BUDGET PROPOSALS AND ECONOMIC SITUATION

HC Deb 22 April 1955 vol 540 cc485-580

11.7 a.m.

Mr. Harold Wilson (Huyton)

This debate so far, to judge from the speeches we have heard from the benches opposite, has been proceeding against a background of an odour of dissolution. The complacent speech of the Chancellor of the Exchequer on Tuesday was very fully dealt with by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and by other hon. Members on these benches who have spoken since that time.

I do not intend to deal with the Budget points in the right hon. Gentleman's speech, for the reason that they have been so fully dealt with, but I think it is worth noticing that in this morning's "Manchester Guardian" some new estimates have been made—I believe they were made by a firm of stock jobbers—showing exactly how the Chancellor's proposals will assist some of the big financial companies in this country.

It was my right hon. Friend who pointed out on Wednesday that about £21 million would go to only 300 companies. The calculations have been made for separate individual companies on the basis of last year's balance sheets, and I see that the estimates given in the "Manchester Guardian" show that from the Chancellor's largesse this year Unilever will get no less than £1,064,000 tax remission, I.C.I.—and this is on the basis of figures a year old, so presumably this year's figures will be better—will get a remission from the Chancellor of £760,000; Courtaulds will get £435,000; and Distillers £423,000.

These are the amounts that have been given away to the big monopolies, while in my constituency and in the constituencies of us all a family man with two children, earning £12 a week, will get a concession of 3s. a week. [Laughter.] I know that this is very amusing to the Chancellor. His friends are doing rather better than ours are out of this Budget. As my right hon. Friend pointed out, the 3s. a week that the family man earning £12 a week is to get will be subject to the docking of another 1s. as a result of the right hon. Gentleman's actions in the field of National Insurance contributions.

Yesterday, we had a speech from the Minister of Supply, who was standing in for the President of the Board of Trade. We all, of course, regret the absence of the President of the Board of Trade and the reason for his absence. Many of us yesterday regretted that the right hon. Gentleman would not be here to make a statement about the Lancashire cotton industry, but it is now clear from what the Minister of Supply said that even if the President had been here we should not have had the statement anyway.

It is well known, not only in the Committee but in Lancashire, that the Government's record of dealings with the cotton industry over the past nine months has been a continuous record of delay, of evasion and of cynical and callous neglect. As long ago as 8th July last year the Cotton Board appealed as a matter of urgency to the Board of Trade for some action to deal with these abnormal imports of grey cloth—8th July last year, more than nine months ago. Six months later, both employers' and trade union representatives were coming along to press the urgency of the case on the President of the Board of Trade. In February the Minister of State, Board of Trade, paid his visit to Manchester, which I am sure he will never forget, when both sides of the industry impressed upon him in very strong language indeed their views about the failure of the Government to take action to deal with this problem.

The Chancellor of the Exchequer went to Manchester and gave them some hope that the Government were considering their problems and would do something about them. When it became clear that the Government would respond to nothing other than political pressure, then political pressure started. Violent resolutions were passed not only in trade circles but even by local Conservative parties. The Conservative Association in Middleton passed a resolution which was quoted in the House on 9th March by my hon. Friend the Member for Stalybridge and Hyde (Mr. Blackburn). The resolution reads: This meeting … records its disappointment, in view of the visit of the Chancellor of the Exchequer, the President of the Board of Trade and the Minister of State, that apparently nothing tangible is being done to support the textile trade against cheap overseas competition …. This meeting further records that such inaction is likely to lead to unemployment. The Middleton Conservative Association passed the resolution unanimously at its annual meeting and it was given the greater authority by the fact that it was stated in the local Press that the resolution had been drafted by the hon. Baronet who sits as Member of Parliament for Middleton and Prestwich (Sir J. Barlow). Of course, the hon. Baronet backed his strong words on that occasion by voting the following week against our much milder Motion criticising the Government's lack of action in the cotton situation, and I have no doubt that he is now in his division and will be spending the next few weeks there soliciting votes in support of the proposition that Conservative freedom works.

We next tabled a Motion in the House, and then the Government had to do something. They asked the Cotton Board for its views—this, seven or eight months after the Cotton Board had given the Government its views. They then arranged this highly-publicised window-dressing at No. 10 Downing Street and got the Prime Minister to see the cotton leaders to try to sooth them down. From all the publicity surrounding the meeting it would appear that no Prime Minister had ever before met the representatives of the cotton industry. My right hon. Friend the Leader of the Opposition not only received deputations from the cotton industry at 10, Downing Street, but went to Harrogate to meet cotton leaders on both sides of the industry at a very big conference organised by the Cotton Board in 1949.

But, of course, Conservative leaders, knowing that the Prime Minister was on his way out, thought it would be a rather nice gesture to use him for this purpose of giving some degree of assurance to the cotton industry instead of producing any policy to deal with the problem. The former Prime Minister himself gave us to understand that a statement would be made before Easter—but no statement was made before Easter and we still have had no statement. All we have had is an assurance by the Minister of Supply that a statement will be made on a day convenient to Lancashire. What we understand by that is that if the Government have anything to say a statement will be made about 24th May; and if they have nothing to say, it will be announced on 27th May.

I think Lancashire is entitled to ask what is happening in the Government's relations with the Lancashire cotton industry. We have seen evidence in the last few weeks of still more seriously developing unemployment, still further falls in production, more mills closing down, many thousands of workers given what are euphemistically called extended holidays at Easter time, which we know is a form of extended short-time working. Yesterday, in the House, the Minister of Labour gave very alarming figures indeed of the loss of cotton operatives from the industry. The Chancellor knows this very well indeed after the experience of 1952: if these operatives are lost from cotton this time it will be more and more difficult to get them back if, in future, there is a recovery, as we all hope there will be, in the prospects and fortunes of the cotton industry. It may be that if this problem is overcome, as it will be when the Labour Government take over, we shall be attempting to meet world export demands as well as home demands with an acute labour shortage in the cotton industry and all the disruption which that causes.

Although the Government have been so secretive about what is going on, I think most people in Lancashire, at least, know what is going on. When the Cotton Board met the Prime Minister it recommended a system of quotas on imports. Everybody knows that, although the Government are very secretive about it. We made it clear in the debate on the cotton industry on 9th March that for our part we should view the proposal to introduce quotas with the utmost reluctance. Our reason for that was that we had a far better scheme which we put forward and which would solve the problem far more easily and without all the difficulties which quotas would bring. But we should, at any rate, welcome a system of quotas rather than a continuation of what the Middleton Conservatives described as the Government's "inaction."

I think it is clear that the Government have decided that they will not introduce quotas to protect Lancashire against this unfair subsidised competition, and the Chancellor obviously hoped to buy Lancashire off with his derisory reduction in Purchase Tax on certain textile piece goods. He told us that the reduction would be worth about £2½ million this year and about £3 million in a full year. It is very interesting to note that the figures which I gave earlier show that his total tax remissions to I.C.I. and Unilever almost equal what has been done for the whole of Lancashire at this time—and no one suggested that these great monopolies were in need of any help from the Chancellor at all.

The view was expressed in Manchester, I think, that not one spindle, in a single mill, will be kept going for a single month as a result of what the Chancellor has done in this Purchase Tax remission. We had emphasised the need for sweeping changes in Purchase Tax on textiles because, as has been said recently in Lancashire—and I think it puts the point very well—Lancashire is accustomed to changes in the market demand and to all sorts of shocks and has been able to meet them in past years because of her adaptability. If the demand for one class of goods changed, Lancashire could rapidly switch over to another. But at present there is no room for the exercise of this flexibility, because at one end of the trade, the coarse end, the market is completely dominated by the imports of Indian cloth while at the other end of the trade, the fine end, we are unable to make, either for the export trade or for the home market, those goods which carry this penal rate of Purchase Tax.

The Chancellor has made a partial remission of taxation on piece goods, but I think he knows from the representations made to him that even if he had gone the whole way, and had removed the tax on piece goods, that in itself would not have solved the taxation problem for Lancashire. The reason is this: as long as he kept Purchase Tax on clothing, it would be impossible for Lancashire to produce the two-fold poplin shirtings and all the rest which are not now being produced and which could earn considerable revenue in the export markets, including the dollar markets. We were hoping that the Chancellor would not merely sweep away the tax on cotton piece goods, but would sweep it away as well on items of cotton clothing.

It is probably true that the Government are doing their best to get a reduction in Indian tariffs on Lancashire exports to India. We wish them well in those endeavours. That would be a useful, small, contribution in Lancashire's export problems and would do a little to redress the very unfair balance on tariff treatment between this country and India in cotton goods. I hope the Government will be successful in those efforts; we all know what their difficulties are at present. But I want to repeat to the Chancellor that even if he is successful that still will not solve Lancashire's basic problem.

Lancashire's basic problem is caused by large imports of Indian goods in conditions which amount to unfair and virtually subsidised competition. No token, or even substantial, remission in tariffs on Lancashire goods going into India will, of itself, solve our problem at home. It will be a valuable and fair contribution to our export trade, but that is all one can say about it.

Why cannot the Government be frank with Lancashire about this question? Lancashire appreciates straight talking; what it does not appreciate is the long record of evasion and prevarication which we have had from the Government on this question. If the Government have written off Lancashire, why do they not say so? There is a strong suspicion in Lancashire—I shall not say whether I share it or not—that the mill owners did not contribute enough to Tory Party funds at the last Election. They certainly will not contribute much this time. The whole sorry story of the eight or nine months, combined with their neglect of Lancashire over three and a half years, marks the contempt in which the Government hold the cotton industry. Only at a moment like this does fear of electoral considerations sometimes drive them into some action. I hope they will be so driven.

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

Does the right hon. Member seriously maintain that Lancashire attaches no importance to measures which we took in 1952 to give advance orders of about £20 million to deal with the recession in that year and the restoration thereby, and by other means, of comparative prosperity after that to Lancashire?

Mr. Wilson

One of the wonderful things about the Chancellor is the way in which he is always ready to take credit for sweeping changes in world economic affairs. He knows quite well that the textile slump in 1952 was world-wide and was aggravated by the action of the Government. It was over the whole world, and when it ended over the whole world it also ended in Lancashire.

We had been pressing the right hon. Gentleman to do a number of things, one of which was to remove Purchase Tax at that time. We were powerfully backed by the right hon. Member for Blackburn, West (Mr. Assheton), who was still arguing the same case yesterday. The Chancellor did not do so; all he did was to advance a few military demands on a very small scale. We freely recognise that that was welcome in Lancashire, but the right hon. Gentleman cannot claim that it solved the problem of the 1952 recession. If he is hoping for any praise in Lancashire for what he has done this week, or if he is suggesting that he is solving the problem by his derisory concession on Purchase Tax, he will be very disappointed.

Turning from Lancashire to other aspects of the speech of the Chancellor, I think that one of the very significant things about the Budget—hon. Members opposite have sung very quietly about this—is the figures of Government expenditure with which the Budget is designed to deal. We remember that on 20th or 21st September, 1951—the day when the last General Election was announced—"The Times" carried an article by the right hon. Member for Chippenham (Sir D. Eccles), who is now Minister of Education.

That article pointed out how easy it would be for a Conservative Government to reduce Government expenditure by £600 million a year. The right hon. Member, in his campaign in Chippenham, made a series of speeches, one of which so impressed the Prime Minister that he gave directions for it to be circulated to every Conservative candidate and every Conservative candidate told the electorate how they would reduce Government expenditure.

What is the record of the Chancellor in this matter? I put a Question on Tuesday and, in reply, the Financial Secretary to the Treasury told us that on the basis of Exchequer issues the expenditure by the Government in the financial year just ended, compared with expenditure in the last full financial year when my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) was Chancellor had increased by £1,048 million—over a billion pounds. What of the pledges to reduce the expenditure by £600 million?

Mr. Butler

I never gave any such pledge and I happened to disavow it at the time.

Mr. Wilson

But the Prime Minister did and the Minister of Education did. All Conservative candidates all over the country did.

Mr. Kenneth Pickthorn (Carlton)

Not all of them.

Mr. Wilson

If one takes rather more comparable figures, we find from the White Paper on National Income and Expenditure that in the calendar year 1951 central Government expenditure was £4,050 million and, in the calender year 1954, it was £4,870 million, an increase of £820 million a single year between the two periods. Conservatives used to talk about groundnuts. They are learning a little about that kind of propaganda now, although I have no doubt that some of the more illiterate Conservatives who come to our election meetings will still have a word or two to say on that subject.

We recall that the total cost of the groundnut scheme was £36 million and find that on the Government's own figures the Chancellor is now paying in increased interest payments abroad—which get us nothing at all—£80 million more than in 1951. We find that he is throwing away to foreign money lenders in a single year more than twice as much as was expended on the whole groundnut scheme.

Mr. H. Hynd (Accrington)

That was not all wasted.

Mr. Wilson

As my hon. Friend says, that was not all wasted, though we have learned, perhaps, some rather expensive lessons from it. This year, with the higher Bank Rate, we must expect an increased outpouring of increased interest charges, which will be higher than in 1954.

I wish to turn to some of the questions affecting trade and industry which come out of the White Papers issued by the Government. Government spokesmen generally this week have been taking their tone from the Chancellor, and have been making light of the serious balance of payments situation with which the country is faced. I wish to recall one of the basic figures, to which, so far, the Chancellor has appeared to pay very little attention. If we take the United Kingdom balance of payments with non-sterling countries we find that whereas, in 1953, the surplus was £44 million, in 1954 we had a deficit of £109 million.

The serious thing about that was that, whereas we had a surplus in the first half of 1954 of £58 million, the deficit in the second half of the year was £167 million, making a net out-turn of £109 million for the year as a whole. As the Chancellor knows very well, those figures have worsened seriously in the first quarter of this year.

If we take the sterling area balance of payments with the non-sterling countries we find that, whereas, in 1953, we had a surplus of £325 million in 1954, the surplus was only £7 million. Once again, we had that very serious worsening during the year—a surplus of £171 million in the first half and a deficit of £164 million in the second half, making a net out-turn of £7 million. As the Committee knows, since then again there has been a serious worsening in our balance of payments.

I suggest that there is nothing there to justify the complacency of the Chancellor of the Exchequer, nothing to suggest that the irrelevant measures of 24th February will put the situation right. That, I think, has been shown by the January-March trade figures. Yesterday, we had an extraordinary argument from the Minister of Supply. He told us that payments in respect of trade precede the shipments of goods by two months. He said that it was all very well to talk about the serious trade figures in March but that they reflected the payments figures of January; and the more favourable payments figures for March would be reflected in improved trade figures, one presumes, in May.

That was the most fantastic argument I have ever heard advanced in this Committee. We know perfectly well that payments figures follow shipments of goods; they do not precede shipments. We know that the improvement in the payments situation in March was a temporary improvement due largely to a movement of "hot" money and short-term capital into this country. It did not in any sense reflect an improvement in the trading situation. How does the Chancellor think that a change in the Bank Rate would lead to an increase in exports in March, some of which were at the docks before the end of February?

Mr. Butler

I thought I had actually said that that was the case. I would not have tried to claim any such thing.

Mr. Wilson

I think the Chancellor understands this point fully, but I wish that before the Minister of Supply had left the Treasury the Chancellor had given him a little simple instruction on the point, because, obviously, he went badly wrong on it yesterday.

Basically, it is not short-term movements in finance that measure the economic position of the country: it is the movements in exports and imports. I think the Chancellor will agree with that, and would agree also that the figures for January, February and March have been very sombre indeed. In the first quarter of this year, our average exports were £247 million, against average imports of £335½ million. We know that those figures cannot be compared directly because of the f.o.b.-c.i.f. complication, but to compare like with like and comparing 1955 with 1954, we find on the Board of Trade figures that exports were up by 10 per cent. over the corresponding period in 1954 but that imports were up by 23 per cent. over the same period of 1954.

Comparing like with like, the gap between them has worsened by about £35 to £40 million a month—a worsening in the situation compared with 1954, which, we all know, was a bad year. That means that if this continues there will be a worsening in our balance of payments on export-import account of about £400 million a year. Figures of that kind cannot justify the complacency that we have had from the Chancellor this week.

Why do we have these serious trade figures? To illustrate what is happening in export markets, I should like to refer simply to two industries, one of them an old-established industry and the other one which has increased a great deal since the war: cotton and engineering. In the case of cotton, as we have often had cause to remind the House, exports of cotton piece goods last year were the lowest, apart from the wartime years, for any time since 1840, when the figures were first collated. We all know the reasons—Japanese competition, the effect of Purchase Tax, and serious fears about raw material prices.

It is very significant that Lancashire's export trade is being paralysed by these fears about raw material prices when we were assured a year ago that the establishment of the Liverpool Cotton Futures Market would deal with all these problems. In fact, all that that market has done is to cause the country to break off its long-term contracts with Commonwealth countries for cotton, so that even last year, when some of the contracts were still running, the percentage of cotton coming to this country from the Commonwealth fell from 34.9 to 26.7 per cent., while the percentage coming from the dollar area rose from 28.3 to 34.6 per cent.

In Lancashire, the Liverpool Market now is nothing more than a bad joke. It is being by-passed by the mills, who are buying direct from America. It has led to a fall in raw cotton stocks in this country to the lowest figure, during war or peace alike, since the American Civil War. This means that if there is any kind of emergency—I refer not only to international affairs; one might think of a dock strike, for example—the Lancashire mills would be stopped because of of the improvidence and doctrinaire actions of the Government in setting up the Liverpool Cotton Futures Market.

In the case of engineering, which since the war has been our largest export industry and which has borne a very high degree of responsibility for the increased exports in the immediate post-war years, we see from the Economic Survey what is happening. Table 27 in the Economic Survey, which deals with the distribution of supplies of metal goods, is one of the most significant commentaries on the economic policies of the Government.

The Government took over a thriving industry. In 1951, production was £3,720 million. In 1954, largely as a result of investments which had been made under the Labour Government and the new factory buildings, production had increased to £4,120 million, an increase of £490 million in our engineering production. One would have thought that the greater part of this £490 million should have gone to two things, to exports and to investment. In fact, the amount that went to investment increased by only £25 million, an increase of 2 per cent. That is to say, our production of engineering goods for investment in British industry increased by only 2 per cent. between 1951 and 1954. The amount that went to export did not rise at all. It actually fell by £30 million.

Where did the increase go? First, of course, it went to defence, which accounted for an increase of £190 million. Then there was an increase of £135 million in cars for the home market. Then there was an increase of £80 million on consumer goods for the home market. There we have the test of how the Government carried out their responsibilities in relation to the country's biggest industry from the export and import investment point of view. We have seen a negligible increase in investment and a fall in exports, and the industry has been devoted more and more to the production of consumer goods and cars for the home market.

Yesterday, the Minister of Supply said how pleased he was to see the increase in exports of cars abroad. We are all delighted about it. It brings back to the minds of some of us on this side the experience of the late Sir Stafford Cripps, when he called upon the motor vehicle industry to push up its exports to only 50 per cent. of its total production. That was a moderate demand, but Sir Stafford Cripps was howled down by the manufacturers at their annual beanfeast at the Grosvenor House Hotel, and their action in howling him down was endorsed by the previous Prime Minister, the right hon. Member for Woodford (Sir Winston Churchill), in a speech which he made from the Dispatch Box a few weeks later. In fact, it was because of the controls and the planning which we had that the Minister of Supply yesterday was able to rejoice in the increase of car exports.

Another big development in our export markets which was due to the action of my right hon. Friend was the development of exports of refined petroleum. We put a great volume of resources, which we would dearly have loved to put in the housing programme or elsewhere, into developing an oil refining industry in this country. That saved us hundreds of millions of dollars that we were having to pay out year by year for imports and, at the same time, it created a vast export industry which is now returning, in the Chancellor's financial returns, very large export figures.

Indeed, as soon as the Chancellor gets out of the election period, and is able to return to private life or private business, I think that in his more sober moments he will be the first to confess—at any rate to himself, if he does not do it publicly—that a considerable proportion of the exports that are being recorded today are possible only because of the action we took in developing the export trade and in building export factories in the old Development Areas, where before the war there was nothing for the workers except unemployment, and because of what we did in expanding the basic industries. We did those things in very difficult conditions. The Government now in office, in easier conditions, have been able to reap the harvest from them.

Therefore, if nothing is to happen in the export trades, where are the Government hoping to obtain increased earnings? They talk about invisible earnings, but another serious thing which is shown in the Government's White Papers is the reduction in invisible earnings over the last year or so. United Kingdom invisible earnings in relation to the rest of the world in 1951 were £490 million and, in 1954, £471 million, so we are now getting less on invisible account under this Government than we had in 1951 under the Labour Government. Why is that? When these commodity markets were reopened for cotton, metals, and all the rest, we heard a great deal about their going to increase our invisible earnings, but those earnings have, in fact, fallen under the present Government and the removal of controls over the commodity markets has made us more vulnerable.

If we turn to investment, my right hon. Friend the Member for Leeds, South gave figures the other day of total investments and estimates which were produced before the Royal Statistical Society. Let us look at them in more detail. I am using here figures of net investment after depreciation, with all figures at constant 1948 prices. One finds that whereas, in agriculture, there was a net investment of £12 million a year in the last three years of the Labour Government, there was, under the present Government, in 1953, a net disinvestment of £5 million a year in agriculture. In the case of coal, gas, electricity and water, the net investment in our last three years was £89 million whereas, under the present Government, the net investment was £101 million. In other words, the one thing in respect of which net investment has risen is nationalised industry.

The figure for manufacturing and distribution under the Labour Government was £247 million but under the Conservative Government the figure in 1953 was only £191 million, and we know that a great deal of the investment which has been made under the present Government has been of an inessential character, on factories to make Coco-cola and that kind of thing. Factories put up under the Labour Government, under a strict system of licensing control, were, in almost every case, essential factories, making a real contribution to our balance of payments position.

When we consider the distribution of manpower, we find that, last year, agricultural manpower fell by 21,000. There was no improvement in mining, but distribution was up by 77,000. The Government, of course, are very pleased that those employed in national government are reduced in number by 14,000. We all remember the speeches from the benches opposite on how essential it was to release the bureaucrats from Government offices into productive work. Fourteen thousand of these bureaucrats were released, but the number engaged in professional, financial and miscellaneous services rose last year by 46,000. They are not engaged in production. In some cases they are engaged by reputable bodies like the Stock Exchange which, however, is not engaged in production. They are also engaged in the commodity markets, price rings, trade associations, and all the rest. Therefore, that is another Tory pledge which has failed to come off.

The Chancellor is making a great deal of the fact that there has been increased consumption. How much has consumption increased under what the "Economist" has called "batsman's wicket conditions"? If we exclude cars and private motoring, there has been an increase of 5 per cent. in consumption over the past three years. The biggest proportion of increase in consumption has been in cars and private motoring. There is not very much to write home about there. The Financial Secretary was giving some highly selective examples of food figures the other day. We find from the Government figures, however, that the consumption of animal protein was still less in 1954 than it was in 1950 and that the consumption of fats has only just now recovered back to the 1950 level and gone ahead a little.

The consumption of dairy products, after being below the 1950 level right through the lifetime of the present Government, last year managed at last to pass that level. The consumption of eggs and egg products and fresh vegetables is down. Therefore, after all the propaganda, the figures are nothing like the figures which the Government had suggested. I can only use Government figures, and if hon. Members who appear to be amused can produce better figures, we shall be very glad to see them.

The greater part of the increased expenditure on food has been swallowed up in higher prices. Last December my right hon. Friend the Member for Leeds, South mentioned figures which the Government had provided showing how much of a family's increased expenditure on food must be attributed to higher prices. Between 1951 and 1954 there was an increase of £823 million in the national family expenditure on food, according to Government figures, and of that expenditure £659 million represents increased prices and only £184 million increased quantities of food consumed. An average family of four spends 25s. a week more on food now than in 1951, but of that sum 19s. 6d. represents increased prices and only 5s. 6d. increased quantities. Against these increased prices, all the Chancellor has given has been this beggarly 2s. 6d. a week or 2s. a week in the case of a married couple receiving National Assistance.

This is the indictment of the Government and their economic policy. In 1951, they took over an economic and industrial system which under Labour planning had recovered from war and pre-war neglect in a manner unparalleled in Europe. The Chancellor cannot deny that he has boasted about it abroad. They took over an industrial system geared for higher and higher exports, with our basic industries expanded in most cases to a level far greater than pre-war. The financial crisis with which they had to deal—serious as it was—was not produced by any policy emanating from this country. It began in the commodity markets of the world, especially in the United States, and ended there without any help or intervention by the Chancellor. For three years since then the Government have had easy economic conditions. Terms of trade have been worth £600 million a year to the Chancellor. Investment in industry has been ready to yield greater and greater production.

Yet, against this favourable background, what has the Chancellor done? He has let the position drift while his Government have sought to give handouts to brewers, landlords, steel masters, and all their other friends. Gold and dollar reserves are still below the 1951 level. Exports have increased by a lower proportion than has been the case in any other country in Europe. Half the world, in the East, is still cut off from our trade. Economic links with the Commonwealth have been seriously weakened as long-term contracts for Commonwealth goods have been ended to clear the ring for market speculators.

Mr. Butler

What does the right hon. Gentleman mean?

Mr. Wilson

I mean the figures which I have given about cotton.

Investment has stagnated and our industries are losing ground against rivals. We have had a series of Budgets against a favourable world background which, as we all know, have increased and not reduced the maldistribution of wealth and of income in the country.

We have had the climax this week in a Budget which gives pounds a week to the richer sections of the community and millions to the big monopolies, when those suffering the greatest hardship and living on National Assistance get a shabby 2s. 6d. or 2s. a week. That is the indictment which we present against the Government, and that is the charge which they will be called upon to face at the polls next month.

11.50 a.m.

Mr. John Arbuthnot (Dover)

I have been listening with interest to what I can only describe as the squalid speech of the right hon Member for Huyton (Mr. H. Wilson). I listened, waiting for something constructive. I was waiting for him to put forward a programme, something to give the people hope and encouragement. But, far from being constructive, all the right hon. Gentleman was able to do was produce a series of criticisms and indictments.

He started by referring to Lancashire and said that the tax reliefs to Lancashire were derisory. Lancashire is extremely grateful for those tax reliefs. The right hon. Gentleman said that the problem in Lancashire was caused by unfair competition from India. It is the duty of my right hon. Friend the Chancellor and the Government to take a broad view of the problem of trade with India. The Chancellor can never forget that at present our export trade to India amounts to about £100 million a year.

Mr. M. Turner-Samuels (Gloucester)

The hon. Member has made a significant, and, I think, a completely inaccurate statement. He says that Lancashire is grateful for what the Chancellor has done. Will he give the Committee any vestige of evidence at all by anyone from anywhere to justify that absurd statement?

Mr. Arbuthnot

There have been several statements to that effect.

Mr. Turner-Samuels

Mention one.

Mr. Arbuthnot

There have been several in the Lancashire papers on the subject—

Mr. Turner-Samuels

The hon. Gentleman should not hide behind such generalisations on a matter of this kind, it is too serious.

Mr. Arbuthnot

The right hon. Member for Huyton made his speech without interruption, and I hope that the hon. and learned Member for Gloucestershire (Mr. Turner-Samuels) will—

Mr. Turner-Samuels

My right hon. Friend made a speech founded on accuracy.

Mr. Arbuthnot

—allow me to make my speech.

Our export trade with India brings into this country £100 million a year. That must be weighed in the balance. Were we to go back on the trade agreements with India, which appeared to be the suggestion of the right hon. Member for Huyton—that we should impose discriminatory preference on Indian goods coming into this country—it would mean that the £100 million would go.

The right hon. Gentleman talked about Government expenditure and the increase which has taken place. Does he suggest that we are spending too much on education? Would he like to see a reduction in the number of schools built by the Government? One of the things which will be brought out during the General Election is that in three and a half years this Government have built twice as many schools as the party opposite built in six years. Does the right hon. Gentleman grudge the increase in the number of school places made available under a Conservative Government? Does he grudge the success of this Government's housing programme? Would he like to see people who are now well housed—thanks to the great efforts of the Conservative Party and the builders—again without housing accommodation? Or is it that he would like to see the cuts made that he suggested should be made in defence?

Mr. H. Wilson

The hon. Gentleman has put a great many questions to me and I shall not attempt to take time in answering them all. Of course, no one on this side of the Committee begrudges any increase in social service expenditure. What we begrudge is that hon. Gentlemen opposite secured votes in 1951 by pretending that if they were returned there would be large cuts in Government expenditure. While everyone welcomes any possible increase in the housing programme, I should like to see the hon. Gentleman use his enthusiasm to persuade the Minister that he should rescind the cuts in the building programme in my own constituency, where we want to build 400 houses and are allowed to build only 150.

Mr. Arbuthnot

The fact remains that our housing figures were not only greater than those of the party opposite, but the number of houses built was even greater than the party opposite said could be built.

The right hon. Gentleman referred to imports. One of the reasons for the increase in the volume of our imports is the fact of the expansion in British industry—

Mr. Ivor Owen Thomas (The Wrekin)

Will the hon. Gentleman give way?

The Chairman

Order. If the hon. Member for Dover does not give way, the hon. Member for The Wrekin (Mr. I. O. Thomas) must resume his seat.

Mr. Thomas

All I am asking is that the hon. Member should give figures in support—

The Chairman

Order. If the hon. Member for Dover does not give way, the hon. Gentleman must sit down.

Mr. Arbuthnot

The great expansion of industry generally has confronted the coal industry with a difficult situation. Our coal industry has not been able to expand as rapidly, with the result that we have found it necessary to import coal and oil.

The suggestion from the benches opposite appears to be that it is a mistake to import coal and oil. I feel that we are right to take bold measures to see to it that our industrial production continues to expand. In due course the coal and oil industries, and eventually the development of atomic power, will succeed in bringing our imports and exports into balance.

It is true that some prices have increased, but others have been reduced, as has been instanced by advertisements appearing recently in co-operative shops in London—"Tea prices reduced." The prices of lard—

Mr. Turner-Samuels

The cost of living has gone up, and is going up all the time.

Mr. Arbuthnot

—and eggs are lower. Not only that; wages are increasing more rapidly than prices. Wage earners in this country are today able to buy more in terms of goods than ever before.

As April approaches, we find ourselves indulging in the exercise of preparing our own Budget forecasts. As Budget day drew near this year I recognised—as I think did everyone else—the dilemma facing the Chancellor of the Exchequer. On the one hand, we saw a mounting Budget surplus which obviously suggested the possibility of relief in taxation. On the other hand, our export trade was meeting with growing resistance, and we realised that too large a figure of home consumption was bound to be at the expense of exports. I should like to congratulate my right hon. Friend, therefore, on the skill, courage and integrity with which he steered his way through the hazards facing him, giving incentives where they were most needed and keeping half his Budget surplus in hand.

The Budget has been criticised mainly on three grounds. We are told that it is inflationary; that it is a Budget for the few and neglects the many; and that it is an electioneering Budget. I do not believe that it is inflationary. The real danger of inflation today arises from high taxation, and that mental attitude which takes the brake off proper control of expenditure in industry. There is often a feeling that, because the Chancellor takes such a large slice in taxation, there need not be the same control of expenditure as would otherwise be the case. That affects everything from the salary of the typist to the redecoration of the board room. As taxation is reduced it will produce a deflationary and not an inflationary result.

It is said that the £40 million to £45 million of relief in the standard rate of Income Tax goes to companies. Companies need that incentive to economy when faced with a high Income Tax level, and Profits Tax on top of that.

Mr. Turner-Samuels

If the reduction of Income Tax levels is so important as a remedy for inflation, is the hon. Gentleman suggesting that a reduction of 6d. will prevent inflation?

Mr. Arbuthnot

I certainly suggest that the taking off of 6d. is going to help in that direction. This is only a foretaste of Budgets to come in future years, with Conservative Governments being returned.

It has been suggested that my right hon. Friend's action in the Budget is inconsistent with the attitude which he took on 24th February when he raised the Bank Rate and curbed hire purchase. I do not agree. When my right hon. Friend raised the Bank Rate, he started the process of bringing money from abroad to this country and of encouraging saving here. By that action he also discouraged borrowing for purposes which were either unsound or unnecessary.

The curb on hire purchase was a reminder that any sound hire-purchase terms must be such that at any time the remaining value of the article bought is greater than the value of the instalments due. Unfortunately, a number of companies were tending to forget that, companies, for example, who were selling articles on hire purchase without any initial payment.

My right hon. Friend has now reduced the standard rate of Income Tax. That might be inflationary if goods were not to be available to meet the extra demand, but my right hon. Friend reckons that, with the increased production which Conservative prosperity is bringing about, there will be enough goods to meet not only demand but also the demand for exports as well. My right hon. Friend's record for judging the financial situation aright has in the past proved to be a pretty shrewd one.

I only want to say one thing to my right hon. Friend in passing: I cannot help feeling that had he taken 6d. off the standard rate last year, he might now be enjoying an even larger Budget surplus. We in Britain are not a spendthrift nation. We are a hard-working and thrifty nation, and I do not believe that anything like the whole of the amount by which my right hon. Friend has been able to reduce taxation will be spent on consumer goods. I believe that much of it will be saved. Indeed, the savings of this country have risen quite substantially in the past few years.

My right hon. Friend has been accused of producing a Budget for the few. That argument does not bear looking at. There have been 17½ million taxpayers relieved of some direct taxation and 2,400,000 have been relieved of paying Income Tax altogether. If we add the families of those taxpayers who have benefited, it means that the vast majority of the people of this country have reason to be grateful to my right hon. Friend.

The other accusation which has been made against the Chancellor is that the Budget is an electioneering Budget. What nonsense that is. Had he been producing such a Budget, he would have distributed the whole of his surplus instead of only a part of it. He Would have reduced the tax on beer and on tobacco and the duty on petrol and on entertainments. The fact is that the Budget is a Budget of realism and one of integrity.

The criticisms made by hon. Members opposite tempt one to ask what sort of a Budget they would have produced. If, unfortunately for the country, they are successful on 26th May, what will their next Budget be? I think that the best way to get an answer to that question is to turn to the Socialist Party's policy document, "Challenge to Britain." I am never quite sure whether that document is intended to paper up the cracks in the party opposite or whether it is a bone of contention over which they chew in secret upstairs, but the fact is that the Socialist proposals in "Challenge to Britain" place a staggering volume of extra burden upon the taxpayers. Mr. Balogh, the Socialist's own economist. writing in the "New Statesman" on 19th December, 1953, estimated that the additional cost of the programme outlined in that document would require at least an extra £600 million at once from the taxpayers, with subsequent additions later. The Socialists proposed to spend £700 million to £800 million on food subsidies, that is, £400 million to £500 million more than is at present being spent. Then they have promised to guarantee primary producers in the sterling area in the form of bulk purchase contracts, to buy large quantities at settled prices. That appears on page 7 of the document, if any hon. Gentleman would like to look at it.

Mr. Balogh reckoned that the increased cost of that would be between £100 million and £200 million in one year. Then, I quote from the same source, between £600 million and £800 million extra would have to be found for industrial and agricultural development. If the party opposite were to be returned on 26th May and were to implement all its proposals in full, it would result not only in high taxation, but probably in a capital levy as well, and that would effectively kill all forms of private saving.

The authors of "Challenge to Britain" meet this point when, on page 21, they say: Voluntary saving will be made up through taxation. That must mean budgeting for a surplus of between £300 million and £600 million. I do not want to be unfair about this, but if we add up the cost of all the promises made in this document—let us take both the high and the low limits put forward—social services and food subsidies would cost between £500 million and £1,000 million. The guarantees for bulk purchase would cost between £100 million and £200 million, the industrial and agricultural development proposals would cost between £600 million and £800 million, and the increased Budget surplus £300 million to £600 million.

Adding this up the lowest cost of all this comes out at £1,500,000 and the highest cost £2,600,000.

These figures do not take into account the cost of land nationalisation or the cost of the taking over by local authorities of rented houses. Neither do they take into account anything—and here I quote from page 8 of "Challenge to Britain"—for raising the standard of living in the poverty-stricken areas of the world, even at the cost of sacrificing something of our own standard of living. Let us take an average of the figures above, say, £2,000 million, and see how a Socialist Chancellor of the Exchequer would be able to find that sum. It would mean raising Income Tax by 2s. in the £. This would produce £400 million; add to this the doubling of all rates of Purhase Tax to produce £300 million; and 1s. a pint on beer to produce £360 million; 2s. 6d. extra on 20 cigarettes to produce £570 million; 2s. 6d. extra on a gallon of petrol to produce £300 million, and the doubling of the duty on betting and entertainment to produce £70 million. All these increases together would be necessary to produce the £2,000 million required.

The Socialist Party may say, "Oh, but we are not going to do it that way. We think that a capital levy would be the way out of the problem." I would remind right hon. and hon. Members opposite that the late Sir Stafford Cripps rejected the proposal for a more general capital levy, and they will find confirmation of that in the OFFICIAL REPORT of 6th April, 1948. He described it as administratively impossible, saying that it would require an enormous valuation staff, that the assessment and collection would take years, and it could be of no immediate value to the Treasury.

Mr. H. Wilson

This is a very interesting argument, but I do not understand any of the hon. Gentleman's figures. I am sure that the Chancellor would be the first to explain to the hon. Gentleman that any assessment of the cost for industrial investment would not be additional to Government expenditure, and that if we had to have a Government surplus, as the present Chancellor has, for financing capital expenditure, we would not add that to the amount already set out in those figures for industrial expansion, so that wipes out some £260 million of the hon. Gentleman's calculations. Further, will the hon. Gentleman tell us—because we gather that he has been reading this document—on what page, and in what line, there is any reference to our decision to have a capital levy, because, as one of the authors of that document, I do not recollect it.

Mr. Arbuthnot

It is not called a capital levy as such. I am referring to page 21: It will deal with this by the appropriate forms of direct taxation of capital. That is a euphemism for a capital levy.

Mr. Wilson

I was a member of the National Executive, and at the Margate conference, when we announced that form of words on behalf of the Executive, it was unanimously agreed. Will the hon. Gentleman not recognise that that form of words would apply very appropriately to capital gains taxation, and since there is capital gains taxation in the United States, will he give his view on that possible form of taxation?

Mr. Arbuthnot

It seems that I am taking up a lot of time in making my own speech, and I do not want to take up further time by making the right hon. Gentleman's speech for him. An "appropriate form of direct taxation on capital" seems to me to be a pretty thin disguise for a capital levy. I am trying to suggest to right hon. and hon. Members opposite that a capital levy really does not work. It is merely a transfer of ownership from individuals to the State.

Mr. Turner-Samuels

On a point of order. May I ask, Sir Rhys, whether all this which we are having to listen to is relevant to the discussion of the Budget provisions.

The Deputy-Chairman (Sir Rhys Hopkin Morris)

I have nothing to do with the validity of the argument. The argument is in order.

Mr. Arbuthnot

A capital levy frees no real resources for Government use, and if a capital levy were to be used by a Government to finance current expenditure it would be wildly inflationary, and it would only work once.

There is one further point which I should like to make. Owing to the circumstances of this year's Finance Bill, it is not open to hon. Members to propose new Clauses. I do not know whether my right hon. Friend proposes to introduce a second Finance Bill this year, but, if he does, there is one matter to which I should like to refer—a matter concerned with the taxation of British companies operating overseas. Here I should declare an interest. I give an illustration from an important industrial and mining concern which operates overseas, chiefly in the United States.

In the United States, and in many other countries, such a business gets the benefit of special mining depletion allowances, which are granted to encourage mining enterprises. A British company, however, which gets the benefit of these concessions has to surrender the whole of these tax savings to the Inland Revenue, because there is no comparable allowance for British tax purposes.

I wonder whether it is realised that as long as this taxation policy continues there can be no incentive to any company in the United Kingdom to launch a new mining enterprise in any such country. I believe it is true that in recent years not one single new mining company has started operations overseas. I have no doubt that if this policy continues it will lead in the end to the loss to Britain of nearly all our mining interests operated in such countries as the United States, Canada, Australia and Southern Rhodesia.

The Royal Commission on the Taxation of Profits and Income has recommended the removal of these heavy penalties, and I want to ask my right hon. Friend what his views are on this matter, which is so vital to our industry and also to our balance of payments.

12.15 p.m.

Mr. H. Hynd (Accrington)

This side of the Committee is grateful to the hon. Member for Dover (Mr. Arbuthnot) for giving us a preview of the speakers' notes which apparently will be used on Tory platforms at the forthcoming General Election. If these views are all that hon. Members opposite are going to produce I am sure that we shall all enjoy ourselves. The hon. Member described the speech of my right hon. Friend the Member for Huyton (Mr. H. Wilson) as squalid. I would hesitate to use similar language about this, but I think that most hon. Members would agree that it could be hardly called a deep economic argument.

The hon. Member for Dover said in the earlier part of his speech—and he was challenged by some of my hon. Friends—that Lancashire was grateful for what had been done for it. I noticed his right hon. Friend the Member for Blackburn, West (Mr. Assheton) sitting behind him, but the hon. Member for Dover could not see the expression on his face. The right hon. Member for Blackburn, West, when he made his contribution to the debate yesterday, did not quote the opinion of his local chamber of commerce as to the situation. I should hesitate to think that it will pass a vote of thanks at its next meeting about what has been done.

Of course, I must not be too hard on the hon. Member for Dover, because when he makes a speech about Lancashire he is going rather outside his territory, and, in fact, he shows that he is all at sea when it comes to talking about the cotton textile industry. When he went on to talk about exports he let the cat out of the bag completely. I warn him about the danger of saying this when speaking on the political platform, and I warn him about it particularly when he goes into the mining section—the thinking section—of his constituency, because he gives the whole show away when he says, in excuse of the Government's neglect of the Lancashire cotton industry, that it would interfere with other exports to India.

That is what we have been saying on this side of the House for a long time. We say that the Government are deliberately sacrificing the Lancashire cotton industry in the interest of exports for other trades, and the hon. Member for Dover apparently agrees with that, judging by what he has just said. I was puzzled at what he was really getting at in his speech until right at the end it came out. He had the audacity to line up in the queue with all the other Conservative business interests which want something extra in the form of business subsidies from the Government. The leopard does not change its spots, and we were told a long time ago by the ex-Prime Minister that Conservative party policy is to have an open hand at the public Exchequer.

We had this again today from the hon. Member for Dover—"Please give us more money from the public purse to help our business interests." I intend to be brief, because I want to say only a word or two in support of what my right hon. Friend the Member for Huyton said in regard to the Lancashire cotton industry. I thought, when listening to him today, that many of us would feel that it is not only a pity but a tragedy that he is sitting on the Opposition side of the House and not occupying his proper position as President of the Board of Trade at this time, when that industry is in such difficulty.

I am genuinely sorry for Conservative candidates who have to fight seats in Lancashire at the forthcoming Election. They will find themselves faced with very strong resentment indeed—justifiable resentment—partly because of the positive action of the Government in regard to the Japanese Trade Agreement which injured the cotton industry, partly because of their negative action in regard to India trade and hurting the industry in that way, and partly because of the disillusionment at the unsuccessful effort of the Government to help Lancashire by setting up a very limited and far-too-closely confined Development Area. Practically nothing has been done in that new Development Area despite all the propaganda of the Government about it.

In Lancashire, today, the workers are facing, at the worst, unemployment, and at the best, displacement; shopkeepers are facing trading losses; local authorities are at their wits' ends to know what to do when, on the one hand, they have the prospect of a greatly reduced rate income and, on the other, greatly increased expenditure, which has been intensified by the Government's recent decision to increase the rates of interest for borrowing, including borrowing in respect of projects which have already been started. That will add considerably to the expenditure of local authorities.

All these difficulties have been put before the Government so often that it is almost a waste of time to repeat them today. Our main criticism at the moment is that we have been denied the promised statement of Government policy in this matter. It is true that when the former Prime Minister led the country and the House to believe that he was going to make a statement of Government policy before Easter, he chose his words very carefully. When I asked the President of the Board of Trade why this statement had not been made, as promised, he pointed out to me, quite rightly—I had not noticed it, and I do not suppose many other people had—that the Prime Minister had carefully said that he "hoped" to make a statement before Easter.

He certainly led us to believe that he would, but he chose his words very carefully; apparently even when he used those words he knew that he would not make a statement before Easter, otherwise there was no justification for the words he used. Do the Government realise that their honour and the honour of the ex-Prime Minister are at stake in this matter? Not only was that statement not made before Easter, as everybody anticipated it would be, but it has not been made even yet.

When we asked again, this week. about this promised statement of Government policy, we were told that it was not yet ready. That is not good enough, and Lancashire will not forgive the Government for it. They must realise that the situation in Lancashire will not right itself automatically, and it cannot be laughed off. They must do something about it.

Lancashire has been very patient. Chambers of commerce throughout the county are alarmed, and are seething with discontent and anger. I am quite certain that it is only because most of their members are loyal supporters of the Government that they have not been creating more fuss in public than they have done up to now. The Government must realise that they are putting a very considerable strain upon the political loyalty of their friends in the business community in Lancashire.

12.23 p.m.

Mr. J. E. B. Hill (Norfolk, South)

In rising to address this Committee for the first time, I certainly feel in great need of the indulgence which is customarily given to a beginner—particularly towards the end of a debate which has not been free from controversy.

I want to move from the factories of Lancashire to the fields of East Anglia, because my constituency is mainly interested in agriculture. The criticisms with regard to agriculture to which I have listened during the debate amount, broadly speaking, to the claim that farm guarantees have been whittled away; production is falling, and farmers are dissatisfied. All I can say is that that does not accord with my experience. During my short time in the House I have heard speeches which have claimed that farm guarantees were much too high. I can only suppose that the true position is best illustrated by the current issue of the monthly journal of the National Farmers' Union, which carries the headline, "Just, But Only Just." As a farmer, perhaps I should declare an interest in agriculture. I do not ask for more than justice, and I do not think that any reasonable farmer does.

As to production, it has not fallen. There has been a steadily rising agricultural production ever since the war. The official figures show that in 1953 and 1954 the total had reached a record of 155 per cent. above pre-war. Admittedly, in the year which has just ended we have fallen back to 153 per cent., but that was due mainly to the weather. Farmers have to live with the weather; they have to gamble with it, and take its ups and downs. To the farmer, the weather is as harsh an enemy as are the terms of trade to an economist. As production climbs higher and higher, it is rather like going up Mount Everest—the higher one gets the harder progress becomes.

Farmers are said to grumble. I think that they were shaken last year because they had to adjust themselves to a greatly changing situation—with the end of rationing—and they and the Ministry suddenly realised that they were not too certain what the housewife would choose. One lesson which we have learned, among many, is that the housewife, together with most of the rest of us, does not much like fat. That has explained much of the lack of interest shown in some of our products, which can and have been improved in quality.

At the moment, agriculture has a vital part to play because of its dollar-saving and export-saving capacity. Unless we are protected from unfair competition, especially from the influx of products from overseas which may be offered at less than the cost of production, we cannot fulfil our task of producing as much as we should to feed our people and keep down our balance of payments requirements. In order not to impede world trade, and to give the housewife freedom of choice in the shops, we have devised a system of deficiency payments to replace the old fixed payments and allocations, rather than a protective tariff, which some farmers might prefer because it seems more respectable and is less open to criticism. The effect, however, is much the same.

As the Chancellor made clear, the cost of agriculture last year was £246 million, which is 20 per cent. of our output of £1,250 million. If my mathematics are correct, that is equivalent to a 25 per cent. protective tariff, which is not out of line with the tariff protection given to other vital and vulnerable industries which we cannot do without. The 55 per cent. part of our increased output since the war represents more than £400 million as a direct saving in export earnings.

I regard this protection not as a mattress, still less a feather bed, but as a shield, which enables us to attack the cost of production behind it. Our agriculture has been making a great technical advance each year. Last year it was worth £25 million but, unfortunately for the farmers, the costs arising off the farm—over the majority of which they have no control—rose by £39 million, so that the final bill for the Exchequer went up and not down.

I want to pursue this battle of costs a little further by going into the question of agricultural fixed investment. Agriculture is our biggest single industry, but it is a mosaic of thousands or hundreds of thousands of small enterprises, each bristling with its own physical and financial difficulties. If I may ask the Committee to descend from the sublime scale of the Economic Survey, in which every digit represents £1 million, to the petty time-and-money saving economies of farm routine, a quite remarkable fact will emerge.

We have 360,000 farms as separate commercial units, two-thirds of which are of less than 100 acres. A common feature is that many of them have an obsolete layout and buildings designed long ago at a time when man was the only machine and skilled labour was cheap and abundant. They do not readily lend themselves to modern and, as it were, streamlined production. Big savings are to be gained in a general modernisation of the layout of the small farm. One hour's labour saved daily on a farm is worth £50 a year. If, therefore, one hour could be saved on all farms under 100 acres, the total amount saved would be £12½ million. Similarly, if the routine on big farms Were so changed as to save a man's labour, that would be an annual saving of not less than £350 per farm Capitalised, that is a large sum.

These changes are slow, and difficult to make. The Farm Advisory Survey will indicate over the next few years much that needs to be done, but there is a great need for fixed capital. That brings me back to the Economic Survey, which shows that the capital investment going into agriculture shows a small, but none the less welcome, rise compared with the much faster rate of capital going into other industries. It has increased at a slow over all pace but, nevertheless, the amount of capital going into agricultural building last year was £26 million. That is a record total and is £4 million more than in the previous year. That would seem to belie the suggestion that farming is not prosperous but I still doubt whether the amount of fixed investment is quite enough. Moreover, its distribution favours the large, the more fertile and well-to-do farm rather than the small and needy one.

I wonder whether enough capital is going into small farms; and whether there is not some scope here for bringing down the average costs of production by an infusion of new capital. In the long run, this could help to bring about the sort of economies that we farmers would like to make. Could we consider a system of farm reconditioning grants in which the Government would lend the bulk of the capital at a low rate of interest? Such capital will not come from the small farmer or small owner for this sort of work. I would not want to add to Treasury liability; it might well be done by an extension of the production grants system, where money could be found to service any deficiency on such a loan from within the total support guaranteed for agriculture.

This may be a small point to raise in the context of this debate, but we are searching for means to keep ourselves progressively more efficient. Agriculture, particularly at this time, has a great opportunity. Rising standards mean an increased demand for good food, as has been seen in the last six or nine months. Likewise, the countryside was never more valuable as a market for the products of industry. In my own area, I expect to see the television aerials going up now that we have a local station.

Full employment in the towns is inextricably linked with full production on the land. The farmer and the farm worker are very grateful for the firm and practical support which the Chancellor of the Exchequer and the taxpayer have given us. We can, and we must—and, indeed, we very much want to—go on from strength to strength in contributing our maximum effort to the economic well-being of the country.

12.35 p.m.

Mr. Eric Fletcher (Islington, East)

I am particularly pleased that it falls to my lot to be able to congratulate the hon. Member for Norfolk, South (Mr. J. E. B. Hill) on the most interesting maiden speech which we have just heard. I speak with some knowledge of the hon. Member before he came here, and I think he will realise that the Committee has listened with very great interest to what he had to tell us about agricultural conditions in his own constituency and elsewhere.

The Committee always listens with great attention to a Member when speaking with such obvious sincerity and firsthand knowledge of a subject to which he has devoted a great deal of thought. The hon. Member put forward some very constructive suggestions which will no doubt be taken to heart by the Government and the Treasury and elsewhere.

In the ordinary way I should go on to say that I felt sure that the Committee would wish to have many other opportunities of hearing the hon. Member. But as we are on the eve of the dissolution, and the hon. Member represents a marginal constituency which we shall hope to capture from the Government in the forthcoming General Election, he will not expect me to say that on this occasion. In the unlikely event, however, of his return here after the General Election. I am sure we shall all wish to have many other opportunities of hearing contributions from him to our debates.

Now I want to turn to rather more controversial matters, and to indicate what I regard as the four major criticisms of the Budget. We think that the Chancellor has exposed himself to criticism on four counts, not only here but in the country. First, in deciding to give away in tax concessions £140 million, the Chancellor is taking an unjustified gamble with the nation's economy. Other hon. Members have pointed out that his decision on tax concessions this year on the scale proposed is inconsistent with the gloomy picture which he painted of our economy as recently as February. His whole attitude in the Budget speech contradicted the warnings that he uttered only a few weeks ago about the seriousness of our balance of payments situation.

It is only fair to say that no one on the Government benches has stated so clearly as the Chancellor has done the precarious nature of our economy. He has warned the country that our balance of payments is in a very delicate state, and has said that we should be heading for another serious financial crisis unless energetic steps were taken to correct the adverse trend.

All responsible economists and commentators throughout the country whose opinions I have read since the Budget have expressed their amazement at the decision which the Chancellor felt able to make this year in giving away £140 million. It is regarded as being totally out of line with the serious warnings that were given in February last. Can anybody really doubt that this sudden change of attitude on the part of the Chancellor has been influenced by the fact that we are on the eve of a General Election?

I do not wish to weary the Committee with a lot of quotations. I am quite content to refer to the article by Professor E. V. Morgan which appeared in the "Manchester Guardian." He voiced the serious misgivings that are felt by responsible economists everywhere about the Chancellor's attitude, and he summed it up in language which I should like to quote. Describing the Budget, he said: The Chancellor's analysis of the financial situation raises three crucial questions. Can production expand at the pace which the Chancellor expects? Will the demands of domestic consumers be as modest as he believes? And, even if both these expectations are fulfilled, will the margin for increasing efforts be sufficient to pay for our rapidly rising import bill? After considering the matter, Professor Morgan comes to the conclusion, as many other commentators have done, that the Chancellor has adopted a most optimistic assumption about the balance of payments situation, and that, if his assumptions are not fulfilled, there may well be a serious recurrence of domestic inflation and a very substantial adverse balance in our foreign account.

We all hope that the Chancellor's gamble may come off, but we are entitled to point out that it is a very serious gamble for him to take at this particularly dangerous and critical time. We are also entitled to indict the Chancellor, as we do, with having made a reckless and dangerous gamble of this kind on the eve of a General Election. I do not think anyone would have expected such a gamble to have been taken in the course of an ordinary Budget speech.

Secondly, our criticism of the Budget as a whole is that it is inflationary. Inflation in this country produces very serious consequences and evils, particularly for the worst-off sections of the community. During the whole of the Chancellor's tenure of office at the Treasury, we have suffered from a measure of inflation.

The Economic Secretary to the Treasury (Sir Edward Boyle) indicated dissent.

Mr. Fletcher

The Economic Secretary shakes his head, but the whole trend on the Stock Exchange, particularly the steady rise in prices of industrial shares on the Stock Exchange, is the best possible reflection of the state of inflation that goes on. In fact, it is very largely because of inflation and because of the fear of continued inflation that Stock Exchange prices have been rising.

The continued upward pressure to buy equity interests in industrial concerns is very largely a measure of hedging investment against inflation, or of a desire to get the benefit of the inflation that is taking place. It is no use the Economic Secretary shaking his head. He will have noticed that the City's reaction to the Budget has already been that it is regarded as inflationary, and, because it has been regarded as inflationary, it is expected that shares will continue to rise.

Sir E. Boyle

I only shook my head because the hon. Member for Islington, East (Mr. E. Fletcher) said that there had been inflation throughout the period of office of this Government. Surely, he would not regard the situation in 1952, when at one time there were 467,000 unemployed and share values were sharply falling, as inflationary? That was the only reason why I shook my head.

Mr. Fletcher

I am much obliged to the hon. Gentleman; I think we may agree that there has been inflation since 1952, and the Conservative Government has been in office for 3½ years. I am quite content; I gather than the hon. Gentleman shares my view.

There has been a steady measure of inflation over the last two or three years. The party on this side of the Committee is entitled to complain of the effect of inflation as worsening the position of all those people who are dependent on pensions and who live on fixed incomes and all those who are unable to take any steps to protect themselves against the results of inflation.

This measure of inflation is particularly discreditable at the present time, because it must have an adverse effect on our balance of payments situation. Our fiscal policy is being watched throughout the world, and one has only to read the comments that appear in foreign newspapers to see that the rest of the world regards the Chancellor's Budget as having been so devised largely for electoral reasons and as containing a measure of inflation in it. That in itself is very serious, because it aggravates our balance of payments situation.

Our third charge against the Chancellor's Budget proposals is that, assuming that he is right—which we deny—in being able to make tax concessions to the extent of £140 million this year, the methods chosen to distribute these tax reliefs are most unjust and inequitable. I think these reliefs are ill-distributed, and that they are given to those who deserve them least. They are given to the better-off sections of the community at the expense of the poorer and less well-off sections. So far from producing incentives where incentive is required if production is to be expanded, they do the reverse.

One hon. Member opposite has asked us what proposals we should have made if we had been in the position of having £140 million to distribute. I can think of far better methods of distributing that amount of tax relief than those which have been selected by the Chancellor, and I want to indicate some of them. I think we should take this opportunity of doing so, because of the fact that the Budget Resolutions, on which I shall say a word or two in a moment, are drawn in such a way, it seems to me, as to deprive the Opposition of its traditional and consitutuional right of being able to put down Amendments to the Finance Bill for the purpose of showing how, in our opinion, any tax remissions that can be made should be distributed.

I do not want to repeat criticisms made by my hon. Friends of the Chancellor for having, for instance, given greater benefits to those whose income comes from investment than to those whose income is earned. In so far as one of the right hon. Gentleman's objects was to provide incentives, how can he claim that he is really making the best value of the incentive motive if he distributes greater largesse to those who have unearned rather than earned income?

The Chancellor has gone even further in his failure to observe what we pointed out in the debates on the Finance Bills both last year and in the previous year, that, when the time came for any concessions to be made in our Income Tax arrangements, the recommendations of the Royal Commission ought to be seriously considered. I was very surprised indeed to find that the Chancellor, who is generally very careful in what he says, appeared to take credit in his Budget speech for having paid attention to the Royal Commission's recommendations. He seems to me, on the contrary, to have deliberately ignored them.

What did the Chancellor do? He increased the personal allowance of the single person from £120 to £140; he increased the allowance of the married person without children from £210 to £240, and he increased the child allowance from £85 to £100. Then—and surely this was misleading the Committee—he claimed, quite erroneously, to have taken a step along the road marked out by the Royal Commission. He claimed that he was putting his proposals forward as evidence of his firm intention to do all he could to help parents. He has done nothing of the kind.

May I remind the Committee what the Royal Commission proposed in its Second Report, which was published in April, 1954? That was just before our debates on the Finance Bill last year, when we urged that a number of the recommendations of the Royal Commission should be carried into effect. I recall that on that occasion the Chancellor—or one or other of his colleagues—while expressing sympathy with our proposals, indicated that he had not had time fully to digest the Royal Commission's recommendations, and would require more leisure and a longer time to study it and to bring forward his own proposals.

The Committee must remember the gravamen of the Commission's recommendations for the appropriate redistribution of the burden of taxation. The Royal Commission pointed out that one of the inevitable results of the steady inflation, to which I have just referred, had been to bring about a disproportion in the relative burden of tax falling on married persons with children as compared with that falling upon bachelors and childless married people. That disproportion and that distortion had grown up more or less insensibly but certainly inevitably because, with the rise in prices, the increase in wages and in our general structure, the basic allowances had not risen in proportion.

The result was stated in paragraphs 169 and 172 of the Report, and put even more succinctly, if I may say so, in the observations of the four members who published a minority Report. Dealing with the results of inflation, the minority Report says: In the first place, the starting point of liability is at a much lower level of real income than before the war. In the second place, the rise in taxation has been proportionately much greater in the lower categories of income taxpayers … than on those higher up the income scale. In the third place the rise in the tax burden has been much greater on the family man than on married persons without children; and it has been much greater on married persons than on single persons. I make no apologies for quoting this, because I think it is one of the most serious detailed charges to be made against the Chancellor's recommendations about tax remission. The Report goes on: We doubt, for example, whether the needs of revenue could justify the fact that the married man with two children who before the war, on a pre-war income of £400 a year, paid an identical amount of tax as the single man at £150 a year and the married man with no children at £250 a year should now be asked to contribute, on the same real income, more than three times as much as the corresponding single man and one-and-a-half times as much as the married man. Equally, revenue considerations would hardly justify raising much the same amount of additional taxation from the man with a post-war income of £1,000 a year irrespective of whether he is single, married or married with two children—with the result that the burden of the postwar tax is six-fold the pre-war tax in the case of the married man with two children, two-and-a-half fold in the case of married persons without children, and less than twofold in the case of single persons. The Chancellor has done nothing whatever to remove that grotesque anomaly in our Income Tax arrangements. On the contrary, he has aggravated the existing burden which falls with undue severity on the father of two, three or four children as compared with the bachelor or the married couple without children. What possible excuse can there be for thus flying in the face of these expert recommendations?

The Chancellor adds insult to injury when he claims credit—which he has no right to do—for having shown some evidence of his intention to help parents. He has made their position worse relatively than that of the married man with no family or that of the single man. The child allowance has gone up less than the personal allowance has done, and by only half the amount of the increase in the allowance to married couples with no children. It is really a scandalous injustice.

It is made worse by the fact that because of the way in which the Budget Resolutions are drawn this year, and because of the way in which the Finance Bill—of which we have had the advantage of a pre-view; whether it will be in the same form when introduced this afternoon I do not know, but assuming that it is—has been framed, I understand, from inquiries which I have made, that we are precluded from being able to put down Amendments to correct this inequality. I hope that before this debate concludes we shall have an assurance that we shall be able to debate, in Committee, Amendments designed to correct those anomalies. It is no use hon. Members opposite asking what we should have done in similar circumstances if we are to be deprived of the opportunity of putting down Amendments to show what we would have wished to do.

Since we have none of the usual opportunities of putting down new Clauses and submitting an alternative series of Amendments on the Finance Bill, I should like to indicate, speaking entirely for myself, some of the concessions which I would have much preferred instead of these large remissions to companies. I am disappointed that no further step has been taken to accelerate the repayment of post-war credits. All hon. Members must be aware of untold cases of hardship whereby elderly people living in difficult circumstances and entitled to post-war credits from the State are still unable to cash them or to get any advance on them so that they may pay their debts. We would have wished to call public attention to the need for some acceleration in the repayment of post-war credits.

Again, if there had been the ordinary machinery for putting down new Clauses, we should have had a good deal to say about the Purchase Tax. I do not know whether the Economic Secretary realises the great hardship that is felt by housewives and others from Purchase Tax, which is applied on a vast range of articles—not luxury articles but articles of domestic necessity.

If we are to maintain increased production on which our prosperity as a nation depends, if we are to make sure, as the Chancellor is gambling, that production increases beyond the rate at which domestic consumption increases, it is my belief that something must be done to relieve the housewives, and the best relief of all is to enable them to purchase, at prices within their means, some of those articles of domestic necessity, such as washing machines and kitchen utensils, which are fundamental if we are to keep in employment so many married women as well as men. It is on maintaining full employment wherever possible, among women as well as men, by giving every possible incentive to the married man with children, and by giving assistance to the housewife who is often at work herself, that we shall get the best results.

For these reasons, which I have tried to summarise, I regard the Chancellor's Budget as disappointing in the extreme. He seems to have taken an unnecessary gamble with the country's delicate financial balance of payments situation. He seems to have made an entirely inequitable distribution of the tax reliefs which he judged opportune, and the Budget proclaims the glaring omission on the part of the Chancellor to correct the anomalous injustice to the married man with children who for so long has been paying a measure of taxation far above what is just and equitable compared with the single man.

1.4 p.m.

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

The hon. Member for Islington, East (Mr. E. Fletcher) told us that he thought the Chancellor's concessions were a dangerous gamble. I think he will agree with me that that would depend upon what actually is the trend of production and consumption. If, in fact, production should go up more than he expected, and if consumption should come down more, it would not be a gamble.

I do not intend to make any prophecies on that score, but I think the hon. Gentleman shares with me the honour of being on the Board of Governors of the London School of Economics, and I think that if he consulted some of our most distinguished friends there, he would find that they would say—I think my friend Professor Morgan, whom he quoted, would also say—that it has been their experience in recent years that the Treasury have been far more skilful in making guesses on the course of production and on savings than they themselves have been as independent economists.

The hon. Gentleman made great play about the dangers of inflation, and I can share his apprehensions in that respect. But I would remind him that from his own Front Bench we have heard the plea that the Chancellor should have spent his money in reducing indirect taxation on beer and other commodities. Surely a reduction in taxation to encourage consumption must be more inflationary than a reduction in direct taxation, some of which remission may be saved and which may, increase production by the extra incentive it provides.

The hon. Gentleman himself went on to deplore the fact that the Chancellor had not seen fit to make a big advance in post-war credits, and he referred to the hardship inflicted on what he called the elderly people. In these days I do not believe that women of 60 or men of 65 would agree with the term "elderly." I do not think it is quite in keeping with modern conditions. I can think of few things more inflationary than if those taxes which were credited during the war were now suddenly returned in full to the extent of tens of millions of pounds.

If I disagree very much with almost everything the hon. Gentleman said, at any rate I am in complete agreement with what he said about the excellent speech of my hon. Friend the Member for Norfolk, South (Mr. J. E. B. Hill) who, I thought, made such a constructive and well-informed speech, and just the sort of speech which we welcome in the House of Commons.

I turn to the speech of the right hon. Member for Leeds, South (Mr. Gaitskell). The whole of the remainder of my speech will be devoted to a criticism of part of his speech, and I should add that I have warned him that I was going to do so, although I quite understand his reason for not being here. In making my criticism, I think it would be churlish of me not to pay a tribute to what I consider was a great speech. I think it fully deserved the tremendous enthusiasm which it evoked from hon. Members opposite. In case praise from this side of the Committee, even from such a humble quarter, should be damning to the right hon. Gentleman—and I think he knows that that is the last thing I would wish—let me assure him that my praise of his speech is entirely for a very fine Parliamentary performance and does not at all denote any agreement with what he said.

I thought his speech was somewhat marred by a good deal of electioneering. I suppose that, in the circumstances, that is forgivable. Members of the Opposition, and more particularly leaders of the Opposition, who have to whip up a degree of enthusiasm and confidence which seems to be a little lacking at the moment, can be forgiven for engaging in electioneering stunts which, on other occasions, they might deplore. Indeed, it is one of the comforts—though not the only comfort there is—of sitting in an obscure position in this House, that we do not have to descend to that sort of thing.

Mr. Barnett Janner (Leicester, North-West)

What is the Budget itself?

Mr. Spearman

I was talking about the comfort of being a back bencher.

Mr. Janner

Would the hon. Gentleman agree that the intention of the Budget is precisely what he is attacking us for?

Mr. Spearman

No. The intention of the Budget is to give a stimulus to production. Of course, we can all disagree about whether or not that intention will be achieved.

I believe that the right hon. Member for Leeds, South may perhaps regret some of the things which he said. One part of his speech I feel almost certain he will regret, and that was his attack on the use of the Bank Rate. It was a most irresponsible thing to do for anyone who had even the flimsiest of hopes of being in charge of the finances of the country again. The right hon. Gentleman is not an irresponsible man, and I therefore assume that he feels that his chances of holding that responsibility again are so small and so remote that the years will pass by and his indiscretion on Wednesday will be forgotten.

In my opinion, the very skilful use of the monetary weapon by my right hon. Friend is perhaps the greatest single achievement in his administration, and that is saying a good deal; and I think that the failure of the former Chancellor of the Exchequer to use that weapon was the greatest individual blunder of the Socialists' administration—and that, indeed, is saying a lot.

I am not taking a doctrinaire view on money rates and I am not suggesting that there is always something good in dear money and always something bad in cheap money, for that is an old-fashioned view. Old-fashioned views are still held by some hon. Members opposite. There is a time and place for everything, and I would say that when we have full employment and demands perhaps increasing more rapidly than resources, that is essentially a time for the skilful use of the monetary weapon. There have been other occasions, and I am sure they will occur again, when a skilful use of the monetary weapon has meant not dearer but cheaper money.

The right hon. Member for Leeds, South must often think what a tremendous amount of austerity and suffering he could have prevented if he had used that monetary weapon. Indeed, he might have avoided some of the unpopularity which followed his failure to do it. I think the reason for which hon. Members opposite are so opposed to this very beneficial weapon is that they cannot get the bogey of the 1930's out of their heads. I am not for one moment denying the cruel hardships caused by the heavy unemployment in those years, which occurred under a Socialist and a Conservative Government. What I am saying is that we had unemployment in those days because there was a glut of goods and we did not then know how to bring about an effective demand for them.

Maynard Keynes and many of his distinguished pupils have not lived for nothing. We now know how to deal with that situation. We are no longer faced, as it were, with an avalanche which we could not control. Unemployment is now something which is under our control, always provided that we can get the raw materials. The real fear of unemployment and why we were so near mass unemployment at the end of the late Administration—and why we might be near it again if they come back to power—is because we would have been unable to get those raw materials without which we cannot keep our factories engaged.

Mr. G. R. Mitchison (Kettering)

I have been waiting to hear the hon. Member's objections to the comments by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) on the use of the Bank Rate. Those comments were, first, that it was not the moment to use the Bank Rate, when exports were decreasing; secondly, that it resulted in a very large increase in the charges for the National Debt—and the hon. Member has not mentioned that; and thirdly, that it imposed a very heavy and almost intolerable burden on local authorities and, consequently, in such matters as rents for council houses. Perhaps the hon. Gentleman, who criticised these comments, would now deal with them.

Mr. Spearman

The hon. and learned Gentleman has a very quick mind and he often jumps ahead of what we slower people are trying to do. I was coming to that point in two or three minutes, and perhaps I may ask his indulgence for that length of time.

Before I deal with that, may I return to the right hon. Gentleman's speech? He said, as reported at column 195 of HANSARD: The sole object of this policy is, ultimately, to reduce imports and perhaps make room for exports. He went on to say that … we shall be faced not only with the danger of a fall in production, but with the danger of unemployment."—[OFFICIAL REPORT, 20th April, 1955; Vol. 540, c. 195.] But what other way is there of putting right a deficit in the balance of payments except by increasing exports and decreasing imports? There is nothing else.

Mr. Mitchison

Surely the hon. Member ought not to pick out a sentence like that? If he will read the whole paragraph he will see that the point which my right hon. Friend made was that it would damp down production.

Mr. Spearman

Yes, but surely the use of this monetary weapon is a way in which we should get lower imports and make more room for exports, and all I am saying is that that is the only way in which equilibrium can be obtained.

Mr. Mitchison

By damping down production.

Mr. Spearman

Broadly speaking, there are only two things which can be done if we have a balance of payments deficit. One is to do nothing, which was the policy of the right hon. Member for Leeds, South when he was in office. As a result of that we lost gold at such a pace, and were losing it at such a pace when he went out of office, that our entire gold reserves would have been wiped out by June, 1952.

Mr. Mitchison

They were larger than they are now.

Mr. Spearman

I think the hon. and learned Gentleman is getting his years a little mixed. He is talking of 1950 and he has taken no account of the sterling liabilities on the other side. If he will examine the rate at which gold was leaving this country when the Socialist Government left office he will see that had that continued for nine months the entire reserves would have been wiped out.

What I am saying is that there are only two things to do. One is to do nothing. That is what hon. Members opposite did. The other is to check demand at home. Here, I come to a completely non-controversial point. I do not know whether the hon. and learned Member for Kettering (Mr. Mitchison) has ever seen his way to agree with me, but he can hardly disagree with this proposition. There are three methods of checking demand: one is the use of physical controls, another is the use of the fiscal weapon and the third is the use of the monetary weapon. All these have the same object. They are not contradictory. Some of us like one much more than another, but they all aim at the same thing, and for each of them we have to pay a price.

Taking, first, the monetary weapon, I entirely agree with the hon. and learned Gentleman that that costs the Treasury money. I think that he vastly exaggerates the cost, for he is assuming that because we have dear money we therefore maintain it indefinitely. I am not preaching dear money for ever and ever. I am preaching it as a useful and indispensable weapon for a certain time. If the use of this weapon costs some tens of millions of pounds or more to the Treasury, I would say that that is unfortunate but that it is infinitesimal compared with the disaster which would befall the country if we ran into widespread inflation.

Mr. Mitchison

If the hon. Member prefers arguments about rates, does he not realise that if the Bank Rate is to be increased at the rate at which it recently has been increased we shall soon be getting a Bank Rate of 20 per cent., 30 per cent., 40 per cent., 50 per cent. or 60 per cent.?

Mr. Spearman

I think that perhaps the hon. and learned Member sometimes allows his ideas to get ahead of ordinary wisdom. Perhaps that was not one of his wisest interruptions.

The second weapon is the fiscal one of taxation. We have to pay a heavy price for that. I do not think it can be controverted that that weapon must be dis- couraging to enterprise and hard work. At present, we have to use that fiscal weapon fairly severely. I do not think that the monetary weapon alone would do it. My argument today is that the cost of the fiscal weapon is very considerable and should be lightened by the use of the monetary weapon as well.

The speeches of the former Chancellor of the Exchequer are always thoughtful and constructive. He always gives his reasons and alternative methods for achieving what he wants. If I may say so, that was not very apparent in the speech of the right hon. Member for Huyton (Mr. H. Wilson) today. The former Chancellor laid greater emphasis than I think he has ever done in this House before on the value of the third instrument, physical controls and particularly control of imports.

I should like to point out two objections to those. As I said, all these things have their faults and the fault of this instrument is far the greatest. First, it invites retaliation. Hon. Members opposite seem often to forget that in this country three-quarters of our exports are manufactured articles and three-quarters of our imports are food or raw materials which we must have. To invite retaliation on that vast amount of our exports, which is the only way of paying for the goods we have to have, seems downright silly.

Secondly, all imports must mean an allocation of supplies of raw materials to manufacturers. That allocation must be based on the experience of previous years. That means to say that the enterprising, go-ahead firm which increases efficiency and turnover is penalised, while the sluggard, who holds back, scores. That seems a very unfortunate part of the consequences of import controls.

In fact, I would say that to work the system of import controls fairly would involve a team of archangels and they are not always very apparent among hon. Members opposite, whereas to use the weapon employed by the Chancellor requires only the supply of honest bank managers, and we have them. Far more important, if imports are less and we do not check home consumption we may certainly get six months respite. That is all the former Chancellor of the Exchequer can hope to get, a few months' respite. After that, if we have fewer supplies and the same demand it is quite clear that prices must soar and when prices go up enough we shall not be able to export. That would mean another devaluation and devaluations mean mounting costs of living.

Again, if that demand is greater than the supply we would go back to shortages, which means rationing. Are hon. Members opposite really prepared to support a policy that means going back to rationing and shortages? That is the inevitable consequence of ignoring the monetary weapon. The right hon. Member for Leeds, South was very definite in what he said about it. He said: It was a nasty, fierce, mangy, hungry cat, called 'Bank Rate at 4½ per cent.'"—[OFFICIAL REPORT, 20th April, 1955; Vol. 540, c. 194.] Perhaps the right hon. Member for Huyton would answer for the right hon. Member for Leeds, South. If the right hon. Member for Leeds, South attacks the Bank Rate in that way, it seems that we can fairly imply that he would put it down if he were in charge again. That is a very important question. I hope that an answer will be given because foreigners must read that implication into what the right hon. Member said. If that is so there will be apprehension in foreign capitals which will be most damaging to this country.

Mr. I. O. Thomas

The hon. Member has quoted the adjectival terms about the famous cat. Does he not realise that my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), in making that reference to the speech of the Chancellor, was referring to a statement made by the Chancellor, which is given in quotation in column 194 of the OFFICIAL REPORT that day, where the Chancellor is quoted by my right hon. Friend as having stated: Our future policy …"— that is, the policy of the Government— will emerge like a cat from the bag in due course, when the time has come for it."—[OFFICIAL REPORT, 20th April, 1955; Vol. 540, c. 194.] Presumably, the cat was let out of the bag when the Chancellor made his Budget statement. Our opinion of the qualities of the cat, when it emerged, of course differ.

Mr. Spearman

I do not think that the hon. Member for The Wrekin (Mr. I. O. Thomas) is always wiser than the former Chancellor of the Exchequer, but I can quite understand that on this occasion he has done his best to tone down the very unfortunate remarks of the right hon. Member for Leeds, South. It remains true that the Bank Rate of 4½ per cent. was described by the right hon. Member as, A nasty, fierce, mangy, hungry cat. If the hon. Member will read the succeeding columns in the OFFICIAL REPORT, I think he will have no doubt at all but that his right hon. Friend was entirely opposed to the use of that Bank Rate.

In conclusion, I say without any doubt at all that if that is the policy of right hon. Members opposite, if they should have responsibility again, there will be an acute intensification of the hardships, shortages and rationing which we suffered from them before. If Sir Stafford Cripps beat us with whips, the right hon. Member for Leeds, South—modest and gentle as indeed he is, and most unwilling to do it—intends to beat us with scorpions.

1.28 p.m.

Mr. J. Beattie (Belfast, West)

Having listened to the hon. Member for Scarborough and Whitby (Mr. Spearman) say that the Budget was a stimulus to industry, I find his remarks a stimulus to me to proceed to destroy the arguments he put forward. One of them was that the Government have mastered unemployment; that they have now secured full employment. I think that the hon. Member must have been viewing that question from the point of view of the area which he represents. He has not been viewing it from the wider vantage point of the Budget. If he came to my division, in a part of Ireland of which hon. Members opposite claim ownership—

Sir E. Boyle

It is part of the United Kingdom.

Mr. Beattie

That can be argued out. I could give an exhibition of a return to the hungry 'thirties on the streets of Belfast due to unemployment caused by the failure of this Government to alleviate distress in an area which they claim.

The Chancellor of the Exchequer has given a sop to the linen industry, which is a very old industry in the part of the world from which I come. The least that I was hoping for was the abolition of the Purchase Tax on linen, but I failed to get anything of that kind. The Chancellor has given us a sop, perhaps to recompense us for the services which his Government have had in the last three and a half years from nine of the Members from my area in coming here week after week and keeping the power in the hands of the party opposite. If that is the recompense, I hope that those hon. Members will remember the repayment which they have received for maintaining their support continuously in every Division in the House of Commons.

I should like to refer to another aspect of the Budget which hits very hard the people whom I represent. When my right hon. Friend the Member for Huyton (Mr. H. Wilson) was speaking this morning, I thought to myself that his remarks were quite true and to the point regarding Northern Ireland. When he was speaking of cotton and the reduction of Purchase Tax of from 50 to 25 per cent., I was a little disturbed that my right hon. Friend failed to refer to the very important industry which is on all fours with cotton. I refer, of course, to linen. I understand, however, that the right hon. Member's remarks covered linen as well as cotton.

Mr. H. Wilson

I specifically said that we were pressing for the complete abolition of tax on textiles and cloth. The hon. Member will recall—I think that on that occasion he voted—that we put down a Motion for the complete abolition of Purchase Tax on all textiles, which certainly includes linen.

Mr. Beattie

I accept that statement. I had no doubt in my mind after speaking to my right hon. Friend about his intentions. I am glad that the linen workers of Northern Ireland at least have their friends on this side of the Committee, and I hope that at the forthcoming Election they will not forget the friends who have endeavoured to help them.

We have in Northern Ireland an aircraft industry, a shipbuilding industry, and an engineering industry. We have many industries in the City of Belfast, which houses one-third of the total population of Northern Ireland. I cannot see how shipbuilding, aircraft production or engineering will benefit by the increased Bank Rate or how dear money can be a stimulus to industry. Dear money will not bring orders to the City of Belfast. As an alderman of the Corporation of Belfast, I know that the city has had difficulties, because of the Bank Rate, in getting money. As my hon. and learned Friend the Member for Kettering (Mr. Mitchison) said, it may soar to the point at which we are unable to get money to carry out the useful services which we are compelled to undertake under local government law.

Having spoken of linen, I turn now to the Budget in general. We in Northern Ireland are payees under the Budget. Per head of the population, we contribute equally with anyone in England, Scotland and Wales, but are we getting equal treatment through the medium of distribution? If anyone tries to tell me that we are, my arithmetic must be badly out of focus.

We have other industries which suffer and labour under a great strain in respect of tariff rates on raw materials. We were hoping for some relief from the very heavy charges on transport, but we have got nothing other than the moiety of the Purchase Tax. Do the Government really believe what their Members say in their speeches about my part of the country? The Economic Secretary said that it was part of the United Kingdom. If we are in this big family, why have the Government not come to the aid and assistance of the poorer member of their family? We are in distress, and we are looking to the Government for help and comfort, and we are looking to them to let us earn a decent living in producing something useful for the country as a whole.

Sir E. Boyle

It was only a short time ago that the decision was taken to subcontract a number of Canberra aircraft to Short Bros. and Harland in Belfast. No one single subject has occupied more man-hours in the Ministry of Supply in recent months than the affairs of Northern Ireland. I give the hon. Member that assurance from personal experience.

Mr. I. O. Thomas

What are the Government doing about it?

Mr. Beattie

I hope that it works out in practice. I do not want Belfast to be given simply overflow contracts which cannot be fulfilled in the factories in England. We want something with stability in it.

We have an aircraft industry, and we have the workmen and all the necessary make-up for the production of aircraft. Instead of being used as an overflow factory, we claim, as part of this country, that we should at least have recognition as an aircraft production centre in the true sense of that term.

We also want the Government here to understand clearly that we are entitled to our full share of the Admiralty contracts. We have not received them in the past. We are now losing foreign orders. At one time, we built ships for foreign countries, but we are now in keen competition with other shipbuilding yards which have recovered their position. We have the stocks, the men and the tools, and we want an allocation of Admiralty orders. The Government should not confine themselves, as they have done in the past, to dockyards in England and Scotland. There is a shipyard in Northern Ireland, and it is the Government's responsibility to help that part of their family.

I am grateful to the Chair for allowing me to make my few remarks. I hope that the future does not prove to be so dark and gloomy as I visualise it to be if aid is not forthcoming. Taking the Economic Secretary at his word, there is hope, and clearly there will be some satisfaction if the big contracts to which he has referred come to us in Belfast.

1.40 p.m.

Mr. Donald Sumner (Orpington)

In rising to speak in this Chamber for the first time, I hope that I may claim the customary indulgence of the Committee. These words seem to be becoming rather infectious in this debate, and we know how narrowly the hon. Member for Islington, East (Mr. E. Fletcher), who has now left the Chamber, escaped the unprecedented situation of being sandwiched between two "maidens." It is a great honour to me to be privileged to follow the late Member for Orpington who was, I know, much respected on both sides of the Committee for his great natural good will and individuality.

Hon. Members of whatever seniority will not have forgotten how they felt when they first took their place in the House of Commons, and how they wondered what lay before them. I could not have anticipated, when I made my humble arrival here towards the end of January, however important I might have thought it was, that such great events would be set in train—that we should see the marked dissension on the Benches opposite manifesting itself, that we should have the resignation of a Prime Minister, the announcement of a General Election, and finally the presentation of the Budget and a draft Finance Bill of an unusual if not unique character.

I should like humbly to congratulate the Chancellor on his Budget proposals. They may well come to be held up as a model of how to achieve the most good with the minimum of detail. I will try to be as non-contentious as possible, difficult though that may be at this moment of time, but I must confess to feeling surprised by what has been said by hon. Members opposite, most recently by the hon. Member for Islington, East when he described this as an electioneering Budget. One wonders what the Opposition expected. Would the Chancellor have done right if he had done nothing for anybody?

Mr. Janner

That is what he has done.

Mr. Sumner

If that were what my right hon. Friend had done, perhaps there would be no cause for dissatisfaction on the benches opposite.

If it can be said to be in any sense true that this is an electioneering Budget it can only be true in the sense that the Budget proposals are the natural outcome of the Chancellor's policy and as such they are bound to be of great appeal to the electorate as a whole. But if it had been an electioneering Budget one would have expected to see detailed concessions of various sorts to particular groups and interests. The Chancellor, by a broad stroke, has swept the burden of taxation from some shoulders which could least bear it. He has encouraged efficiency and the will to work. He has encouraged capital investment and has increased the opportunity for expansion in industry.

If I attempt to consider briefly some of the more detailed concessions which one might have looked for in other circumstances, I realise that one could not have expected them now and I am to some extent looking into the future. My excuse must be that though I modestly expect to be here again, despite imminent events, I can never again have the same advantageous opportunity as has been mine today of being called upon to speak.

We live in prosperous times again, with full employment, high wages and a high standard of living. I honestly believe that the concern of both sides of the Committee must be for those who are unable, for one reason or another, to take advantage of that situation by reason of some disability, whether it be age, physical handicap, widowhood, or any other reason, which prevents their entering into the labour market in the ordinary sense and taking advantage of the present position and enjoying the high standard of living which is available to those who do not suffer from any form of disability.

It was for that reason, therefore, that one could so heartily welcome those additional advantages which were given by the Government in the last few months by way of increased old-age pensions and increased benefits. But, having said that, I feel that one must not be entirely content to rest upon one's laurels. It is to state the obvious to say that there are two ways in which those people in the categories which I have described can be helped. One is by giving them a little more and the other is by making what they have go a little further.

I shall endeavour to be non-contentious and to put both sides in saying that whenever some healthy and strong wage earner, taking home a good pay packet and enjoying the decent standard of living to which he is so fully entitled, clamours for a little more—and which of us would not want a little more—he is making it all the more difficult for those who have not his advantages. If I am to put what may be thought by hon. Members opposite to be the other side of the picture, I must also say that it is true that every time anyone who is a taxpayer and has a satisfactory level of income after deduction of tax clamours for a little less tax he is, albeit unwittingly, as in the other case, making the situation more difficult for those who are less fortunate than himself.

I understand that hon. Members opposite argue that there is something immoral or unjust about the present Budget proposals. It seems an extraordinary argument to say that because a broad sweeping proposal inevitably relieves all taxpayers it is in some sense wrong. If one is to say that, one must also say that the standard rate of Income Tax must never be varied. Surely, that cannot be a reasonable argument for one moment.

There are other groups who deserve our attention and in whose favour those who are more fortunate should sometimes be prepared to give way. They are not always very vocal and they cannot put a pistol to the head of the national economy. I refer only in passing to certain classes of retired officers. Their case has been put forward time and time again, but I am sure I need not apologise for mentioning them again. Their case was raised recently during a debate on the Adjournment, and was put from these back benches with far more skill and knowledge than I could hope to command. But I feel that they have a case, and I trust and believe that justice will be done.

The hon. Member for Islington, East referred at length to the family man. I could not keep my promise about being non-contentious were I to try to follow up his argument. I do not agree with the hon. Gentleman that the family man will not be grateful to the Chancellor. I think that the family man will be very grateful indeed. I agree that the family man needed help, and he has now received help. I trust it is not remiss to express a hope that at some future stage more may be done for him.

I am thinking particularly of a certain section which one might call the average or moderate salaried group of the professional classes. Such people have been hard put to bring up and educate their children in a way in which they believe—as they are entitled to do—would be jn the interests and to the benefit of the country as a whole. It may be that in the future, as we go forward in prosperity under a Conservative Government, it will be possible to do more for them, and perhaps to do something for those who pay for the education of their own children.

While I am speaking of certain groups in the community, I should like to say a word about widows in connection with death duties. It has always seemed to me that widows bear a particularly heavy burden in this regard. On the whole, men tend to marry women younger than themselves, and women have a longer expectation of life. Consequently, there are thousands of women in this country faced with years of widowhood. I think it regrettable—though, of course, it is a vast and complex question which I can only touch upon now—that under our present system of death duties, just at a time when they lose the support of their life partner, they should also have taken from them a substantial part of their financial security.

I know that the problem has often been considered, and it is not for me to pretend it is easy of solution or that I can suddenly produce, as it were, a solution out of a hat. I should have thought, however, that a great country like ours might have been able to bring in some scheme to enable widows to be left with the capital security built up largely through their own sacrifices during the lifetime of their husbands: and that the capital sum should not be taken away until the death of the widow. One might visualise a scheme for putting that money into a form of trust in Government securities.

There are many matters of detail which I should like to mention, but I shall not do so, of course, in order to save time. I should like, however, to refer to the theatre, which is usually referred to nowadays as the live theatre. As hon. Members know, provincial theatres all over the country are closing down with remarkable and worrying regularity. Entertainments Duty is, possibly, a small matter in the vast scope of this debate, but the live theatre is traditional to this country, and I do not believe that we desire another generation to be brought up entirely on canned and potted entertainment. The problem of the smaller cinemas has already been referred to, and I shall not attempt to add anything to what has been said on that subject.

I cannot entirely conceal my disappointment that there should be no reduction in the tax on petrol. One might have thought that a way of effecting a substantial reduction in the cost of living, apart from giving relief to the overburdened motorist who—if it be not an unfortunate metaphor—seems always to be the willing horse in the taxation field.

Having looked forward to future possibilities, I consider that the Budget proposals will be regarded in retrospect as very good and very brave. They do not pander to the demands of the moment or of any particular interests or group of interests by giving away all the surplus. They give away half to the benefit of the country as a whole. The hon. Member for Islington, East told the Committee what would have been done with the surplus had his party been in office. I do not know about that, I only know that it would not have been in a position to distribute any surplus at all.

1.56 p.m.

Mr. Barnett Janner (Leicester, North-West)

I wish to apologise to the hon. Member for Orpington (Mr. Sumner) for an interruption I made during his speech. I am sure he will understand that it was because I did not realise then that the excellent speech he was delivering was actually a maiden speech. That is why I committed the, shall I say, wrong that I did. I do not agree with what the hon. Gentleman said; nevertheless, he said it in such a way as to make it sound extremely convincing. His was indeed an excellent speech and I am sure that hon. Members will be happy to hear him on future occasions, which we all hope will be many.

Of course, with the rest of his party the hon. Member for Orpington must, unhappily, bear the misfortune of having to answer for a Budget which is a poor one to meet present-day demands. This is a bad Budget. I shall not go into the many arguments already adduced by my hon. Friends, but there is not the slightest doubt that it does not help the lower-paid workers in this country. It does not in any way right the wrongs done to the average individual during the term of office of the Tory Party.

By way of illustration I would refer to the Bank Rate. It is no use attempting to deny that the increase in the Bank Rate has affected individuals and families most materially. It has increased their local rates and it will increase the amount of interest rates to be paid by local authorities. None of the concessions in this Budget can meet even that.

Mr. William Shepherd (Cheadle)

Will the hon. Gentleman tell the Committee what would have been done had his party been in power? Would they have reduced the Bank Rate?

Mr. Janner

I think we should certainly have considered that proposition. I do not know whether the mess into which we have been put by the increase in the Bank Rate by the Tory Government would enable us to do it if we were returned to power, but I think that we should endeavour to do it, because we feel that the high cost of money places the individual who was in real need before in much greater need.

Apart from that, certain Acts have been passed in the course of the Tory mis-government of the country which have increased the cost of living to the so-called middle-class man and to the lower-paid worker, in particular, to such an extent that these so-called concessions of the Budget which, I think, are intended to be used as a kind of electioneering salve, are not at all in proportion to the need of the people concerned.

To give an illustration, though the Housing Repairs and Rents Act has been in operation for only a short period, hundreds of thousands of rent increases have already been made throughout the country. A large number of applications have come before the rent tribunals and the courts, and vast reductions have been made in the demands of landlords by those tribunals and courts. But, apart from that, large numbers of demands made by landlords have not been contested by the tenants, either because they have not been in a financial position to get help to do so or because they have not had the knowledge to contest them.

The result is that as much as a £1 or 30s. a week has been added to the budget of many families who are described as middle-class. Increases of 4s. and 5s. a week on low rental houses are by no means unusual in this respect. If again we compare what the Budget is to give those people with that one item alone, the Committee will realise that it is absurd to suggest that the so-called concessions in any way meet that extra item of expenditure.

There have been many instances in my constituency of how the mismanagement of the Tory Government has affected people's purses, particularly in the family sense. One illustration of this is the shortage of schools. Due to the Tory Party's policy, the necessary schools have not been provided in the proper places and this has resulted in a kind of circus whereby children go to school from one district to the next. Some of the buildings still being used are at such a distance from residential quarters of the children that they should either have been set aside altogether or utilised for other purposes.

Because the Government would not allow the Leicester Education Committee to use sufficient money to build the necessary school accommodation at Stocking Farm—a new district in which houses have gone up—many of the young children have had to go to another district to school. The result has been that their parents have not only been put to the expense of conveying them to and from those schools, but, in addition, of providing them with additional clothing to protect them against the weather and so on.

On top of that, the earning capacity of some of the families has been reduced because the parents concerned have had to spend a portion of their time in taking the children to school. As a consequence, the productive capacity of those families has also been reduced. This is another example of many that could be given throughout the country of the damage done by the policy of the Tory Party. I believe that what the Chancellor undoubtedly thought to be an electioneering Budget will recoil upon his own head.

In his speech, the hon. Member for Orpington referred to some concessions which, he said, ought to be given to the family man and to people who have no possibility of enjoying the high standard of living to which the Chancellor and other hon. Members have referred. What is the use of a high standard of living which is available only to the richest families in the land and not to the whole community? It is no use having a standard of living which cannot be utilised when food prices have risen to such an extent that the average wage earner is not in a position to buy what he needs for proper sustenance.

The suggestion that workers strike just for the sake of getting a small additional amount of pay, or that they should be content with wages which make it impossible for them to obtain the ordinary amenities of life, is just nonsense. It has even been suggested that it is mean of them to do that. Of course, the main reason for discontent is because many people are having to live under conditions that do not allow them to meet the daily expenses for an ordinary standard of life.

I believe that, generally, the country understands that and, also, that although the shops may have supplies of goods, that is no use if the housewife has to scrounge round only to find that she cannot buy with her husband's wage packet, which may be somewhat higher than it was before, the things which she was able to buy when it was lower.

I now turn to another matter dealt with by the hon. Member for Orpington. In addition to the bare necessities of life, there is such a thing as trying to give those who wish to enjoy the entertainments available a reasonable possibility of doing so.

Lieut-Colonel Marcus Upton (Brixton)

Boxing.

Mr. Janner

I had intended to deal with the subject of boxing, so I might as well come to it straight away. The Committee knows my particular interest in the sport, which happens to be in two spheres. I enjoy the sport itself, and, professionally, I act for some of the profession.

The hon. Member for Orpington spoke about the living theatre and the cinema. These entertainments are a vital part of the life of the nation as a whole. I happen to know a little more perhaps about the particular topic upon which I wish to speak in a few minutes than I do about some of the other entertainments, although I know the difficulties that prevail in the rest of the entertainment world, as well. I think it is the duty of the Government to see that people have the kind of entertainment which they want, provided that it is wholesome and that there is a general demand for it.

What is the position? We have asked in Committee and in the House, time after time, for consideration to be given to boxing. Boxing promotions are decreasing now because of the heavy Entertainments Duty they are called upon to meet. A full and clear statement has been given to the Chancellor without result. If it were the intention of the Government to do away with that sport—kill it altogether—because they do not agree with it, I can quite understand why the Government have done nothing about it. But if the Government agree that the sport should continue, surely they ought to do what the Chancellor on previous occasions has said he would do—prevent it from being killed by reducing the crippling taxation.

Of the total tax paid during the year ended 30th September, 1954, which amounted to £116,600, £25,700 was paid in respect of only two promotions. In other words, the smaller promotions are being driven out of existence. To gauge professional boxing solely by the number of large promotions which take place would not be a fair assessment of the position.

For example, the number of commercial tournaments dropped from 648 in 1952 to 306 in 1954. That was a decrease of 528 per cent. Let me give an illustration which, I think, will bring home immediately to the Committee what I am driving at. Monday night is the most popular night of the week for small promotions, and it used not to be unusual for 12 or more shows to be held each week on Monday nights. But on 21st February this year only one tournament was held in the whole of Greater London, and only two others in the rest of Great Britain. We have talent in this country which compares most favourably with that in any other part of the world. The trouble is that, owing to the lack of promotions, our boxers are not getting sufficient opportunity to exploit or improve their skill and to gain experience.

In Northern Ireland, where no increased tax has been imposed, an interesting comparison can be shown which further illustrates my point. Regular weekly tournaments, some on an extremely small scale which would be impracticable in this country, have been taking place in Belfast over the last three years, as a result of which certain boxers have been developed to a point where they can command sufficient box office attraction to warrant very large-scale promotions. The result has been that the actual tax which has been obtained by the Revenue has been increased in consequence.

While I am on this subject I should like to give one or two quotations from statements made on behalf of the Government on previous occasions and I shall ask the Committee to realise that in spite of these nothing has been done to help this sport.

On 20th May, 1953, the Financial Secretary said: I have had the privilege of meeting the British Boxing Board of Control and discussing these matters with them and with one or two hon. Members on both sides of the Committee who are interested in this matter, and I can assure the Committee that it is certainly not the intention of my right hon. Friend to destroy the sport … we are certainly anxious to watch carefully the progress of this sport, and that, while we do not accept the exceedingly gloomy prognostications that have been offered in this debate and outside, we do appreciate the anxiety of those concerned and we would certainly not wish to do this sport any injury."—[OFFICIAL REPORT, 20th May, 1953; Vol. 515, c. 2205–6.] The present position confirms the anxiety expressed by those concerned. There is not a shadow of doubt, in the view of the boxing stewards and the community generally that the sport is being destroyed. There are now 50 fewer licensed boxers than there were in the year before the tax was increased, and the number of fresh applications for 1954 dropped by considerably more than 50 per cent. The Government have not only failed to establish a reasonable means of existence for a very large percentage of the community but they are also destroying much of the pleasure which so many people have been accustomed to enjoy for many years.

I hope that when hon. Members on the other side of the Committee have examined clearly and concisely the terms of this Budget for themselves, they will do what they can, even at this late hour, to urge the Chancellor to deal with what is essential for the benefit of the community and the standard of living—reduce the Purchase Tax on many commodities, deal with the points we have raised, and ensure that people can live a proper and happy life without fearing that they will be unable to make both ends meet.

2.18 p.m.

Mr. Norman Cole (Bedfordshire, South)

In the 1953 Budget debate I referred to the Budget of that year as a springboard Budget. I want to stress today that the Budget which we are now discussing is evidence of the truth that the Budget of two years ago was a springboard for the people.

The prosperity of our country is evident in what we see around us, and is reflected in this Budget. The springing forward of our people has been shown in the high degree of happiness and prosperity which they are now enjoying. In short, the Budget, introduced on Tuesday is a fair and accurate reflection of the standard of life and of the ever increasing prosperity which the country is, happily, enjoying at the present time. In my view, this Budget is a responsible Budget. It is the Budget of a Chancellor who has had a continuing policy—a policy developed from the Budget of 1952, soon after we came to power, and the Budget of a Chancellor who expects to be in a position to advance that policy in future years for the benefit of our country.

In introducing his Budget, the Chancellor said that he thought that much of the money which he was making available to the people by the reliefs he was giving would be reinvested in the National Savings movement. I concur with him in that view. One of the most heartening things about the prosperity which we have been enjoying is the fact that in the last year the enormous figure of over £900 million has been saved. I endorse the tribute paid by the Chancellor to those in the National Savings movement for all the work which they are doing to make possible the savings which our people desire to make.

Savings arise through two factors—the ability to save and the willingness to save. I think it is true to say that we have created the ability to save. The willingness to save, which is so amply demonstrated today, springs from the fact that the people now have confidence in the future value of the money which they are investing in National Savings. They are coming back to the good, safe adage that to save one's money for future benefits is better than spending it from day to day as one obtains it.

The Budget contains something to help all classes of the population, including the family man. Not least among those helped by the Budget are the 2,400,000 people who are relieved altogether from taxation, and I would add to that number the 2 million people who were relieved from tax by a previous Budget introduced by my right hon. Friend. As I did when I spoke during the Budget debate of 1953, I want to stress the repercussive benefits which accrue from a reduction in the standard rate of Income Tax. There is no other single line of taxation relief that can be of more assistance to our people than such a reduction. Its benefits flow through the whole economic life of the nation, in many ways which are not always recognised by us, and I congratulate my right hon. Friend for making that concession.

It is a solemn thought that for the first time since the beginning of the war we are now down to a standard rate of 8s. 6d. in the £. Many of us may feel that there is still room for an even greater reduction, but we are at least down to a rate which is better than anything we have known for the last 15 years. We are all very glad of it, and I think that the people generally will be equally glad.

There are one or two matters which many hon. Members would like to have seen included in the Budget. I mention them because I want the Chancellor to have them particularly in mind, in the hope that when the financial opportunity arises he will be able to do something about them. It would be of great help to all ranks and grades of society if something could be done as soon as possible about the fuel tax, not only for pleasure motoring but to reduce the cost of goods and increase the standard of living.

In this matter, I would draw special attention to the position of many country bus services. Owing to the small number of passengers carried, and the costs of running such services, a very difficult set of circumstances has arisen. Many hon. Members know what a great help such a concession would be to companies who run such services. I appreciate the difficulty of making any such reduction selective for any purpose, but a reduction in the tax on fuel would be much appreciated by everyone.

I should also like to mention a matter upon which I have spoken in our debates on Finance Bills in past years. I should like my right hon. Friend, at some time, to give consideration to the vexed question of the duty upon light hydro-carbon oils used in industry. A concession in that direction would help not only our production for home consumption but also our exports abroad, which use such oils.

There is also the general question of Purchase Tax. I am fully aware that it is not yet possible to grant a full remission in this matter, but if the day does come when we can dispense to a larger extent with this form of indirect taxation, such a remission would be most commendable and most popular.

Our present state of prosperity, of which this Budget is a true reflection, has not been brought about by any magical process—by a wave of the wand or an overnight metamorphosis of the economic situation. The prosperity of any country depends upon three things, which are quite simply stated—the activity, the hard work, and the productive capacity of its people. Another and an equally important fact is the leadership of the Government which is in power at the time. It is a combination of those factors which has brought us the degree of prosperity which we now enjoy, and which we all trust will continue and increase as the years go on.

I do not believe that we have yet reached the limit of happiness, prosperity and general benefit. I believe that we can rise to yet greater heights. The potentiality is there, in our people, and the power of leadership is most certainly there, in our Government. I believe that if we can continue this production, good will, and hard work by our people we may enjoy a much higher standard of living over the next 20 or 25 years. This Budget is a step towards that goal. I commend my right hon. Friend for introducing it, and I trust that it will bring many benefits to our people.

2.28 p.m.

Mr. Ivor Owen Thomas (The Wrekin)

I have listened to the greater part of this debate, and though I have been called almost at the death of it, I am grateful for small mercies. I think it will be generally agreed that, before making one's contribution, it is best to listen to as many other speeches as possible and to try to understand them as much as possible.

Between the sittings I have been trying to get to the bottom—if there is a bottom—and the purpose of the Budget as a financial statement. It is no exaggeration to say that it is designed to be an Election Budget. I do not blame the Government for that; it is a part of party politics, and they have every right to hope that they are doing the right thing, at the right time, for their chances in the General Election which they have decided to declare. Looking at the matter from the national point of view, however, and in relation to political developments and party political strategy, it is right that the Government should ask themselves whether they have done the right thing in determining to go to the country at such short notice.

I do not want to be misunderstood. Our general feeling is that we welcome the opportunity of testing the strength of the contending parties by a General Election. The more the people of the country know about what has been happening under this Government during the last three and a half years and the more they understand the contents of the Budget, the more they will determine that the Government should be changed.

Our opponents take every opportunity to belittle what was achieved by the Labour Government elected in 1945, in the very difficult circumstances immediately after the war. They should appreciate the almost overwhelming difficulties. There was no American aid and the export trade had not been rebuilt. This took a long time. We had to overtake many arrears in regard to the social services. The electors should be grateful for the great work done by the two Labour Governments from 1945 to 1951. My memory goes back to what happened after the First World War, and I know that the welfare of the people was much better attended to after the Second World War, from 1945 to 1951.

Before our opponents came back into power in 1951 they promised to improve the general standard and to make life easier for the people. They made promises about the cost of living. What they have done is now open to examination and criticism. They promised to reduce the cost of living. It is interesting to make comparisons of food prices between October, 1951, and February, 1955. Butter was 2s. 6d. per lb. and is now 3s. 8d. to 4s. 2d. a lb. The price of margarine has gone up in that period from 1s. 4d. to 2s. 3d., that of cooking fat from 1s. 4d. to 2s. 2d., cheese from 1s. 2d. to 2s. 2d., bacon from 2s. 7d. to 3s. 9½d., carcase meat from 1s. 8d. to 2s. 9d., sugar from 6d. to 8d., a quart of milk from 11d. to 1s. 2d., flour from 4d. to 6¾ d., tea from 3s. 8d. to 7s. 8d., and coffee from 4s. 2d. to 8s. The purchasing value of the £ fell from 20s. to 17s. 8d. The Interim Index of Retail Prices showed an increase in that period from 129 to 146 on all items of family expenditure.

These facts belie the promise of the Tory Party, made in the Election of 1951. The Tory Party has not reduced the cost of living, which has continued to soar. All effective controls have been removed and the possibility of inflation has increased. Even the Chancellor of the Exchequer realised only a few months ago that the Government had to do something about the worsening condition of inflation, so he increased the Bank Rate. This means that every local authority requiring a loan for public purposes has to pay an increased interest charge, leading inevitably to a rise in the price of what it has to sell or the service which it has to render.

Our opponents have decided to go to the country, thinking that the time is opportune and advantageous for them. We welcome the opportunity. The Government are playing with chance in this Budget, and are taking a risk in the hope that it will come off. Looking at the situation in relation to the conduct of the affairs of the country, why have the Government decided that it is now necessary to go to the country? They still have 18 months of life under the constitutional maximum of five years, dating from 1951. They could still have another Budget. Their plea is that there has been a change in leadership; but the Government and their supporters remain the same. Has there been a change of policy because of the change in the leadership? Is it not the same Tory Party with a majority which has been effective as a majority over the last three and a half years?

Mr. T. L. Iremonger (Ilford, North)

I fully appreciate the force of the hon. Gentleman's argument. I should be interested if he would apply it to the circumstances which prevailed in 1951.

Mr. Thomas

The reply to that intervention has already been given from this side of the Committee. The circumstances were not comparable. The majority was very narrow and could not be counted upon—[HON. MEMBERS: "Ah."]—let me finish—as effective owing to the incidence of illness. The absence of six or seven Government supporters meant, with a majority of only 10 or 11, the difference between success or defeat in a Division.

It is a fact which cannot be denied that this Government, with its majority, has been enabled to continue in office and in power for no less than three and a half years. They cannot deny that, if they wished to go on for the next 18 months, there is nothing to prevent them doing so. Their whip is effective, their majority exactly the same. [HON. MEMBERS: "It is two more."] Well, that is an added reason why it is not necessary to have an Election at this stage. That strengthens my argument.

Mr. J. B. Godber (Grantham)

Does not the hon. Gentleman want an Election? Is he not anxious to get to grips with the electorate?

Mr. Thomas

I made it perfectly clear that we welcome this challenge. What I am trying to do, and what the electors will endeavour to do, is to seek the effective reasons, if there are any effective reasons, for the Government's strategy and tactics in deciding on a General Election now, and, as democrats, we are entitled to make that examination. That is all I am trying to do.

We welcome this opportunity of challenging the Government. Their record has been a very unhappy one as far as the general welfare of the country is concerned. The cost of living has continued to increase, and the distribution of wealth will be more inequitable as a result of the proposals in the Chancellor's Budget. The people who are already the most prosperous and the people with the greatest wealth stand to gain the greatest amount from the Budget concessions which the Chancellor is making. Even if the Government and the Chancellor use the argument that these concessions are made for the stimulation of further investment and further production, I put this question to them, and I think it deserves an answer.

Why does not the Chancellor impose a condition in the Income Tax concessions given to companies that all amounts saved by means of such concessions should be put back into industry and not declared as additional dividends? Is there to be any restraint, or just an appeal? Does the Chancellor expect that appeal to have any effect? I doubt it very much, because there is every inducement, from the point of view of the companies, to take advantage, while the going is good, of the special concessions which the Chancellor is making to them. No liability is laid upon them to plough the money back into industry, and it will merely be spent in the declaration of higher dividends. That will be the tone of every company meeting during the next 12 months.

Finally, the people of this country have been severely let down by the Government in respect of many of the social services. Education has suffered because sufficient materials and labour have not been diverted into the building of new schools. If hon. Members want the figures, they are available, but it is a fact that the bulk of the new schools which have been completed over the last three and a half years are schools which had already been prepared and actually commenced before this Government came into power. The number of schools which have been planned or started has rapidly declined over the last three and a half years, and I defy the Chancellor and the Government to deny that statement. The figures are there, and I will give them.

Mr. R. A. Butler

No; let us get on.

Mr. Thomas

We are getting on.

I will give the official figures. The following figures were given by the Minister of Education, as recorded in HANSARD of 21st October, 1954, c. 199. On 1st June, 1951, the number of schools under construction was 1,204; on the 1st June, 1952, the number was 1,061; on 1st June, 1953, 1,042; and on 1st June, 1954, it was only 993. That was a substantial reduction, which is only explained by the fact that, in order to boost up the number of houses being built, materials and labour had been diverted to that purpose. Labour had been diverted to the building of non-essential buildings—luxury flats and other construction of that kind.

The result is that the number of classes of more than 40 pupils in overcrowded schools over the same period has risen, and I am entitled to make this comparison. In January, 1951, the number of classes with more than 40 pupils was 35,103; in January, 1952, it increased to 40,266; in January, 1953, to 44,582; and in January, 1954, the latest available figures, to no fewer than 44,940. As in the case of the other figures I have just quoted, these are official figures taken from Government records, in this case the Report of the Ministry of Education.

The Government have let down the country in many vital aspects of social activities. This is just a window-dressing Budget. I believe that the Government, and the Chancellor in particular, are very disturbed about possible developments in the world economy, and consequently in ours, during the next 12 months. They are having this General Election when they think that the going is good for themselves.

I do not think that they will get back into power. I certainly hope that they will not, because we want a Government of realists, a Government having the welfare of all our people at heart, and not just the welfare of some section. If this present Government are not returned, and if there is any distribution of national wealth to be made, it will be made far more equitably than the Chancellor proposes in his Budget. We on this side of the Committee welcome the challenge. We have nothing to be afraid of. When we can say "Goodbye" once again to a Tory Government we shall be doing a service not only to this country but to the world in general.

2.51 p.m.

Mr. Douglas Jay (Battersea, North)

I should like, first, to congratulate the hon. Member for Norfolk, South (Mr. J. E. B. Hill), who seemed to me to speak much more eloquently for the farmers of Norfolk than I have ever heard the Chancellor do for the farmers of Suffolk—[An HON. MEMBER: "Essex."]—I am sorry, Essex—or, indeed, of any other county.

The Chancellor told us rather coyly on Tuesday that the scope for discussion on the Finance Bill would be restricted. There may be some case for streamlining procedure this year since we are all eager to carry this argument to the country. But, according to some learned advice given to me, it almost seems—I hope it is not true—that the Government have made it impossible to put down any Amendments to this Finance Bill at all.

I am sure that you, Sir Charles, will be the first to agree that even in these circumstances Parliament has some rights, particularly over finance. We certainly cannot acquiesce in the Government treating the House of Commons as though it were a Supreme Soviet or a Tory Party conference. I should, therefore, like the Chancellor to give an assurance today that it will at least be possible to move some reasonable Amendments to the Finance Bill. I gather that there has been some technical hitch over the Bill, no doubt due to the indecent haste with which the whole of this matter has been rushed through.

I thought that the most remarkable feature of the Chancellor's speech was its omissions. He never once mentioned the fact that a higher National Insurance contribution of 1s. a week is being imposed on every worker; yet that is, of course, the basis of his whole Budget. He forced it on the unfortunate Minister of Pensions and National Insurance in order to give himself the £100 million which now, as he said on Tuesday, he is "giving away," on his usual plan of the greater the income, the greater the relief. Indeed, every farm worker in Norfolk, Suffolk, and Essex will pay the extra 1s. and precious few will get any tax reliefs from the Budget. The right hon. Gentleman will raise the money by a reactionary poll tax and will give it away on the principle of … Unto every one that hath shall be given …. Let us, briefly, trace the three steps of this very instructive story. First, when the Minister of Pensions and National Insurance imposed the extra 1s. in December he said that he thought most people would be happy to pay the extra …. He added that if the Opposition voted against it, that would be simply playing politics and electioneering."—[OFFICIAL REPORT, 8th December, 1954; Vol. 535, c. 981.] When the Chancellor put on his restrictions on hire purchase in February he said that that was necessary … to moderate excessive internal demand."—[OFFICIAL REPORT, 24th February, 1955; Vol. 537, c. 1457.] When he comes here in April and gives these large benefits to his friends, after the trade situation, in the words of the "News Chronicle" city editor had turned "really ugly" the Chancellor, in his own words, is … liberating the human spirit …."—[OFFICIAL REPORT. 19th April, 1955; Vol. 540, c. 39.] I think that the country will be interested to know, in terms of hard figures, just how the human spirit is being liberated by this operation. In the following calculation I allow for the double change—because it all hangs together—in Income Tax and in National Insurance contributions. I take a couple with two children, with income all earned—whom we have agreed in this debate to be fairly typical. Very simply, it works like this. The £400 a year family is 52s. a year worse off, as a result of the operation. The £500 a year family is 20s. a year worse off. That is the average family earning £10 a week, which is the average level of earnings. At the same time, again allowing for both changes, the £2,000 a year family is £35 a year better off, and if we go to £15,000 a year, that family is £360 a year better off. That is how we are all enabled, in the Chancellor's words on the wireless on Tuesday night, To stretch, breathe and grow. Those, of course, are all earned incomes. On top of that, as my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) pointed out those with unearned incomes do better out of the Budget at every point up the scale. The Chancellor called that … fresh incentives to the forces of growth …"—[OFFICIAL REPORT, 19th April, 1955; Vol. 540, c. 56.] On Wednesday, the Financial Secretary produced some of the most extraordinary figures I have ever heard, in an attempt to prove that the rich have really done very poorly out of this Government. He climbed, as it were, through the looking-glass, peered back to the outside world, and described what he saw in terms of percentages which would have delighted the Mad Hatter. The plain man is not interested in these straw-in-the-hair percentages. He wants to know how much everyone is getting in terms of pounds, shillings and pence.

This is how it really works out, over the four Budgets introduced by the Chancellor since 1951, and taking again the married couple with two children on earned income. Over those 3½ years the £400 a year family has gained nothing at all. The £500 a year family has gained £13 a year; for the £5,000 family the gain is £285 a year, and for the £20,000 a year family the gain is £1,035 a year. Of course, the highest prize through the whole performance, no doubt again in the name of "fresh hope for the forces of expansion," of which the Chancellor spoke, goes to his real hero, the single man wholly living on unearned income.

What is the Chancellor's defence for all these outrages of social justice? He gave virtually none. The proposals did not proceed from the argument. They emerged like that cat from the bag—or perhaps I should say, like a new Tory leader from a Tory Party meeting. The only ghost of an argument were a few ancient, musty clichés about incentives to production and enterprise, and so forth.

Let us look at the actual evidence we have before us. I think it is plain and striking. First, take the test of production. As we know, under the five years of Labour's fair shares tax system, Britain's industrial production increased 35 per cent., or 7 per cent. a year.

Sir Ian Horobin (Oldham, East)

Is that straw in the hair?

Mr. Jay

In the three years of the Chancellor's incentive régime it has risen barely 10 per cent., or 3 per cent. a year.

Taking exports—and this is even more striking—they rose in volume from 1947 to 1951 by 67 per cent. Yet in 1954 they were only 3 per cent. in volume above 1951, and only 4 per cent. above 1950. Or take the test of United Kingdom dollar exports, which I will give in terms of figures to please the hon. Member for Oldham, East (Sir I. Horobin), who does not like percentages. I do not think hon. Members have noticed this. From 1946 to 1951, under the Labour régime, United Kingdom dollar exports rose from 100 million dollars to 393 million dollars—almost four-fold. But from 1951 to 1954, under these "incentive" Budgets, they have only risen further from 393 million to 419 million dollars. What a poor advertisement that is for the incentive theory. What a striking example of how Conservative freedom really works.

After all, the present Government started with three solid advantages which the Chancellor seldom mentions. First of all, there was the industrial re-equipment programme carried through in the years of the Labour Government. The Financial Secretary to the Treasury on Wednesday claimed that what he called impartial international reports justified the Chancellor's policy. What the last Annual Report of the International Monetary Fund on the United Kingdom and Europe actually says is this: The reconstruction and development efforts undertaken since the end of the war have to a large extent had the effect originally intended. It says that "these efforts have laid the foundation for economic production so firmly" that relaxation became possible.

That is in itself a fitting epitaph on the work of the late Sir Stafford Cripps. In Britain, in those four years from 1948 to 1951, we built up a new oil refinery industry which is now the greatest in Europe; and many hundreds of millions of pounds were invested in manufacturing and other industries. It is as a result of that that we have had higher productive capacity in these recent years.

The Government have also had a double advantage from the fall in import prices between 1951 and 1954, because that eased the import bill before affecting exports all the way through that period. Yet that benefit has never reached the housewife through a lower cost of living.

Let us bring this price story up-to-date, in order to get it crystal clear. In the two years under the Labour Government ending in the third quarter of 1951, import prices rose by 66 per cent.; but the cost of living rose only by 14 per cent. On the other hand, in the 3¼ years from the third quarter, of 1951 to the last quarter of 1954, under the present Government, import prices fell by 13 per cent.; but living costs again rose by 14 per cent. So it takes a 66 per cent. rise in import prices under a Labour Government, and a 13 per cent. fall under a Tory Government, to produce the same rise in the cost of living. How right indeed was the Tory 1951 Election manifesto—and I am glad to be able to agree with it here—in saying: A Government will be judged according to the effect of its programme upon rising costs and prices. Since 1951, the cost of living has risen faster here than in almost any other country. Over that period it has either been stable or has risen less than here in the United States, Canada, Belgium, Switzerland, Germany, France, Italy, Ireland, Holland, Sweden and Denmark. That in itself is very remarkable.

Thirdly, the Government have enjoyed a huge advantage—another thing the Chancellor never tells the House—in that during the last three years the United States, very rightly and very wisely, has been pushing out more dollars by way of aid than she has sucked in by her normal export surplus. Yet we are almost the only non-dollar country which has not obtained a share of that gold. As hon. Members know, our reserve is lower today than it was in October, 1951. What I think some people do not realise is that during that same period the gold reserve has risen in Germany, France, Switzerland, Italy, Holland, Belgium, Sweden and Canada. I can find only one comparable country—Norway—which has also suffered a loss in that period.

Mr. R. A. Butler

The right hon. Gentleman is. of course, referring to the sterling area as a whole and not to this country.

Mr. Jay

Certainly. We all know, I hope, that the gold reserve is a sterling area reserve.

The truth is that we have had a great opportunity in these three years of good fortune, and have very largely missed it.

Mr. Charles Ian Orr-Ewing (Hendon, North)

Before he leaves this point does the right hon. Gentleman intend to mention that his Government used £2,000 million of American money and that we are now paying the interest on that loan, which has a very considerable effect on the situation?

Mr. Jay

The hon. Member knows quite well that the present Government have been receiving large amounts of defence aid. He may not know also that during the immediate post-war years the Labour Government were repaying, and paying interest on, the Canadian wartime loan of 1942.

In view of the rather mythical picture given by the Minister of Supply of what happened in 1951, I will briefly put these facts on record. In 1951, the gold reserve began to fall from the peak post-war level, which it has never reached again, in the first week of July. We put the first import restrictions into effect in the last week of July; and at the beginning of August we instructed the officials concerned—and I am bound to say this because of what the Minister of Supply said—to prepare a series of drastic cuts to be put into effect as quickly as that could be done.

Mr. Orr-Ewing

Why was that not announced?

Mr. Jay

I will come to that in a moment.

In 1954, the gold reserve began to fall, also in July. But the Government took no action, as far as we know, until February, 1955—seven months then, instead of three weeks in 1951. That is the difference.

The hon. Member for Hendon, North (Mr. C. I. Orr-Ewing), who, I know, speaks out of genuine forgetfulness, asked why we did not announce it. The situation was announced, and the measures taken were announced by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), who was then Chancellor of the Exchequer, in a speech at the Mansion House in October, in which he said that those measures had already been taken. The present Chancellor of the Exchequer, making his first speech in the House in the subsequent month of November, paid a tribute to my right hon. Friend for having fully warned the country of what was happening.

I will quote only one sentence from what my right hon. Friend said at the Mansion House in that October. Hon. Members opposite seem to have forgotten it. Having mentioned the measures which were being taken, my right hon. Friend said, consumption at home must, therefore, be cut down. That was what he said in the middle of the Election campaign, and it is not quite what the present Chancellor said to us on Tuesday.

The Chancellor prided and preened himself in his Budget speech on having kept expenditure down. I think the Committee ought now and again to take a look at Government expenditure. In an intervention this afternoon, the Chancellor said he had never given any undertaking like that of the Minister of Education to make cuts in expenditure. I think he had forgotten the manifestos of his own party.

There were two of them. One, which went by the name of "Conservative Faith," said that the Labour Government, "with frantic extravagance" was spending at the rate—I think these were the calculations of the right hon. Member for Woodford (Sir W. Churchill)—of £22,000 million in six years. I wonder whether hon. Members opposite realise that the Chancellor on his estimates for the present year, on the same basis, is spending at the rate of £32,000 million in six years?

There was another manifesto, called "Britain Strong and Free," which was certainly very free with the facts. It gave this categorical undertaking: Reductions in Government expenditure will make lower taxation more possible.

Hon. Members

Hear, hear.

Mr. Jay

In view of those interventions—I do not know whether to call them cheers—I wonder how many hon. Members opposite have noticed that the overall estimate of the Chancellor of Government expenditure this year is higher than that for the last full year of Labour Government by £1,534 million.

Mr. I. O. Thomas

Cheer that.

Mr. Jay

Does the hon. Member for Hendon, North realise that the total the Chancellor proposes to take in taxation from the public this year is an all-time record for peace, and exceeds that in the last year of Labour Government by no less than £756 million. He is proposing to collect record totals from the tobacco tax, petrol duty and Purchase Tax. I think that the record level from the Purchase Tax will be particularly distressing to the Minister of National Insurance, who, I always remember, gave the pledge in this House in October, 1950, that a Tory Government would abolish Purchase Tax altogether, apart from a few luxury items.

I say that, of course, not because we believe that Government expenditure on social services or on defence is unnecessary—of course we do not—but simply so that the country may judge in good time of the veracity of Tory Election promises.

I now invite the Committee to look at three items of Government expenditure. First, debt interest. The Chancellor, according to the Financial Statement, expects to spend this year £85 million more on debt interest than did the Labour Government, even including the U.S. debt interest, in our last year.

At the moment, the Treasury bill rate stands at the extraordinarily high level of 3¾ per cent. That is 3¼ per cent. higher than it was under the Labour Government; and, on the present £5,000 million, or a little more, of Treasury bills, that represents nearly £170 million a year. The increase alone is very nearly twice the whole Exchequer contribution to the National Insurance Fund annually. It is very nearly equal to the total of war pensions and National Assistance together.

On Wednesday the Financial Secretary asked me where the money would come from to pay for the higher social services in Labour's Election programme, and the hon. Member for Dover (Mr. Arbuthnot) indulged in some statistical antics on the same subject earlier today. I am very glad to answer that question. We should certainly begin by saving some of that £170 million which now goes on debt interest.

Secondly, I should like to give some information, particularly to hon. Members opposite, about the Ministry of Food. Here is another remarkable mystery. The Ministry of Food has been abolished—the Prime Minister can tell me whether I am wrong—or so we thought. The Minister has disappeared, and the Parliamentary Secretary has been hurriedly spirited away. But the Ministry of Food Estimate for the present year goes up by £54 million to £287 million. That really is a remarkable feat, even for this Government. The Ministry has gone, and the Estimate goes up higher than ever before. I wonder whether that will cause delight to the heart of the hon. Member for Kidderminster (Mr. Nabarro), or whether that is perhaps why he is not here this afternoon.

Thirdly, on expenditure, I should like to ask the Chancellor whether he is really satisfied that military expenditure overseas, not counting the new burden with which we are confronted on account of Germany, was actually 50 per cent. higher in 1954 than in 1950. Is there really no room for economies to be made in this direction?

What a pity it is that the Chancellor of the Exchequer has followed this reactionary taxation policy over the last three and a half years. If only he would lift his eyes from the Tory Central Office and look out at rather wider horizons, he would find that all over the world the countries with social stability, with contentment and with democratic liberties, are those with progressive direct taxation systems; and that those with no redistribution of wealth through he Budget are plagued with poverty, strife and Communism.

We have been asked, in this debate, what we in the Labour Party would do in present circumstances. Like the Chancellor, I think that we should not be timid. I believe that the time has come for far-reaching, new steps forward to greater social justice, wider opportunities and more democratic distribution of wealth. Why has anybody ever opposed such a policy, except for selfish reasons? It is partly, I think, because people have feared that damage might be done to production and investment by taxes on great wealth and high profits—and there have been such genuine fears. But the whole of the last ten years has shown that production depends not on taxation, but on full employment.

On Tuesday, the Chancellor never looked seriously at the evidence, but took refuge in some glib, empty phrases about lower taxes on companies "giving a keener edge to competition." If he really thinks that tax reliefs of that type will stimulate vast industrial investment, I wish he would look, for instance, at the "Westminster Bank Review" for February—not a Socialist propaganda organ—in which Professor Cairncross, after a thorough analysis of the post-war and pre-war experience of taxation on company profits, comes to this striking conclusion: What has been taken by the Exchequer in higher taxation of profits has been at the expense of the shareholder rather than the consumer or the self-financing of industrial expansion. That is strikingly, and fascinatingly, confirmed by the Chancellor's own Survey this year, which shows that the increase in dividends in 1954, at £80 million, was precisely the same sum as was remitted in taxation on company profits during that year.

If the Chancellor really believes that tax reliefs on high individual incomes will somehow stimulate a great burst of. new productive effort, he is defying not merely all post-war experience, and the figures which I gave earlier, but last year's Report of his own Royal Commission on Taxation and Profits. That Report firmly and unanimously concluded that the incentive argument had been vastly exaggerated.

Nor do I accept for a moment the view that there is no room left for a more just division of wealth in the country. We all know, for instance, that 50 per cent. of private property is still in the hands of 1 per cent. of the population. But, in addition, the Economic Survey shows that companies are adding to their assets every year, after covering depreciation, dividends and taxation, an amount more than five times as great as the annual yield from death duties. That means that the shareholding class are gaining more year by year in capital appreciation through undistributed profits than they contribute to the public through death duties.

If anyone really thinks, and I believe that some people still do, that there is no scope for more social justice in current living standards, I would just say this. The inequalities in living standards today, which are provocative, unjustifiable and which deface our society are, as often as not, paid for, not out of income known to the Inland Revenue, but out of capital gains, out of consumption of inherited capital, and by the whole range of practices associated with expenses allowances and accounts. I do not believe that Surtax avoidance is so small as to make the Inland Revenue figures of income alone a true measure of what can be done in the future.

Some hon. Members opposite have asked what our policy is and what we would do. To them, I say, finally, that we in the Labour Party are in favour of fairer taxation, not higher taxation. That means lower taxes on the smaller man, and the smaller company, and on household goods; and a bigger contribution from capital gains, from distributed profits, and from those who live on inherited wealth.

If we in Britain are to stand before the world, with all that that means, as an economic and social as well as a political democracy, we have to ensure that the high profits and capital gains, due to full employment, are shared out fairly over the whole community. It can be done, and it should be done. I therefore welcome the chance, given to the country by the General Election, to start now.

3.23 p.m.

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

We have had a very valuable debate ranging over four days. I shall not be able to repeat the arguments of my Budget speech, although it was not possible for it to be published in the Press, for I have only a short time in which to speak. But I will try to sum up and answer some of the points which have been made in the course of the debate.

First I should like to congratulate the three maiden speakers in our debate. They were the hon. Member for Wrexham (Mr. Idwal Jones), whom we shall all be very glad to hear again, my hon. Friend the Member for Orpington (Mr. Sumner), of whom I should wish to say likewise, and my hon. Friend the Member for Norfolk, South (Mr. J. E. B. Hill), who spoke on agriculture. His speech was of very great assistance to us in our discussions, and I hope that he may often intervene again on behalf of the agricultural interests in his own district.

My hon. Friend will be glad to hear that I made a slight mistake in an intervention yesterday on the subject of agricultural production, which has been affected by the weather, I refer hon. Members to the Economic Survey for the exact situation. I have little doubt that agricultural production will, as a result of recent Price Reviews and the encouragement given by the Government, continue to show the trend to rise which was shown before the recent disastrous weather. I am glad that the right hon. Member for Battersea, North (Mr. Jay) recognises that for a quarter of century I have represented Essex farmers and farm workers and not those in Suffolk, the neighbouring county of Constable and Gainsborough.

The debate has followed the usual lines, and I have been accused by one of our leading newspapers, which can now publish its comments, of having an infectious laugh or chuckle. The reason for that is that I have been so pleased to recognise so many old friends again in the criticisms of hon. Members opposite. As I told the Committee, my right hon. Friend the Prime Minister said that he had never heard a speech so instinct with newly acquired class-war hatred than that of the right hon. Member for Leeds, South (Mr. Gaitskell), who recently left Winchester College and is now occupying a prominent position in Her Majesty's. Opposition. I have seldom heard such arguments.

The only person who appears to have died in the course of the two years since 1953 is the lonely bachelor with an. income of £100,000 a year—unearned. He has not been heard—

Mr. Hugh Gaitskell (Leeds, South)

He has lost his voice.

Mr. Butler

He has not been resuscitated, and so far as I know, he has yet to find a wife. But I hope that the child allowances I am providing will be of some assistance to him.

On the other hand we have had the really preposterous argument advanced by the right hon. Member for Huyton (Mr. H. Wilson)—who has been obliged to leave our debate for another engagement and who had the courtesy so to inform me—that £1,060,000 has been given to Unilever and only a few shillings to the man with two children—[Laughter.] The Committee will note, from the laughter at the repetition of the right hon. Gentleman's argument, the sort of level at which the debate has been conducted from the other side of the Committee; and we shall have no fear in accepting the challenge of the right hon. Gentleman at the Election.

Strange to relate, the British people are not, as right hon. and hon. Members opposite have tried to make out, a sort of cringing poverty-stricken set. They have improved greatly in their standard of living and have profited greatly under this Government. They are an independent set of people who like their independence. They are a commonsense set of people and they will not be misled by the arguments put forward from the other side of the Committee.

With that short interlude, and as I have little time, I wish to get on to a major matter raised by the right hon. Member for Huyton—the subject of Lan- cashire. This was also raised in a very careful speech by my right hon. Friend the Member for Blackburn, West (Mr. Assheton) and it was raised by other hon. Members on both sides of the Committee who represent Lancashire constituencies. I must say that I noticed in the speech of the right hon. Member for Huyton, and in the speech of my right hon. Friend, a very great sense of moderation—I must say that. The right hon. Member for Huyton used some harsh expressions to which I will later make reference. But there was a general aspect of moderation in the speeches about Lancashire, and I think I can explain that in a minute or two.

Before I come to explain why there was this sense of moderation, I should like utterly to refute one statement by the right hon. Member for Huyton. He said—and I have only to repeat it for it to be rejected—that he supposed it was because the mill owners had not given sufficient contributions to the Tory Party funds that this Government had not paid sufficient attention to Lancashire—[HON. MEMBERS: "Oh."] That sort of argument is really despicable. Frankly, I have no idea whether the mill owners have or have not subscribed to the Tory Party funds. Whether they have or not does not make the slightest difference to the duties which any Government should undertake in dealing with the problems of the County Palatine.

Apart from a reference to the Government being responsible for cynical and callous neglect, apart from that rather extreme statement, meant to catch the headlines in the "Manchester Guardian," whose benign monopoly has at last been brought to an end—and I am sure we are all grateful to the "Guardian" for holding the fort with the other papers in the North of England and the provinces during a difficult time—the right hon. Gentleman's speech was quite moderate.

I do not mind the right hon. Gentleman quoting the Middleton Conservative Association. I could quote other associations in Lancashire which have said ruder things than that association. I do not mind him referring to the difficulties of the county or commenting about the danger of the loss of cotton operatives. My right hon. Friends and I have been to Lancashire. My right hon. Friends the President of the Board of Trade and the Minister of State, Board of Trade, have been there, and it is really arrogant of the Opposition to think that they are the only people who know anything about the problems of Lancashire at the present time.

We are well aware of the short-time working, and also that the proportion of operatives in the cotton industry only amounts to about 13 per cent. of the total labour force of the county as a whole. But we on this side of the Committee fully understand the vital position of the cotton industry in Lancashire—that it is the heart of the county—and not only its psychological importance, but its importance to the economy. Any suggestion by the right hon. Member for Huyton that we are trying to write off the industry is, as I said in my speech in Lancashire, quite untrue.

I am not going to refer very much today to my own small contribution, which I acknowledge to be small, on the subject of Purchase Tax, because we are having a debate on that one day towards the end of next week. That should give hon. Members an opportunity to survey the benefits, which are considerable, in this small concession, and to make any further suggestions they can for helping the industry in this or any other analogous way.

Mr. Jay

Can the right hon. Gentleman at least give us the assurance that the Government will make their long-promised announcement on Lancashire not later than the Purchase Tax Order?

Mr. Butler

I was referring to the Purchase Tax aspect, and I suggest to the Committee that we should discuss that when we have the Order before us one day next week.

The Purchase Tax aspect is only one small part of the story. I sometimes think that the importance of Purchase Tax has been exaggerated, but I acknowledge that under the scheme at present in operation, as a result of the Douglas Committee's Report, it still has a bad effect on the sale of quality goods, and, therefore, on exports, and it is that aspect of it that I am examining.

However, the big problems of Lancashire—this is an economic as well as a financial debate—are concerned with the problems of our exports overseas from Lancashire and the imports from certain countries which have been such a threat to Lancashire. We have told Lancashire and the interests concerned that these are separate problems. We have made it perfectly clear in any discussions that have been held that the hands of the Government must be absolutely free to take whatever action we think right at any time.

The right hon. Member for Huyton referred to the use of a quota and said that he would view the proposal to introduce a quota with the utmost reluctance. That, we know, has been the view of Her Majesty's Opposition. The right hon. Gentleman said that he would now allow it to be considered. I cannot at the moment give any final answer on that or any other aspect of this very important question of our relations with Lancashire and the future of Lancashire trade.

Any wrong action might result in retaliation against our goods, not only the goods in the textile industry, but the export trade of Lancashire as a whole. It might upset the whole pattern of our trade behaviour and trade success, a pattern which the Government are, in general, determined to maintain. That is why discussions of a vital character and of vital importance to Lancashire have been proceeding with all those particularly concerned, and, I am now able to say, particularly with the Government of India.

It is because I believe that the right hon. Gentlemen who have spoken and the Committee know the importance of these discussions that they have shown a sense of moderation in their interventions. These discussions are still in progress, and I do not think that it would be in the interests of Lancashire to make a statement before we are ready to do [...]. Therefore, what I can say today is that the Government will announce their conclusions on these matters as soon as possible, and we hope that that will be before the House disperses. Against this background, and having acknowledged the moderation of the speeches made, I hope that hon. and right hon. Members will see that it is only because of the gravity of the issue and the importance that we attach to the real interests of Lancashire that we have not rushed in to make a statement before we are ready.

Now I will deal with the speech, or part of the speech, of the right hon. Member for Battersea, North. He referred to military expenditure overseas. He is perfectly right; it has increased to a quite considerable extent and is a considerable drain on our balance of payments. However, we have had to undertake these commitments not only in the interest of our country but in the interest of world peace, and I can only say that I am thankful that our economy in Britain is so strong that we have been able to play this signal part in establishing and causing world peace to prevail in so many different sectors.

The right hon. Gentleman also referred to the fact that I had said nothing about the extra contributions for pensions. If I did not say anything about that, it was a pure oversight, because it has been referred to by the Government and by me on previous occasions. I should like to make quite clear to the Committee and the country that, of course, when the new pensions are introduced there will be the rise in contributions to which the right hon. Gentleman referred. We have always taken the view that we should have an insurance scheme, but when the right hon. Gentleman says that it is only by this mean and niggardly act that I have been able to have a surplus in my Budget I should like to remind him and the country—that is the taxpayers—of the following facts.

We provided in December for no less than £325 million for the next five years in addition to the regular contributions from the Budget of £100 million a year for meeting the rising and increasing cost of pensions. The fact is that the taxpayer must realise, even though he be a contributor as well, that the cost of these extra benefits has to come from somewhere, and I believe, recalling my reference to the independent character of our people with which I opened my speech, that they would prefer to have an insurance scheme which they regard as an insurance scheme than to have this matter carried solely on the Budget without a proper insurance aspect.

The right hon. Gentleman next referred to certain questions of procedure. I cannot go into those in detail, but as he asked the question I shall try to give him: the best answer I can today. We shall no doubt hear more of this next week. First, the Finance Bill, in its printed form, will be available from almost now —at any rate from when the House rises. There was an error to which I drew the attention of the right hon. Gentleman, in the absence of his right hon. Friend, directly it was brought to my attention at, I think, 12.30 this morning. The printers have done a very quick job and the error has been rectified, and now the references to Surtax appear in the Bill as they should do. and not as they did in the White Paper.

The Bill will be available, and hon. Members will have the context for the purpose of considering their Amendments. When we come to consider the scope of the debate, I have at the moment, nothing to add to what I said in my Budget speech. I said then: The scope of the debate on the Finance Bill will, naturally, be for consideration by the Chair in due course; but, given the restricted scope of the Resolutions and the Bill, I think it right to tell hon. Members that there will be a corresponding restriction in the opportunities for moving Amendments and New Clauses."—[OFFICIAL REPORT, 19th April, 1955; Vol. 540, c. 57–8.] That will undoubtedly be the case, and I am glad that I gave the warning. I cannot forestall or foretell what will be the Ruling of the Chair. I can only say that I think that the opportunity of considering individual Amendments and certainly new Clauses will be more restricted than in the case of a normal Finance Bill, which may be a disappointment to right hon. and hon. Members opposite.

I thought it well that I should say that now so that when we face matters next week no one will feel that I have not given warning of the situation. This follows the precedent in 1929, when an Election followed, and when the Finance Bill procedure was truncated. It is impossible to do that without some considerable restriction, although I hope that there will be an opportunity for discussing any aspects of the question to which hon. Members attach importance.

Mr. Jay

But as it was the Chancellor and not the Chair who drafted these Resolutions, cannot the right hon. Gentleman assure us this afternoon, before we pass the Resolutions, that at least it will not be impossible to move any Amendments at all. which I think would be entirely unprecedented?

Mr. Butler

I have not the final opinion as to whether no Amendments at all are possible, or whether discussion on one or another of them may not be possible. My opinion is that the Resolutions are so strictly drafted that it will be very difficult to discuss Amendments increasing the charge.

Mr. Gaitskell

May I press the right hon. Gentleman further on this point? This is a matter of great importance. Since he drafted these Resolutions, surely he must know whether it was in his own mind that no Amendments would be in order. Can he tell us whether, in drafting them, it was his intention to exclude all Amendments? Is it going to be impossible, for instance, to include an Amendment in which many hon. Members on both sides of the Committee are interested, to extend the particular concession to blind and disabled persons which is recommended by the Royal Commission, which costs very little indeed, and which we can agree to in a matter of two minutes, if the Chancellor will only concede it?

Mr. Butler

As I said, it has never been our wish to avoid discussion of any point of view put forward by the Opposition. The difficulty, as I see it, in view of the nature of the Resolutions as drawn, is for Amendments to be in order if they increase the charge. I do not think that we can get a final Ruling upon this matter until we get the opinion of the Chair.

Mr. Gaitskell

I was not asking for that. It would indeed be most improper to ask what the Ruling of the Chair might be. I was asking what were the intentions of the Chancellor when he drafted these Resolutions. Will he answer the question and say whether his intention was to prevent us from putting down any Amendments at all?

Mr. Butler

No, the intention was not to prevent the Opposition from putting down any Amendments at all. The intention was to restrict the scope of the possibility of Amendments, and not to increase the charge, as can be seen from the Resolutions, which the right hon. Gentleman must have studied. That is why I used the words which I did in my Budget speech, indicating that that would be the position. That is what happened upon a previous occasion. I think that it will seriously limit the power of hon. Members opposite to put down Amendments. That is why I used the language I did in my Budget speech.

Mr. Mitchison

Was it the intention of the right hon. Gentleman to exclude any Amendments increasing the allowances?

Mr. Butler

They would increase the charge.

Mr. Jay

No.

Mr. Butler

I do not know what Amendments hon. Members opposite wish to put down. When I see them perhaps we can get together, or they can consult the authorities to see if there is any chance of their being called. Until I see the Amendments, I can say no more at present.

Mr. Gaitskell

I have no wish to delay the Chancellor in the middle of his speech, but this is an important matter, and as far as I can tell it will be our last opportunity to ask the Chancellor about the Resolutions, the Committee and Report stages of which are to be taken immediately following this debate. We are not concerned with Amendments which increase the charge—which are out of order in any case—but those which reduce the charge, some of which have been mentioned. The Chancellor must surely have known what his intentions were when he drafted the Resolutions. Did he intend to rule out any possibility of Amendments from this or the other side of the Committee if those Amendments reduced the charge? Can he tell us that?

Mr. Butler

I would rather not make any mistake this afternoon by giving a ruling upon Amendments which I have not seen. Without having seen those Amendments, including any put down by the hon. and learned Member for Kettering (Mr. Mitchison)—who is an expert on drafting and has helped us with so many Finance Bills—I can only give an opinion. I cannot give any ruling until I know the opinion of the Chair, with whom authority rests. Apart from warning the Committee, which I have done in order to preserve the question of honour involved, upon the technicality of the matter, I must wait until I see the Amendments which hon. Members opposite are going to put down.

In the remaining time at my disposal I want to deal shortly with a few of the arguments which have been raised. The first is to relate the picture which I presented upon 24th February with my decision in the Budget. I would answer that point, which was raised by the right hon. Member for Bishop Auckland (Mr. Dalton) and the right hon. Member for Leeds, South in the following brief way. The measures of 24th February, which were introduced in time, and differed from the action taken when the right hon. Gentleman was Chancellor—which was definitely a delaying action, in my opinion; but I do not want to labour that point—were needed to check the rising trend of demand rather than to enforce positive reductions. The Budget Speech, which I tried to make as clear as possible, made it clear that monetary and fiscal measures are complementary to one another.

In answer to the hon. Member for Gloucestershire, South (Mr. Crosland), whose contribution was, as usual, enlightening although not quite so friendly as usual, let me say that we are trying to keep an economic balance, which requires not only restraint of demand but incentive. The Budget reliefs provide the incentive, and the Budget surplus, which I am retaining to a large extent—well over half—and the monetary policy, restrain demand. The monetary policy will remain flexible for use throughout the year, as the year develops and as need shows.

Here we come up against one of the first great difficulties in the argumentation and dialectics of hon. Gentlemen opposite. They cannot make up their minds whether they want inflation or deflation, and they cannot decide whether this is an electioneering Budget or whether it helps the rich. They cannot make up their minds which way to turn. This happened over the first Finance Bill which I introduced when I first became Chancellor of the Exchequer. The right hon. Member for Leeds, South said that the effect of increasing the Bank Rate would be to slow down the expansion in production so that we should be faced with the danger of unemployment."—[OFFICIAL REPORT, 20th April, 19S5; Vol. 540, c. 195.] I should like to make it clear to the Committee that my policy and that of the Government is to steer, as I have done over the best part of three and a half years, towards the right road between inflation and deflation, and to consider the social needs and the full employment of the people. I believe that with the aid of those two weapons, incentive on the one hand and discipline on the other, with the Budget surplus and our monetary policy, we shall this year steer approximately that course, if we have good fortune and are not pushed out of our way by outside world events. That is the main answer to the point made by the hon. Member for Gloucestershire, South.

It is rather interesting to know that even the most violent critic, namely Mr. Balogh, who has been mentioned by my hon. Friend the Member for Dover (Mr. Arbuthnot), has just reminded us that if hon. Members opposite get into power the bill must be at least £600 million more in extra taxes or, according to my hon. Friend the Member for Dover, £1,500 million more. Mr. Balogh, writing in the "Banker," in an article subtitled "A Left Wing Conclusion from the New Unbalance," makes some singularly friendly remarks in regard to my policy, for which I would like to thank him. He says: The effect of Britain's monetary policy on internal demand might not, in the short run, damage the Government politically. That is very interesting, and I believe it to be true. He goes on to say: It is by no means certain that the Government's 'New Look' policy will not once more be vindicated. I believe that to be true. We have, through the mouth of the Left, found the truth, more than we find it through the extreme political pressure under which the right hon. Member for Leeds, South is labouring. I hope that he will return to the economists of his youth and get the milk of the gospel instead of disporting himself in the uncertain forests of politics.

The right hon. Gentleman then went on to talk about production. I shall have to give him a very short answer on that because of the short time that remains available. His argument was that at the turn of the year production was slack as compared with the turn of the previous year and of the year before. If he looks at industrial production in the first two months of this year he will see that it is already running at about 2½ per cent. above the average level of last year. The increased rate in production is going ahead vigorously, and will respond to the incentives which I have provided.

I have certainly been impressed in all my contacts with industry by the remarkable response it is likely to make. I do not know whether hon. Gentlemen have read the recent independent report "Survey of Industry" of the "Manchester Guardian" in 1955. I will quote two sentences from it. The first is: Never before, since we started this annual inquiry nine years ago, did we find industrial managements so confident. Never before did we find such a change of mood in a single year. There is no doubt, as they say, that "there is still enormous scope for increasing productivity."

I believe that this independent inquiry is of great value to us, and that if we have increased figures of investment in manufacturing industry and in the private sector of industry, we can answer both the production points and the investment points which have been brought forward from the other side of the Committee.

The right hon. Member for Huyton drew attention to the figures, in Table 27 of the Economic Survey, on the metal goods industry, saying that there had been a decline in exports and in different forms of investment in metal goods since 1951, and that the increase had gone into defence. What is the reason for that? It is that the right hon. Gentleman himself in 1951 took off the initial allowances in order to encourage metal goods to go into the defence industries.

It was not until 1953 that I restored the initial allowances, and it is not until after 1954 that we really begin to see the effect of my policy in restoring the initial allowances, which the right hon. Gentleman took off. I am not making this argument in order to show that the right hon. Gentleman was necessarily wrong. I am not impugning his honesty or his policy. What I do say is that it is quite wrong for the right hon. Gentleman to quote figures like that without telling the reason, which was that his right hon. Friend himself took off the initial allowances.

Now a word about companies. The right hon. Member for Leeds, South, in his speech, was a little less outrageous than the right hon. Gentleman the Member for Huyton, but, all the same, I think he spoke about companies in a manner which he will regret if he ever reverts, as I very much doubt he will, to holding high office. I cannot believe that any company or industry will feel any confidence in him after his reference to companies, because he said: There is not the slightest doubt that companies are once again the favourite children of the Chancellor."—[OFFICIAL REPORT, 20th April, 1955; Vol. 540, c. 198.] Why are they the favourite children of the Chancellor? It is because I happen to be interested in the future of the British economy and in the employment of our people.

Further, I do not regard companies as a sort of happy hunting ground and prerogative of very rich and remote men, as do hon. and right hon. Gentlemen opposite. I regard companies, whether large or small—and, very often, the larger companies have a better social and economic record than smaller companies—as the very basis of the national prosperity, and I think the right hon. Gentleman is not doing either his own side of the Committee or the economy of the country a service when he refers to companies and the relief of taxation on companies in the rather unguarded and wild terms which he used in his speech.

I shall not deal at great length with dividends, but I would say that the right hon. Member for Huyton quoted from the "Manchester Guardian," and he said that certain companies had received great rewards from me. He did not read out one most important statement in the "Manchester Guardian," of which, for greater accuracy, I have obtained a copy. It says: Any effect on dividends is bound to be moderate. I hope that will satisfy the right hon. Gentleman. It is a very good thing, when giving quotations, to give the reasons, which the right hon. Gentleman did not do in the case of the metal goods argument, and to read the whole quotation. I thought it right to say, after the figures which I gave in my Budget speech of the ratio between the rise in dividends and the rise in wages and salaries, which the Committee will remember, that we must remember that there should be some reasonable reward for those who venture their resources in industrial enterprises. It is also up to management to make proper provision for keeping in the business enough of the profits to ensure the proper re-equipment and development of the undertaking.

If we pursue the matter in that spirit, we should not forget the interests of the wage earners and shareholders, which are not necessarily inconsistent. We should not forget that many shareholders are holders to the extent of very small sums, and that certain companies are encouraging their own employees to take shares in particular businesses, which we very much welcome. We should also remember that, through superannuation and other funds, the wage earner often has an indirect but very real interest in ordinary shares, the value of which has increased to his advantage. It is important to say these things because latterly our arguments on this matter have been somewhat one-sided and have been getting rather out of shape.

Now, I come to the main Budget concession and the nature of its fairness. I have disposed of the "poor old bachelor" receiving £100,000 a year, and I turn now to the "News Chronicle," which has published a poll which rather interests me. In one column it has asked "All," in another column "Tories," in another column "Labour," and in another column "Libs.," what they think should be the first tax to be reduced. Thirty-five per cent. of Labour supporters put the Income Tax first; that is by far the biggest percentage. The only other big percentage at all is 29 per cent., and that relates to Purchase Tax. Petrol's figure is only 7 per cent.—that is one of the right hon. Gentleman's favourites—tobacco 10 per cent., and so forth. The Tories put 37 per cent.—it is very much the same percentage—in favour of Income Tax first. I therefore seem to have done something which is very sensible. I am also glad to note that the same column says that my right hon. Friend the Prime Minister is very popular and that I am very efficient.

Mr. Jay

Can the right hon. Gentleman say briefly whether the question referred to the standard rate of Income Tax or simply to Income Tax?

Mr. Butler

I hope that the right hon. Gentleman will read the "News Chronicle." He will then be able to see.

There are two cases which I want quickly to answer. The right hon. Member for Leeds, South instanced the case of the married man with two children and an income of £600. The answer is that while it is true that if the income is from investment the tax is reduced by £12 while if it is earned income the reduction in tax is only £7 16s. 8d., I should like the Committee to register before we close, as is said in other circumstances. that the man with investment income is left paying £30 10s. while the man with earned income relief is left paying only £3. That restores the distortion of the right hon. Gentleman's argument.

The right hon. Member for Bishop Auckland quoted the case of a married man with two children and an income of £1,250. While the reduction on investment income, the right hon. Gentleman said, is £29 15s. and on earned income only £22 16s., I should like to remind the Committee that the tax remaining payable is no less than £284 5s. on investment income and only £166 3s. 10d. on earned income. That shows precisely that earned income versus unearned income still retains a comparatively right proportion in the tables which we have arranged.

This debate is indeed a contrast in the philosophies of the two sides of the Committee. The hon. Member for Gloucestershire, South referred, perfectly honourably, to his belief in a return to austerity. We believe that, with the improvements which we have introduced, we must have an expanding economy, which depends upon the vigour and the discipline of a free people.

Question put and agreed to.

Resolved,

That income tax for the year 1954–55 shall be charged, in the case of an individual whose total income exceeded two thousand pounds, at the same higher rates in respect of the excess as were charged for the year 1953–54;

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Resolution to be reported.

Report to be received forthwith, pursuant to Order [20th April].

Resolution reported accordingly and agreed to.

Committee to sit again upon Monday next.