemption from duty. They do extremely good work and they ought to be preserved.

We are all concerned that the right hon. Gentleman has done so little—practically nothing—for old-age pensioners. The hon. Member for Skipton (Mr. Dray-son) said that the Chancellor's financial policy had benefited the pensioners. It is true that the financial interests of the country have benefited enormously by the fall in world prices. That has nothing to do with the Budget.

I have followed the discussion on Estate Duty on family businesses, but I am unable to determine whether the provision covers every type of family business including those with assets of many millions as well as those which are merely small family businesses. Hon. Members opposite make great play with the subject of small family businesses, but if the concession of 45 per cent. is to be given we ought to examine the position very closely.

The hon. Member for Bolton, West is a member of a party one of whose leaders introduced Estate Duty. It seems to me that all kinds of exemptions are being given now and the original intention is being frustrated. For instance, a well-known member of another place died last year and left a large estate. All the newspapers reported that if he had lived a few weeks longer the Chancellor would have lost £1 million or £2 million by way of Estate Duty. It seems incomprehensible to some of us that it is possible nowadays for people whose estates ought to be subject to big duties to be able to evade them in this way. Those who read our newspapers and see that people have died and Estate Duty has been paid are perfectly well aware that the standard of life which that person maintained indicated the possession of a far greater estate than was shown for Estate Duty purposes.

I gather that Clause 25 provides for the concession to be given where there is an interest in the family business. This ought to be made very much clearer. Does it mean that the whole of the business should be owned by the family or will it apply if the family own only 20 per cent.? If they own 20 per cent., does that constitute a family business? Many of us who are outside the realms of big business wonder, when we see a name over a shop or business premises, whether the business is owned by the family or whether it is a subsidiary of a much larger concern. We must examine this Clause very closely indeed.

Surely the Chancellor can do something better about post-war credits than the offer which he has made. Surely post-war credits could be paid to a widow on her husband's death. Surely that would not break the country. Surely a man who has been unemployed for any length of time or who has become disabled or ill should be able to get his postwar credits paid? Surely they could be paid, too, in the case of a man who wants them to help to set up, on a smaller scale, one of the family businesses which we have heard so much about today. Many people want to set up small, one man businesses, and if they have assets in the way of post-war credits they should be able to get the money.

8.52 p.m.

Mr. Arthur Colegate (Burton)

I will detain the House for only a few minutes, and I want to deal in particular with Clauses 15 and 25. I thought the right hon. and learned Member for Neepsend (Sir F. Soskice) gave us a most lucid speech which hid the most confused thinking on this subject which I have heard for some time.

Several of his assumptions appear to be highly erroneous. Surely it is contrary to our historical position in the House of Commons to suggest that a remission of taxation should be called a gift. The only gift is the gift by the Commons to Her Majesty's Executive. It is ludicrous to assume that all income belongs to the State and that anything of a man's earnings which is not taken away from him is a gift. On constitutional grounds I must protest against the right hon. and learned Gentleman's assumption.

Next, the right hon. and learned Gentleman doubted whether the investment allowances in Clause 15 would be effective in promoting the creation of new capital and he gave a clever psychological analysis of possible motives. All we need to do in this connection is to go to industrialists and business men who will benefit from the allowances to find out whether they think the allowances will be effective. I have met a great many of these men in Birmingham and London, and almost without exception they have assured me, without any psychological analysis, that these allowances will be of general benefit and will help them to create further capital.

I must protest against the right hon. and learned Gentleman's interpretation of the Report on statistical investigation by the Board of Inland Revenue, to which other hon. Members have also referred. Anyone who has not read the document would assume from the right hon. and learned Gentleman's speech and from other speeches that this is a Report containing a series of recommendations about small businesses. It is nothing of the kind. It is a mere negative statement, which is true and which I accept, that death duties, so far as can be seen, have not yet broken up family businesses. I hope they have not. What a shocking thing it would be if they had.

What the Report does say very seriously is that, in a very large percentage of cases, the family concerned had to sacrifice the whole of the family assets outside the business in order to preserve the business itself. I maintain that that is not a good thing. Do not let us talk as if these businesses existed merely for the pleasure and benefit of the owners. Running through a great deal of the thought of the party opposite is the fallacy that a good modern business which is creating new capital is merely working for the benefit of the owner, the directors or shareholders, and that it has no effect on the fortunes of the people working for it. If we want to raise the standard of wages and the standard of life in this country, the first thing we have to do is to see that the workman has the most modern, up-to-date and productive plant that can be obtained.

I would say that the figures show that the capital created in recent years and the increased profits which have flowed from it have resulted in a larger proportion going to the workers engaged in industry than to the people who put up the capital. I do not object to it. I think that is right, and I agree that, in addition to providing more benefits for the proprietors, there should be this increased benefit in a higher standard of living for the workers engaged in the industry.

As far as concerns the nationalised industries, which have raised a great deal of capital, I differ from the right hon. and learned Gentleman. The nationalised industries have always had the permission of the Capital Issues Committee to raise capital. Not from any inherent probability of profit, but because they were nationalised industries. They were in a position to go into the market and raise £10 million, £15 million or £20 million at a time. Many people think that the capital raised, for example, in the coal industry, needs very careful examination so as to see what benefits have been obtained from the immense sums put into the industry in the last few years.

There is one further point that I should like to. make. We know that, in the case of both large and small businesses, we have to provide some inducement in order that they may be able to raise the necessary capital, but the moment we suggest it right hon. Gentlemen opposite immediately object. What is the incentive to be? Will they tell us what is their idea of what incentive should be given in order to raise the immense amounts of capital which they admit are necessary for the modernisation of our industries? In that connection comparisons are often made with the raising of capital in Germany and the United States, but the incentives there are far greater than they are here. In the case of Germany, many of the statistics regarding increased capital are very misleading, because they relate to a period during which Germany started from zero, whereas we did not do that, but were at a higher level to start with.

Finally, on the subject of breaking up small businesses, we should remember that the small business of today is probably the big business of tomorrow. There is hardly a big business in this country today about the early history of which I do not know something, and I would say that at least half of them started from two or three people operating in a small workshop. They built up their businesses, ploughed back their profits and so developed them. For the sake of democracy and for the avoidance of monopoly, let us encourage people to start small businesses and to make those small businesses grow, so as to provide the employment and raise the standard of living which we all want to see in this country. I congratulate the Chancellor of the Exchequer on what he does in Clauses 15 and 25. I hope that he will continue to study the whole question of the effect of death duties on industrial production. Perhaps we shall have a few more Clauses of this sort in the next Budget.

9.1 p.m.

Mr. Douglas Jay (Battersea, North)

This meagre Bill and this debate will not have done much to diminish the unpopularity which the Chancellor of the Exchequer brought on himself and on his Government by his Budget a month ago.

What does the Bill contain? It grants a large and indefensible relief on certain death duties; it goes to extreme lengths with the investment allowance to induce private industry out of the lethargy into which it has apparently fallen under this Government; it increases, of course, the chicory duty; it gives some niggling concessions on post-war credits and Entertainments Duty; it carries out the Grant Report partially and very belatedly; finally, it repeals a provision which the present Prime Minister made as Chancellor of the Exchequer in 1928 for the permanent annual charge of the National Debt.

The Chancellor of the Exchequer, who has had many disagreements with the Prime Minister from the time of Munich onwards, has thus smashed up the last remaining monument of the Prime Minister's unfortunate tenure of the Treasury which led, among other things, to the general strike and to the near-ruin of the coal industry. It was not very tactful of the Financial Secretary to the Treasury to refer this afternoon to that monument of the Prime Minister's—or possibly he was referring to the Prime Minister himself—as "obsolete" and "needing to be tidied up."

The Chancellor has tried, however, to emulate the Prime Minister in one respect, and that is as a master of English prose. I should like to draw the attention of the House to one immortal passage in Clause 21, dealing with the question of cemeteries, which might well be included in future anthologies of the English language. This Clause provides that in computing the gains or losses for any period of a trade which consists of, or includes, the carrying on of a cemetery, there shall be allowed as a deduction certain capital expenses. Then the Clause says: Provided that it does not include expenditure incurred on buildings or structures which have been destroyed before the beginning of the first period to which subsection (1) of this section applies in the case of the trade, and only includes that fraction of other expenditure incurred before that time which is equal to the number of grave-spaces which at that time were or could have been made available in the cemetery for sale divided by that number plus the number already sold. Can the Chancellor of the Exchequer explain what strange and sinister purpose he had in mind in driving the Parliamentary draftsmen to perpetrate that remarkable paragraph?

Much of the debate has rightly centred on the investment allowance. The Financial Secretary entered into a rather metaphysical argument to prove that this allowance was not a subsidy, but he and the hon. Member for Burton (Mr. Colegate) seemed to miss the essential point. By this allowance, the Chancellor of the Exchequer is departing from the principle, followed throughout the history of Income Tax by every Chancellor of the Exchequer, from William Pitt up to and including the present Prime Minister, that under Schedule D an allowance should be given for depreciation which is neither greater nor less than the cost of the plant over its whole life. The Chancellor is assuming the plant to have cost more than it actually did.

If the Financial Secretary does not Like calling that a subsidy, perhaps he would prefer Mr. Harrod's term "hand-out." At any rate, it is a tax-free additional item of revenue for private profit-making business which in the end—I should like the Chancellor to confirm this—must cost the Exchequer £60 million or perhaps even £100 million a year, and will go largely to firms the great bulk of whom would have made the investment in any case.

It seems to me that the trouble about the investment allowance is that it is given to prosperous firms which do not need it, and it provides less help for needy firms in the crucial first year than a 40 per cent initial allowance would have done. My right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) had a disagreement with the Chancellor about how it works out. According to my calculations, in the case of the buildings, the firm is definitely worse off in the early years than it would have been with the initial allowance. In the case of plant, the 20 per cent. investment allowance will year by year give the firm more relief than it would have got with the 20 per cent. initial allowance, but definitely less in the first year than it would have had with the 40 per cent. initial allowance.

Perhaps the Chancellor will confirm whether that is correct. If it is correct, the Chancellor is breaking through a fundamental tax principle, and yet doing it in a way which will give less help to the really needy cases than the 40 per cent. initial allowance would have done.

We are entitled to ask what has driven the Chancellor to override the advice of his own Inland Revenue Department and go to the rescue of private enterprise in this rather panicky fashion. On his own showing and in his own judgment, private industry has become so lacking in confidence under a Tory Government that even the heavy cuts in Profits Tax, standard rate of Income Tax and the restoration of the initial allowance last year have been insufficient to wake it up. That is a remarkable confession. We have always been told that, no matter how reactionary and bigoted a Tory Government might be, it would at least inspire confidence in the business community. One had to make terms with the devil, as it were, because he was supposed to have some control over the weather.

But look what has happened. Under the Labour Government, despite the alleged crushing taxation, and despite the Tory propaganda abroad which did not help the progress of Britain at that time, private industry was continuously seeking to invest far more actively than physical resources permitted. Now, for the first time since the war, under a Chancellor who boasts so much of the confidence which he inspires, on his own showing, physical resources are lying unused and private industry has to be given this unprecedented stimulant. The stimulant is given neat, in an utterly non-selective and non-discriminating way, which we believe goes much too far, even if we accept the Chancellor's own argument that he has now reduced British industry to such a state of despondent lethargy that only desperate remedies will stir it up.

However, to give the Chancellor what praise is due, I congratulate him on having at least excluded so-called business motor cars from the investment allowance. Incidentally, that in itself shows that it is possible to discriminate between one type of purchase and another. However, if he does that, why does he still allow the initial allowance to be used for a purpose—for which it was never intended—that is, for buying what we all know are to a large extent really private cars? The purchase of such cars with the help of the initial allowance has became something of a scandal.

The Chancellor thought I was not making a very serious point when I argued that a year ago. Perhaps he thought that it was only done on a very small scale. But we now have this remarkable evidence. When the initial allowance was suspended in the years 1951–53, there was a remarkable drop in the total sales of oars in the home market. Since it was restored a year ago, not merely has there been a positive boom in the home sale of cars, but the actual increase of sales in the home market has, according to the Economic Survey, exceeded the total increase in new industrial building and installation of new plant by all industry. That is a remarkable fact. If the Chancellor denies that this has any connection with the initial allowance, perhaps he will tell us tonight, or at some other time, how many motor cars sold in the home market in the financial year 1953–54 were actually purchased partly with the help of the initial allowance.

What stands out, however, from today's debate as the most objectionable of the Chancellor's proposals is his free gift to owners of family businesses by the reduction of the Estate Duty. Not merely has "The Times" condemned this concession, but even the "Financial Times," which I am sure he reads, on 21st April was astonished by the Chancellor's generosity to the owners of these businesses. The "Financial Times" said: The Chancellor was undoubtedly generous in his Budget, but the bare bones of the Resolution obscured his intentions. He has been more than generous in the Finance Bill. We have had no explanation today from the Treasury Ministers why the Chancellor has departed from the really crushing conclusion of the Inland Revenue in a Report which was issued in July, 1951. The Financial Secretary this afternoon did not deny the main conclusion—and, of course, these were conclusions and not recommendations—of that Report that, omitting the finance businesses, in less than 1 per cent. of the cases examined was it necessary to entrench on the trade assets of the business in order to pay the duty. The right hon. Gentleman said that the percentage rose to 25 in the cases of estates over £10,000.

Mr. Boyd-Carpenter

In the case of businesses in excess of £10,000.

Mr. Jay

In the case of businesses over £10,000, he said that it rose to 25 per cent. He did not say how many of those cases were manufacturing businesses, nor in how many the trade assets were affected to any noticeable extent. Over the total cases, he will remember that he said that these percentages were very small. He also said that many new businesses had been built up since 1948, when the Report was made. That seems an exceedingly weak argument. He might have added that since 1948 there has been founded a special financial institution in the City for lending aid—in the tiny residue of cases where there really is any serious difficulty.

But even if, after all that, there were a few family businesses which had to change hands because of death duties, that would not necessarily be a disaster for the nation. Indeed, possibly in just a few cases a little new blood might even be beneficial.

I should like on this point to ask the Chancellor two questions. First, can he quote, even now, one case—we have asked him ever since the Budget—where, in the words of his own Inland Revenue Department, a manufacturing business has been broken up by the operation of the death duties"? Second, so that we may know what this concession really means, would it mean that if a firm like Morris Motors, which was for many years a private company, almost solely owned by Lord Nuffield—I take this simply by way of illustration—had remained in that position until the death of the owner and had then been worth, perhaps, £30 million or something of that order, this change would in such a case give a relief equal to 45 per cent. of the duty on a business of that kind, which might well amount to £10 or £15 million to one individual? The Chancellor should tell us whether that would be the effect of the concession.

In our view, this Bill contains great scope for Amendments during the Committee and Report stages. Many can be found in the Second Report of the Royal Commission on Taxation, which was mentioned by the hon. Member for Orkney and Shetland (Mr. Grimond) but was unaccountably overlooked by the hon. Member for Edinburgh, South (Sir W. Darling), who, I see, has now left us.

Sir W. Darling

No, I am here.

Mr. Jay

The hon. Member did not refer to the Commission's Report in his remarkable statements about the Income Tax. That Report has made many proposals which, in our view, are opportune and some of which ought to be incorporated in the Bill. Being human, we on this side cannot help being gratified that the Report's two most important contentions are almost precisely those which we have argued with particular emphasis in the debates on the last two Finance Bills.

Both the Majority and the Minority Reports conclude that the two chief defects in the present structure of Income Tax on individuals are, first, that it goes much too far down in the scale and taxes oppressively and expensively much too large a number of small people. It is remarkable that one-third of the individual Income Tax-payers yield between them only about £40 million out of a total revenue of something like £1,500 million from the whole tax. Secondly, as I have argued myself almost ad nauseam, the large family is grossly overtaxed compared with the single owner and the married couple both earning and without children.

Both the Majority and the Minority Reports make many interesting suggestions for putting these two defects right. I prefer the minority proposals to those of the majority, but we must examine these carefully in the course of our debates, particularly the proposals for a specific minimum relief and also those for giving assistance to the large families.

But most important and most remarkable is the Commission's cogent and unanimous refutation of one of the basic dogmas of the Tory party that Income Tax is a heavy and serious disincentive to work and effort throughout the community. Hon. Members have indulged in this propaganda so often that they have almost convinced themselves of its truth. No sensible person would deny that the Income Tax affects various people in various ways. We have always argued that hon. Members opposite have grossly exaggerated the disincentive effects. On this vital topic, which is one of the greatest issues dividing the main political parties, we have now the most dispassionate and comprehensive investigation since the Colwyn Committee of 30 years ago; and it is backed, as the Colwyn was not, by a thorough inquiry among large samples of ordinary workers by the Social Survey. The Commission, which was probably not predisposed to this view, came to the unanimous conclusion that Income Tax, even at the present levels as maintained in Clause 13 of this Bill, was no disincentive to work. It says: We are led therefore by all the evidence we have received to the conclusion that, so far as wages are concerned, the economic effects of the tax system and its influence on work and output are much less important than some of the witnesses have supposed.… Again, speaking of the claim that marginal tax rates are serious deterrents— which is an argument many of us from time to time have used—it says: Fortunately, our inquiries have shown that such disincentive effects as do exist are not sufficiently serious to justify A major upheaval in the tax. I am not arguing that we should never make changes in Income Tax. I am in favour of exempting a great many of those now paying at the lower levels; but I think we all ought to pay attention to the conclusions of this Report.

The report of the Social Survey—and I think this is perhaps even more interesting—shows that only a small proportion of Income Tax-payers themselves are prepared to say that Income Tax is a deterrent to work. This is perhaps even more surprising because we all dislike paying Income Tax and, therefore, we are all inclined to blame all sorts of things upon it.

Mr. Remnant

The right hon. Gentleman should ask them.

Mr. Jay

If the hon. Gentleman looks at the report, he will see that those asked by the Survey placed Income Tax as a deterrent to effort fourth in order following lack of materials, poor working conditions and poor management. Even more interesting is the fact that 22 per cent. of the women and 27 per cent. of the men were actually prepared to state that they had been induced to earn more because of the Income Tax— for the reason, in the words of the report —these are not my words but those of the report— If a man is required to pay tax thus reducing his income, he may seek to compensate by earning more, by working faster or working more overtime when this may be possible. I do not think it affects everybody in that way, but we have evidence here that a certain number of people actually say that it does.

So we have this conclusion in the Survey: … the levels of taxation within present limits do not inhibit or induce any significant proportion of the working population to modify their attitude to their working behaviour. Hon. Members opposite may say, "That may be true of the wage earner, but all the same the higher salaried earners and the professional and managerial workers are undoubtedly far more seriously affected." But in paragraph 149 the Commission also unanimously say this: … we see no evidence that the higher income earners are specially affected by disincentive. Hon. Members will no doubt read this report and think about it. It is concerned with the Income Tax on individuals and not with Income Tax on profits. Its conclusions must be seen in conjunction with the equally interesting fact that in the past year, after all the Chancellor's cuts in his "incentive" Budget in taxation on profits last year, private industry has been less inclined to invest than in earlier years of higher taxation under the Labour Government. The Royal Commission's Report, taken with that lesson, is a powerful vindication of the system of progressive direct taxation, which has been built up in this country under various Governments during and after the war.

I sympathise with some hon. Gentlemen opposite, who evidently feel that they have had their one serious political argument demolished by this distinguished Commission. But I am sure they will be ready to accept its conclusions in a broad, non-party spirit. At any rate, it is in that spirit, and in the light of those conclusions, that we shall have to debate these issues in the future; and that we shall have to amend this Bill over the coming months. It is also in that spirit, I am sure, that the Chancellor, as a wiser and a sadder man, showing penitence for his past errors, will address the House tonight.

9.27 p.m.

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

Before I deal with the right hon. Gentleman the Member for Battersea, North (Mr. Jay), I want to refer to an important development in our national affairs which will probably be welcome on all sides of the House. That is, that our gold and dollar reserves have shown during the month through which we have just passed a very considerable increase, amounting to no less than 135 million dollars. This brings our gold and dollar reserves over the £1,000 million sterling mark. [HON. MEMBERS: "Hear, hear."] I am glad to note the pleasure with which this has been received, because it is a matter on which the safety of the employment of our people depends. I want to make a technical announcement, namely, that the sterling resources of the Exchange Equalisation Account will now need to be increased, and so a further increase of £300 million sterling will be made to this Account in the near future. That is what has happened in the past. As right hon. and hon. Gentlemen opposite will know, according to the rise and fall of the reserves, the Account has to be supplemented, or automatically decreases in that way. We can refer to that on another occasion, but I wanted the House to know that at the earliest possible opportunity. An announcement was made this afternoon.

This is, I think, the result of sound policies pursued within the sterling area. I refer not only to the soundness of the policies here, but to policies of the sterling area Governments. In that at least, even if we have to pursue an atmosphere of dialectical disagreement this evening in order to keep up the spirits of hon. and right hon. Gentlemen opposite—which I shall be glad to do in a few minutes—I think we can join together in saying that the sterling area countries, in which we are included, have pursued policies that have led to this result.

Hon. Members will want to know whether there is any speculative element in this movement. I cannot give any categorical reply, but I have made careful inquiries and, as far as I can make out, the increase during April flows from commercial and financial transactions of a normal character. It represents undoubtedly genuine confidence in sterling, in London as a place to have balances, and in sterling as a currency to use. We can, therefore, draw satisfaction from this result, provided we do not allow it to obscure the hard task which is still before us and to which I drew attention in my Budget speech.

During the last few days, the House may be interested to hear, there has been a running to sterling which may be considered more speculative, though we are too near it to be sure. I always try to give the House the latest information in my possession, and I want to say this, that even if there is this minor speculative element—which I do not think has been mirrored or reflected in the month as a whole—this is largely a reflection of the strength of sterling, and is based partly on some unfounded rumours of what we might or might not have intended to do when the dollar rate was at its highest. I thought it wise to make these observations, which I think put this movement into proper perspective, and to give the House the latest information in my possession.

In view of the many subjects that have been discussed on the Finance Bill, I do not think it would be out of order if, for one moment, I should say that I do not think that anything has happened since our debate on the Budget Resolutions to lead me to change my view at all about the economic outlook or about the kind of Budget that was needed on this occasion, or indeed to alter my diagnosis of the future trend of the American economy. All the facts that have come to my attention since my diagnosis and judgment have confirmed me in the judgment that I made, in the policy that I recommended and in the line which I think this country ought to follow in the coming year.

Reference has been made by the right hon. Gentleman to popularity. Although every effort was made to make the Budget as uninteresting and as much a failure as possible, it is a remarkable fact that the British public recognises an honest thing when they see one. They have realised that the policies carried out during the past year in fact needed so little adaptation and so little change that we have been able to carry on very much as before.

Mr. Jay

Did the right hon. Gentleman say that every effort was made by him to make the Budget as unpopular as possible?

Mr. Butler

No, I simply made a straightforward statement of the national account, and the right hon. Gentleman and his Friends made every effort to make It unpopular. That is one of the objects of Opposition, but the extraordinary quality of some of their criticisms in this debate and on the Budget Resolutions shows what a poor job they are making in the country of these criticisms. So tedious and uninteresting are their arguments that the House has been barely full for one minute during this debate.

The right hon. Gentleman referred to the disappointing lethargy of private industry. I cannot call it that when the latest figure for industrial production has reached between 132 and 133, which is an increase of between 6 per cent. and 7 per cent. over the figures for March a year ago. As these figures, taken with the rise in the gold and dollar reserves, show to any ordinary intelligent man and woman which way we are going, it is not surprising that the country is well satisfied with and confident in the policy that we are pursuing. Further, unemployment has fallen between February and March by 40,000, and I understand that the April figures are likely to show a further substantial decrease.

If I may speak frankly to hon. and right hon. Gentlemen opposite, it is really a rather extraordinary change of tune from the old days, when we were told that under the Tories there would be nothing but unemployment, that now that we in this Government are running a Budget and our Finance Bill, not on a gold standard but on an employment standard, and maintaining employment at a higher level consistently than it has been maintained for years, not a single word of acknowledgment comes either from hon. and right hon. Members opposite or from organised labour at this time. I hope that when they visit their constituencies my hon. Friends will put these points to the electorate and that they will receive the advantage of the acknowledgment that they deserve.

Really, when I read the pages of the newspaper of which the right hon. Gentleman is such an ardent scribe, I wonder how the British public are much longer going to tolerate being told that they are being driven into misery and ruin by a hard-faced medieval Chancellor. It really is such a ridiculous picture that I go so far as to say that, in face of the benign policies of Her Majesty's Government, the propaganda of the Labour Party is so ridiculous as not to be believed on any hustings whatever.

I now want to refer to one or two points which have been made in the debate. My hon. Friend the Member for Leominster (Mr. Baldwin) referred to the agricultural aspect of our affairs, and I shall not have a further opportunity of referring to them this evening. There is no doubt that the 10 per cent. on buildings which the investment allowance will bring in as a whole will be a considerable improvement.

The hon. Member for Orkney and Shetland (Mr. Grimond) asked about the cost of the investment allowance, and I shall attempt to give some indication of that. He said that the duller the Budget the better it was. I think that shows what a highly intelligent man he is. His hon. Friend the Member for Bolton, West (Mr. Holt) made some extremely enlightened remarks about the small businesses. I hope that we may shortly welcome the two hon. Members to our side of the House. My hon. Friend the Member for Horsham (Mr. Gough) raised a question of entertainment expenses. I am not prepared to go into the matter now. The authorities are acting on a constitutional basis, and I think they are aware of some of the difficulties which have arisen in the administration of this matter. At any rate, the case has been reviewed between the authorities in question and myself. I do not wish to go behind the constitutional position but to say that there is humanity and, above all, confidence between the authorities and their victims and that only by confidence can these sorts of controls be maintained in a happy atmosphere.

My hon. Friend the Member for Edinburgh, South (Sir W. Darling) said he would like a Conservative Chancellor to be more economical. That is precisely the view of the Conservative Chancellor and, as one of the main objects of my Budget speech was to lay the situation quite clearly before the public, I understand that I have now gained an extra ally in the task we must all carry forward of cutting and reducing unnecessary Government expenditure.

The hon. Member for Sowerby (Mr. Houghton) made some remarks with which I shall be dealing in the course of the technical reply to one or two points which have been raised and my hon. Friend the Member for Kidderminster (Mr. Nabarro) came in very much in support of the enlightened step I have taken in giving some easement to family businesses.

I wish to deal with some of the technical points raised by some hon. Members opposite. We always listen with pleasure to the suave and able speeches of the right hon. and learned Member for Neepsend (Sir F. Soskice). We remember that on one occasion he batted for the whole night when he was a Minister in the Labour Government in charge on the Finance Bill. I certainly feel Law Officers of such stamina to be an invaluable asset to any Chancellor. On this occasion, unfortunately, while he was in my view—

Mr. Gaitskell

Are we to understand from what the Chancellor has said that that is an explanation of the recent comment of the Attorney-General that he is shortly going to resign?

Mr. Butler

I feel that the right hon. and learned Member was correct in his general technical approach to the problems of trying to compare the rival influences and effects of the investment allowance and initial allowance in respect of buildings. We shall go into this in more detail, because I was very much impressed by what was said by the hon. Member for Ashton-under-Lyne (Mr. Rhodes) and I feel that this aspect of the matter wants a great deal more investigation both before and at Committee stage. I have nothing particularly to quarrel with about the diagnosis. The advantage comes eventually and particularly in the long run in the disposal of the buildings.

Where the right hon. and learned Member did not seem to be absolutely right was on the position, as I see it, in regard to plant and equipment. In the case of plant and equipment the right hon. and learned Gentleman was, I think, under some confusion in his mind as between the straight-line basis and the reducing balance basis of accounting. In the case of any plant and equipment in respect of which the reducing balance basis is taken —and it is open to anyone to choose this basis for plant—the initial allowance is deducted in computing written-down values, and therefore reduces the annual allowance in subsequent years. The Investment allowance—this is where I think the right hon. and learned Gentleman went wrong—is not so deducted, and accordingly, under the new system, future annual allowances will be bigger than under the old system.

Accordingly, the benefit under the new allowance will begin to accrue in the year after the change to the new system, and will gradually approach over the years to the full 20 per cent. benefit. I think that the mistake which the right hon. and learned Gentleman made was in imagining that the relief and improvement would not accrue to the end of the time, whereas, in fact, on the basis of accounting I referred to, which can be adopted in respect of any plant and machinery, it will accrue gradually and firmly during the lifetime of the plant. I think it important to answer the right hon. and learned Gentleman, as it would be a pity, in view of the fact that the object of this was to help investment in industry, if any wrong idea got about as a result of the right hon. and learned Gentleman's examination of the matter. I have taken up the one point on which the right hon. and learned Gentleman was not quite correct in giving his analysis of the position.

The right hon. and learned Gentleman suggested that because finance is short there is no need for this scheme. I find, from the contacts I have had with industry since the scheme was announced, that it will be a definite inducement to industry to invest, and has been so accepted. As our objective, and equally the objective of hon. and right hon. Gentlemen opposite, is to improve investment in private industry, let us all hope that it will have that effect because that is what is wanted at present.

I cannot accept the strictures made on private industry by the right hon. Gentleman and his friends. I have given the figures of improved production, and I do not think it is fair to laud the nationalised industries, saying they are only too keen to invest. The coal industry invests on the authority of the Consolidated Fund, and the others have encouragement from the Government to raise the money they need. We are keen to help them, and we are keen to encourage private industry. I do not think it lies in the mouths of hon. Gentlemen opposite to criticise private industry when it was largely due to the withdrawal of initial allowances by my predecessor that there was a distinct downturn in private industry. After initial allowances were restored, a great deal of that investment has been creeping back. The objective of this plan is to increase investment. Let us hope that it will work.

The right hon. and learned Gentleman made the point that it was a pity that the investment allowance was not more selective. My answer is that the tax machine—and this is a tax relief, not a subsidy—if it is to work with reasonable smoothness and efficiency, can deal only with broad general classes of expenditure capable of fairly precise definition in a Finance Act. It is revealing no secret if I tell the right hon. Gentleman that my colleagues, the Treasury Ministers, and myself, examined very carefully the principle of whether we should make this allowance more selective. We decided to eliminate motor cars and second-hand plant and machinery, but our attempts to make it more selective were not successful. The real answer to hon. Members opposite is that this is not a subsidy; it is a scheme of tax relief. It is not a subsidy to relieve a man from some of the mulcting that he has had to suffer at the hands of Inland Revenue. It is a genuine tax relief, and as such we welcome it. As our general objective is to increase production generally this is the best way we can undertake its introduction.

The right hon. and learned Gentleman made some fun of Clause 21. He will be interested to hear that the very wording he objected to in that Clause was first put before me by Parliamentary Counsel as the following fraction in order to get the financial computation of the aid to crematoria under the Tucker Report: grave spaces available for sale at that date/grave spaces available for sale at that date + grave spaces already sold It is that Keynsian fraction which I have looked up and which would have rejoiced the heart of Maynard Keynes, whose great work on money and employment forms the basis of the fraction to which the right hon. Gentleman takes exception.

Now I come to the Estate Duty on family businesses. Really, there has been a great fuss and to-do made about this. It seems to me that the great difference between right hon. and hon. Gentlemen opposite and we on this side of the House is, judging by what the right hon. Gentleman says about the Royal Commission on taxation—about which I shall have a word to say in a minute—that he seems to think that taxation is a positive blessing. And as for Estate Duty and Death Duty, he is absolutely horrified that I should have reduced it at all for anyone. Frankly, we take a completely different view, and when we see an opportunity of removing estates of a legitimate sort from the ravages of Estate Duty, we are only too thankful to have the opportunity of doing so.

This has been represented as a sort of mysterious action on my part, and I will tell the House frankly how this reform arose in my mind. It arose from the examination of the assets basis of valuation. The assets basis of valuation, which is not a subject I would normally wish to discuss at 9.45 p.m., is, in my view, one of the most tedious subjects in the world, and I suggest that I should reserve my obiter dicta on the subject until the Committee stage when the House is less full. The assets basis of valuation simply means, in simple English, that for death duty the assets of a business are assessed instead of the general price the shares would fetch in the market.

Great exception has been taken to this by hon. Members not only on this side of the House, but on the other side as well. I thought it necessary unfortunately to adhere to the assets basis of valuation, particularly for companies such as were referred to by the right hon. Gentleman under Section 55 of the 1940 Act, to which this particularly refers. I decided to adhere to the assets basis of valuation, and that is a very unpopular step. Having decided that, I thought I could mitigate it in some respects for plant and machinery when assessed for Estate Duty on businesses covered by Section 55 of the 1940 Act.

The right hon. Gentleman asked whether this applied to businesses other than those assessed under Section 55. The answer is that it also deals with businesses carried on by individuals either alone or in partnership. The right hon. and learned Gentleman seemed at the time to think it was a good thing, but the right hon. Gentleman—the "bogyman," who keeps late hours to excite his followers to actions that they might not wish to take—makes out that I am trying to relieve Morris Motors of £15 million or more in taxation. The answer is, broadly, as I have told the House. As I shall tell the Committee when we go into more detail, actually I think it will cost half-a-million in this financial year and at the most £1½ million next year.

This is accounted for by the fact, firstly, that there are practically none of these mysterious businesses which will yield that amount left which are not public companies, and in any case this is designed to deal primarily with Section 55 businesses. It deals also with businesses carried on by individuals or partnerships. I suggest that we may pursue this matter further in Committee stage. I do not wish to put a limit on the size of the business, but I will examine all these aspects before and during Committee stage, because my object was to give what were called family businesses the same sort of relief as I am trying to give by the investment allowance in another field.

Mr. Jay

Would the right hon. Gentleman answer the precise and relevant question I put to him? Would this concession apply to the case of a one-man private company worth some millions, as in fact Morris Motors were at one time?

Mr. Butler

It would apply, as I have indicated, to any business carried on by individuals alone or in partnership, as well as to anything under Section 55 of the Act of 1940. That is why I stated it, because I was asked by the right hon. Gentleman whether it did or not. That is the position.

Let us pursue the matter in more detail, but meanwhile I am very well pleased now by the reception given to this reform not only by the hon. and gallant Member for Argyll (Major McCallum) and the hon. Member for Kidderminster (Mr. Nabarro) and others in this House, but also by many businesses of a small nature in cities such as Birmingham and elsewhere where there are small businesses. They realise that this is a genuine and honest attempt to help them at a time of great difficulty for them.

I apologise for the next subject with which I have to deal, which is Purchase Tax valuation. Really, the subjects in this Bill are not very appetising. The right hon. Gentleman the Member for Batter-sea, North asked why we have not implemented the Minority Report of the Grant Committee dealing with uplift—not, I might hasten to say, religious or moral uplift but the uplift associated with Purchase Tax. The right hon. Gentleman was obviously very interested, because his wife signed the Minority Report. I should like to express my thanks to her and to the wife of one who is of great assistance to me in my economic work who also signed the Minority Report.

I am sorry that I am unable to go all the way with the right hon. Gentleman and his family. The main objection to my going all the way is one of expense. It will cost about £5 million next year to implement the Majority Report of the Grant Committee, though not so much this year, and it would cost £15 million to implement the Minority Report.

Therefore, I frankly could not face the expense. I also think that implementing the Minority Report would give rise to inequity as between big and small retailers. That is the point—to do him justice because, whatever his personal affection may be, the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) is intellectually pure and honourable—which was recognised by the right hon. Member for Leeds, South in the course of our debates last year. He knows the difficulties and I hope that he will remain on friendly terms with his right hon. Friends and support the Majority Report.

The reason we cannot accept the Minority Report in the case of price maintained goods, which all of us know is a very complicated aspect of the Minority recommendations, is that they would mean that articles sold to the public at the same fixed price would often carry a different amount of tax according to the quantity bought by the retailer, and in many cases the differences would benefit neither the consumer nor the revenue but the retailer himself.

It is for these reasons, which are technical and which reflect in no way upon the authors of the Minority Report, that we have decided to accept the Majority Report. I think, looking at the various types of trader—for example, let me look for a moment at the retailers, the big stores and those who are involved—that it will be only the wholesalers, who I think may misunderstand the effect upon them, who will feel the results in any way adversely of the Majority Report.

Therefore, I hope that this rather controversial question of whether we accept the Majority or the Minority Report of the Grant Committee will pass equably and peacefully through the Committee. Frankly, I cannot afford the Minority Report, whatever merits it may have.

I want to refer to the Royal Commission on Taxation. The right hon. Gentleman asked me some questions about the Commission. Had it not been mentioned frequently during the debate, I had hoped that it might have been not in order, because once we start to discuss it I do not see where we shall end. I think that the House will be with me in saying that service on a Royal Commission is an arduous task and that those who undertake it deserve our thanks. I am sure that right hon. and hon. Gentlemen on both sides will join with me in expressing our appreciation and gratitude to Lord Radcliffe and the members of the Commission for the second instalment of the results of their labours, which I dare say are likely to continue for some time.

I do not want to mislead the House into thinking that the House—or later the Committee—are likely to have very great success in getting those recommendations either seriatim or passim, individually or generally, accepted in this year's Budget.

"The Times" has been quoted against me. I would quote it in reply to the right hon. and learned Gentleman by saying that that worthy organ referred to next year's Budget as the time when these great reforms might be introduced. I cannot forecast whether they will be introduced in next year's Budget or when.

The timing of the Royal Commission's Report was not very easy for me; it came out almost exactly at the time of my Budget—just after it, in fact, because of the printing. It was produced at that time because that was when it was finished. It is a slightly awkward period, but we should be obliged for the many proposals made. Some of them are costly compared with the balance of the financial situation which I described in my Budget statement.

One thing which the Royal Commission has not done is to indicate a priority —what it thinks should come first in its recommendations. The Commission intends to do that, I understand, in its final or next report. For all those reasons—of cost, of priority, of timing and of the need thoroughly to digest what has only just been produced after so many years' work —I do not want to raise false hopes in the House or in future in the Committee about implementing the Commission's findings this year. By all means let us look at them carefully and give them the attention which they deserve, and then see what we can do.

I have a few other details to mention. The right hon. and learned Member for Neepsend mentioned post-war credits and the hon. Member for Sowerby asked whether they could be negotiable. I think that is very difficult. I was asked what the cost would be of paying on death. The cost would be approximately £75 million in the first year and £5.5 million in the next year. Those figures are beyond what I think would be wise this year. For example, I do not think the economy needs that injection of spending power. I think the level upon which I decided, which was put to me by my right hon. and hon. Friends and right hon. and hon. Members opposite, is about as far as we are right to go, and the figures which I have just mentioned would be too much to envisage. That is the answer to the right hon. and learned Gentleman and others who put that question.

There has been a certain amount of discussion on the Entertainments Duty. My hon. and gallant Friend the Member for Argyll wants the Highland Games let off, and it is very touching that he should remind me of one of those rare occasions when I visited these games during the short holiday period vouchsafed to me. I cannot give any undertaking to the House that I can take the tax off the Games.

We have had a very controversial time about this question. I have been asked what is the proportion of revenue from sport compared with that from the cinema. Cinemas will in future bring in some £34.5 million. Theatres will bring in some £2.52 million. Sports will bring in some £3.5 million, including racing, which brings in about £1½ million. The ratio of the relief on cinemas—namely ¾d.—to the relief given to sport in this year's Budget is almost exact. We try to keep the ratio of relief the same if we can, and I have given as much relief to sport as I can, but in view of happy memories of time spent in my hon. and gallant Friend's constituency let us certainly discuss these games, boxing and many other controversial matters in the course of the Committee stage of the Finance Bill.

I am glad to say that the Finance Bill is so beautifully drafted that there is only one Clause on the subject, and I hope we may not spend more than a day or a night on it when we come to Committee. I think it would be wrong of me to give any suggestion to the cinemas or any other interest, having done my best to deal with the matter this year, that I can hold out great hopes of further leniency in the course of the Committee stage.

At the very end of my remarks, I come to the matter of the human question which has been brought up frequently in the debate—why I could not do more for the old-age pensioners. That would not normally have been included in the Finance Bill, but it has been mentioned by so many people that I must mention it here.

The "Daily Herald," in its leader of 30th April, continued a campaign which I found at first odious, but which now, owing to the fact that it is brought out almost every day, I find quite familiar and even enjoyable. It said, in brutal words: The Government is grabbing back from the mass of the people what Labour gave them. If there ever was any more unalterable nonsense which passed for political controversy in any newspaper in this country, I should like to see it or to hear of it. In my first Budget and Finance Bill, I managed to give reliefs involving increased family allowances, help to old-age pensioners and help to ex-Service men. It is true that it was balanced by a much needed economy in the sphere of the food subsidies, but it is also true that, in my second Budget, relief was given on Purchase Tax and Income Tax. This is not grabbing something back for the rich. If so, there must be 16 million more rich people in this country, and that is why, I suppose, we have a Conservative Government. This is the sort of nonsense which should be shown up, not only at this Box but also in the country.

The truth is that it is well known that the reason why the old-age pensioners were not included in this Budget is because the Budget is not necessarily the time to do it, and, secondly, as expressed by Mr. George Woodcock in his B.B.C. broadcast just after the Budget, when he said, perfectly sincerely: I think it is generally acceptable in this sense"— that is, the omission of the old-age pensioners— that these inquiries are going on"— to which I referred in my Budget statement— and we of the T.U.C. are preparing evidence for this Committee dealing with the implications of old age. Then, there is the report and so on, so at least it is reasonable to say 'I will not deal with that at this stage'. That is precisely, in human language, from one of the recognised leaders and experts of organised industry—who expresses many criticisms of me in other ways, to which I do not object—the human, commonsense reason why the old-age pensioners were not dealt with in the Budget—not from the lips of a brutal Tory Chancellor, but from the lips of one who should appeal to hon. and right hon. Gentlemen opposite. As I have said previously, this is a matter which must remain ever with and in the minds of any human person, and, when we have a little more of the picture before us, then might well be the time when we can take action on this matter.

I have tried to answer points in the debate which have been put forward, on the part of the right hon. and learned Gentleman, quite reasonably and in clear terms, and, on the part of the right hon. Gentleman who wound up for the Opposition, in jovial and political terms, and some of the points put by hon. and right hon. Gentlemen opposite, but I must say they have not had much of any substance to say about it. The Budget is standing up for itself because it is known to be right and because it is a triumphant vindication of the financial policy of this Government. Our gold and dollar reserves are rising in such a manner as can only betoken the utmost confidence in sterling. Production is rising and employment is being maintained, and this country is going forward with hope and confidence in the future.

Question put, and agreed to.

Bill accordingly read a Second time.

Committed to a Committee of the whole House.

Committee Tomorrow.