FINANCE BILL

HC Deb 13 December 1955 vol 547 cc1017-138

Order for Third Reading read.

4.1 p.m.

The Financial Secretary to the Treasury (Mr. Henry Brooke)

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

Whatever the facts about right hon. Gentlemen or maiden speakers, there is one rule which you, Mr. Speaker, strictly and meticulously enforce. It is that a debate on the Third Reading of a Bill must be confined to the Clauses and Schedules in the Bill. That alone would strengthen me to resist any temptation that might affect a Financial Secretary most inappropriately to give to the House the doubtful enjoyment of his review of the economic state of the country.

This is a short Bill. It consists of only five Clauses, and I might almost undertake to move the Third Reading in five minutes, but as there are three Schedules, perhaps I may be allowed a little more time. However, I believe that I shall be serving your pleasure, Mr. Speaker, as well as that of the House, if I keep my remarks short and to the point.

Since I moved the Motion for Second Reading five weeks ago, the Bill has been amended in three respects. Clause I was amended with regard to certain powers to vary Purchase Tax by Treasury Order. I am inclined to think that the Opposition were under some misapprehension about the present state of the law, and that was what induced them to think that the new powers sought in the original Clause I were much more extensive and potentially dangerous than they were.

Frankly, it still seems to me quite absurd that whereas one can raise the tax on an article now exempt from tax from nil to 90 per cent. by Treasury Order, one cannot only alter the rate of tax from 5 per cent. to, say, 7½ per cent. without going through the whole process of legislation. I am inclined to think that it may be needful to revert to this question on some future occasion. But as there was no doubt at all that it was not essential to include any such power in connection with this autumn Budget, my right hon.

Friend authorised me to accept an Amendment to that effect.

Secondly and thirdly, on account of the number of blind and disabled people at work in the trades concerned, first, shopping baskets and bags, and secondly, brushes, brooms and mops have been exempted from Purchase Tax. My right hon. Friend the Chancellor showed himself particularly anxious to do nothing in this Bill which might affect the position of these handicapped workers. It was possible to exempt these classes of goods from the operation of the Purchase Tax without affecting either the main structure or the main purpose of the Bill.

The main object of the Bill, as the House will know, is to suck away purchasing power which might otherwise aggravate the excess of consumer demand over the available supply of goods, thus forcing up prices in an inflationary manner and also causing the use at home of goods which it is in the national interest to utilise for export purposes. The original estimate of the revenue to be derived from the extra taxation in this Bill in a full year was £112 million. The total cost of the exemptions amounts to only £2 million in a full year, and, therefore, the net figure of additional revenue to which the country can look forward as a result of these tax changes is £110 million.

The main criticism of the Bill has fastened on the extension of Purchase Tax at the rate of 30 per cent, to household goods. This extension of the tax would, as I said at an earlier stage in our debates, cost, on the average, 4d. a week for the ordinary household, an impost which has now been reduced by the Amendments to 31d. a week. The House might like to be reminded that during our debates in Committee and on the Report stage we spent no less than eighteen hours discussing this matter of 3½d.

Mr. Victor Collins (Shoreditch and Finsbury)

Would the hon. Gentleman care to spend one minute more on it and explain this? He said that originally the cost would have been 4d. per household and that we are now saving £2 million out of about £30 million. How is it that that saving represents 12½ per cent. or one-eighth of the amount?

Mr. H. Brooke

I am sorry that the hon. Member has not grasped the figures which are basic to the Bill. I thought that it would not be necessary for me to go over all these facts again. It has been made perfectly clear from the beginning of our debates that the additional revenue to be derived from the extension of tax on household goods is not £30 million, but £15 million. If the hon. Gentleman makes the calculation, he will find that he need not have interrupted. I may say that no one has ever heard such a squealing over cinder sifters as we heard in this House—[HON. MEMBERS: "Oh."] It has raised no echo whatever in the country.

The reason for extending the tax to household goods is this. I come back to it, because a great number of people, not only hon. Members opposite, but people who do not align themselves with any political party, are inclined to ask, why did my right hon. Friend seek to do something which was liable to land him in such unpopularity? The reason is that it would have been unfair and unreasonable to seek to impose additional Purchase Tax only on those goods which were already liable to Purchase Tax when there was this tax-free section of goods in no way unlike the others—because it is quite impossible to draw a clear line of differentiation between an electric toaster and an electric kettle in relation to their taxability.

My right hon. Friend felt that it was essential not to confine the additional tax to those goods which happened—I say this frankly—to be subject to tax already. On the contrary, it was right that part of the burden should be borne by and part of the restraint should be extended to those other goods of an entirely similar nature which, by chance, were out of tax.

Mr. Douglas Jay (Battersea, North)

As this doctrine has aroused a lot of anxiety in the country, can the Financial Secretary tell the House whether he proposes to reintroduce the tax on windows?

Mr. Brooke

I think that that intervention was intended to be funny.

In addition to the extension of the tax, my right hon. Friend has raised all the main rates of Purchase Tax by one-fifth though still leaving them below the rates at which they stood when the right hon. Member for Leeds, South (Mr. Gaitskell) introduced his last Budget.

Furthermore, the Bill abolishes the D Scheme. So far as I can see, the D Scheme was friendless. No one here or outside has sought to defend it on the occasion of its passing or to bewail its demise. By getting rid of it, my right hon. Friend has quietly brought about a major simplification in our tax system and a simplification which is almost universally welcomed by those who are affected by the operation of the tax.

As to the other Clauses of the Bill—

Mr. Elwyn Jones (West Ham, South)

Before the right hon. Gentleman leaves the abolition of the D Scheme, could he indicate to the House the effect already of the proposals in the Bill upon the industries directly concerned? He seemed to take the optimistic view that their fears had been grossly exaggerated by this side of the House. Has there been an opportunity of considering that aspect of the case, because our information is that the industries directly affected have been grievously affected, and, indeed, in the case of some of them there is a real danger of their going out of business?

Mr. Brooke

If the hon. and learned Gentleman is referring to what I was just speaking about, that is to say, goods affected by the D Scheme, I think that his information is very much astray. It would certainly have astonished me, and, I think, astonished the country, to be told that there was any industry now relieved from the D Scheme which was lamenting that fact or finding its trade held up thereby.

I intended to say a word in a moment or two about the more general question of the effect of the Purchase Tax changes, and I will do that now. In so far as in certain trades there has been the hope nourished that the Purchase Tax might be taken off them before the end of our debate, there was undoubtedly a hold-up of trade, and a natural one, because few people were going to enter into commitments when they were not certain whether, a few days later, they might find that the tax had been altered. But that is not so over the field as a whole, and if the hon. and learned Gentleman thinks that the ordinary Christmas shopper is keeping away from the shops and that retail trade is at a standstill, I do not think he can have been along Regent Street lately.

Mr. J. T. Price (Westhoughton): This matter cannot be dismissed in this lighthearted fashion. It is not only a question of the personal shopper. It is a question of the obligations placed upon local authorities and public institutions by a tax, like the tax on public cleansing apparatus—dustbins and all the rest of it—which is a very serious burden. In my constituency, one of the authorities is meeting an additional burden of a 2d. rate by the application of this tax. As the Minister knows, I have sat patiently through our earlier debates on these matters in this House, and I have never yet heard a single valid argument from the Box opposite in defence of the tax on dustbins and other aspects of public cleanliness.

Mr. Speaker

I would remind the House that we are debating the Third Reading of this Bill and not the Committee stage. There have been many interventions. I think it would be more in accordance with the practice of the House if set speeches were delivered one after the other. There will be plenty of opportunity to answer points.

Mr. Brooke

I thought that the course of the debate today was that I would move the Third Reading, that other hon. Members would make their speeches, and that my right hon. Friend the Chancellor of the Exchequer would wind up the debate.

As to the other Clauses of the Bill, the increase of tax on distributed profits has generally been accepted as right and fair in the circumstances of the time. It has been made amply clear by my right hon. Friend that the present change in Profits Tax does not in any way prejudice his free and impartial consideration of the recommendation of a flat rate tax by the Royal Commission on the Taxation of Profits and Income. The right hon. Gentleman the Member for Leeds, South would be the first to appreciate that if a change of that magnitude were to be made it could not be made in the circumstances of an emergency Budget.

It would be a great mistake, therefore, if anybody were to draw conclusions as to the Chancellor's final decisions on the Royal Commission's Report on what he has found it necessary to do as an emergency measure here. I must say, in passing, that there are a good many recommendations of Royal Commissions and other substantial committees which are on one's desk, and although I think that my right hon. Friend the Chancellor of the Exchequer is tireless and ready to stand up to anything, I must say that the Financial Secretary, for one, is not altogether sorry to have a gap of four months or so to reckon upon before embarking on another Budget.

The relief in Clause 3 for Lloyd's underwriters is inserted in the Bill solely for the benefit of our balance of payments. It has met with a modicum of criticism from hon. Members opposite, and, I grant, has not been much welcomed from any quarter, but my right hon. Friend is still convinced that it was right to provide this additional incentive, and that it will bear fruit.

Finally, the dividend strippers have been given notice to quit. With the authority of my right hon. Friend the Chancellor of the Exchequer, my hon. Friend the Economic Secretary has also put it on record that if clever people should discover ways and means of getting round this legislation, which is squarely directed against dividend stripping, the Government will not hesitate to stop any such loophole by further legislation, and to make such legislation retrospective.

This Bill, which I have briefly described again, is the fiscal part of an operation extending over much wider ground—an operation intended to check inflation. Like every campaign, it requires time to reveal its full effects. The Purchase Tax changes will hardly show results on retail trade until the vigorous buying of stocks in the shop, which are advertised at pre-Budget prices, is over, or, indeed, I would say in reference to an earlier remark, until Christmas buying is over.

The right hon. Gentleman the Member for Huyton (Mr. H. Wilson), who, I think, is to speak next, whenever he found nothing else to say in our previous debates came back to a phrase which I used at an earlier stage—the "yawning gap." It has almost become the Financial Secretary's signature tune. The only yawning gap that I have been able to detect is the yawning gap indicated by the complete lack of an alternative policy on the part of Her Majesty's Opposition. The Government have taken action by this Purchase Tax and other measures to make people more and more pause to think. [HON. MEMBERS: "Oh."] Yes, pause to think before buying, before spending and before ordering.

In so far as these tax changes may affect the cost of living, they will do so by such a tiny amount that no wage claim could possibly be founded upon them. If more and more people will pause to think before spending their money, and will start to save it instead, the nation can get through its troubles—although I notice that some people think it a bad thing to help children to save. My right hon. Friend, with great courage, introduced this Budget on 26th October, knowing that he was bound thereby to incur unpopularity in many quarters—because drastic action is always liable to be unpopular. He well knew that he might sacrifice personal popularity thereby, but he fearlessly did what he believed to be right.

The history of this country is littered with occasions when our affairs were allowed to go down through people not having the courage to do what they knew to be right. My right hon. Friend took this action in the interests of the nation; to save it from inflation, the consequences of which the great majority of our people have not yet begun to apprehend, for they have never lived in a country where inflation has become rampant.

Mr. Jay

Did the Chancellor hold this heroic doctrine last April?

Mr. Brooke

Yes. Ever since I have known him he has done what he thought to be right without consideration of his personal position. He took this action this autumn mostly in the interests of those who are living on small or fixed incomes, because they are the people who would suffer more than anyone else if inflation were allowed to proceed unchecked. I suggest that these are qualities of courage and ability to reach decisions in time upon which the House should set the seal of its approval.

4.22 p.m.

Mr. Harold Wilson (Huyton)

I doubt whether, since the days when Richard Brinsley Sheridan was Chancellor, a Finance Bill has been moved in so perfunctory a fashion by the Government spokesman. Although the Financial Secretary was very brief, however—as he said he would be—and very perfunctory, he has certainly been highly provocative. He began by referring to the opposition which the House quite properly showed to this Measure as being a squeal. It has been necessary to remind the Treasury Bench, time after time in these debates, that the whole House, including, his hon. Friends, have not only the right but the duty to criticise this Measure—which we consider to be unnecessary—for increasing the impost upon Her Majesty's subjects.

For the rest, the Financial Secretary seemed to go in for a whole catalogue of contradictions. He said that the object of the Measure was to make everyone pause to think. The people did that at Greenock, as we saw the other day. How he can tell us that the imposition of Purchase Tax was intended to make people pause to think and then, almost in the same breath, tell us that they are flocking in their thousands along Regent Street, doing their shopping, is something that we should need the services of the Economic Secretary to explain.

Mr. H. Brooke

If goods are advertised in shop windows as being for sale at pre-Budget prices is it not natural that people will flock to buy them?

Mr. Wilson

That is yet another contradiction which the Financial Secretary has produced, because when he produced this evidence about Regent Street—he did not mention snowflakes—in answer to my hon. and learned Friend the Member for West Ham, South (Mr. Elwyn Jones), who had asked him what was the effect upon certain industries, and whether they were not prejudiced by the reduction in expenditure, he said, "No—look at the way people are flocking along Regent Street for their Christmas shopping."

This is the ninth day on which the House has been compelled to debate this miserable Bill and, including the speech to which we have just listened, I calculate that we have now had 54 speeches from the Government Front Bench in defence of the various propositions before us. But not in any one—and this goes for the one we have just listened to—have we had any adequate explanation why the Bill was produced at this time, or even why it should be produced at any other time. In his peroration the Financial Secretary paid tribute to the heroic characteristics of the Chancellor of the Exchequer; characteristics that were rather queried by my right hon. Friend the Member for Battersea, North (Mr. Jay).

Referring to his favourite phrase, "the yawning gap," the Financial Secretary said that at no stage had hon. Members on this side of the House produced alternatives. It would be entirely out of order to do so during a Third Reading debate, but if the right hon. Gentleman will study the speeches made in the Budget debate by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), together with a few small constructive suggestions which I put in—not to mention the Second Reading speeches—he will find a whole range of constructive alternatives to the policy which the Government have been pursuing.

I should be out of order to pursue that matter now; we are now confined to discussing the Bill. The fact that it has gone through the earlier stages of its Parliamentary life with such unmerited speed—although there was a little accident on the way—should not be taken by the Government as proof of its popularity or acceptability on this or even their own side of the House. It has gone through so quickly simply because of the unexampled, and, many people feel, the inexplicable, co-operation of hon. Members on this side of the House throughout all its stages, and because of the prolonged and gloomy silences, not to mention the absenteeism, of many hon. Members opposite.

It is remarkable that hardly a single hon. Member opposite has supported the Bill, and this at a time when Government changes are said to be in the offing and when, if rumour is right, there are to be a number of vacancies upon the Government Front Bench—and quite rightly so. Even at such a time, with so great an incentive, hardly an hon. Member opposite has been found to speak in support of the Chancellor of the Exchequer. There have been one or two cases where hon. Members opposite have tried to help. One of the most moving occasions was when one of the brightest adornments of the Tory intelligentsia—the hon. Member for Kidderminster (Mr. Nabarro)— made a speech giving the theoretical arguments, as he saw them, for one of the major purposes of the Bill. He was promptly and most ungratefully repudiated by the Economic Secretary who, in fact, had been imbibing his own economic theory that week from a different textbook. The reasons given by the hon. Member for Kidderminster were not accepted by the Government.

However, we are now debating the Bill not as it was introduced, but as it emerges from the Committee and Report stages. As the right hon. Gentleman said, it is substantially the same Bill that was before us five weeks ago. It is true to say that the Bill, then and now, has hardly had a friend in the entire country. I think it was during the Second Reading debate that I quoted the verdict of The Banker, which is not exactly a Socialist journal. I notice that, more recently, there have been comments in a journal which will be familiar to hon. Members opposite—the National and English Review—the journal of high Toryism. In the current edition, for December, 1955, there appears a long article entitled, "Mr. Butler; the Verdict." On the same page there is an article by the Chancellor's hon. Friend the Member for Harrogate (Mr. Ramsden) entitled, "Why I have changed my mind about hanging."

Commenting upon the Budget itself, which is enshrined in this Bill—and the comment is printed under the heading, "A Foolish Budget"—it says: We are quite certain that higher rates of tax on objects which people regard as necessities of life can serve no useful purpose. On the contrary, such taxation, whatever its quantitative significance, can only have an inflationary effect "— The Financial Secretary does not understand that— by encouraging the trade unions to be less moderate in the negotiation of their wage claims. There may be little or no rational justification for their attitude, but that is irrelevant. Ministers must be conscious of the moral, as well as the statistical, implications of what they do, or they might just as well hand over their Departments to the Civil Service. It goes on: The autumn Budget surely draws attention to the emptiness of the Conservative economic policy at the present moment, to its lack of imagination, its uncertainty of purpose, its confusion of objectives. Friends and foes alike are wondering where Mr. Butler is really trying to go during the next few years. So are we.

Mr. Cyril Osborne (Louth)

He is staying where he is.

Mr. Wilson

I am glad to have the hon. Gentleman's support. There have been very strong Press rumours that the right hon. Gentleman is about to go to some other office. I take it from the hon. Member for Louth (Mr. Osborne) that he has told us authoritatively that we are to have the Chancellor for yet another Budget.

Mr. Osborne

I believe there are equally strong Press rumours about a change of leadership on the Opposition side.

Mr. Wilson

That is a matter which is entirely and democratically within the control of hon. Members on this side of the House.

I am glad to have the hon. Gentleman's assurance that apparently there is no danger that he is going to fill the office of Chancellor of the Exchequer; or if he is, he has not heard yet. The article goes on to say: They suspect that no grand design or even reasoned economic policy exists, but merely a struggle towards solvency, expedient by expedient. It describes the Bill as: a rag bag of proposals which revealed no imprint of the Chancellor's personality but looked rather as if they had been produced by a committee of tired civil servants under a not very expert chairman. I do not think the Budget does bear the imprint of the Chancellor's personality. We have seen clearly that it bears the imprint of the Financial Secretary. Perhaps he was the not very competent chairman who presided over the body of tired civil servants.

Now let us look at this "rag bag of proposals." There are, as the House is aware, four operative Clauses and three operative Schedules. Clause 1, as the Financial Secretary reminded us, raises the level of Purchase Tax where Purchase Tax was already in operation, and imposes Purchase Tax where it was not. Clause 2 increases Profits Tax so as to take back after a year or two's delay most of the largesse given to public companies last April.

Clause 3 is a remarkable one, designed to protect the impoverished Lloyd's underwriters from seeking the aid of the National Assistance Board. Clause 4 is designed to protect the Inland Revenue from the depredations of unscrupulous gentlemen in the City who have been working Tory freedom to the limit by a device known variously as the "Indian rope trick" and "dividend stripping."

There are four Clauses. We have in the early stages of the House's discussion, spent a considerable time on Purchase Tax, so perhaps it will be right to begin my review this afternoon with the "revenue Clauses" as the Chancellor has called them. Of course, when he refers to the revenue Clauses he means those which come within the Board of Inland Revenue. They are not the only Clauses which raise revenue.

Let us begin with Clause 2. This was meant rather naively by the Chancellor as a sop to the trade union movement. He thought that if he could appear tough towards the business community by increasing profits, the trade unions, their members and members' wives would not notice what he was doing to Purchase Tax. The answer, so clearly given by the Trades Union Congress and by individual unions, was expressed very forcefully in this House by my hon. Friend the Member for Sowerby (Mr. Houghton). In any case, as my right hon. Friend the Member for Battersea, North pointed out earlier in our debates, this represents a very big change in the Chancellor's own views about Profits Tax. In 1949—my right hon. Friend brought this statement to the attention of the Committee—when Sir Stafford Cripps proposed an exactly similar increase in Profits Tax, the present Chancellor of the Exchequer said about it: This Measure, although it may appear small, and the 5 per cent. may not appear to involve a great deal of money, perpetrates an act of economic injustice, which is of no value to the country and which further perpetuates the Profits Tax on industry. This, as we have claimed, falls largely on the reserves, something which is not in the national interests at the present time. He went on to say: We believe that to transfer a certain proportion of the reserves of companies to the Government, to be spent perhaps in current expenditure—which will be the effect of this Measure—will, in fact, be an inflationary move."—[OFFICIAL REPORT, 11th November, 1949; Vol. 469, c. 1555 and 1556.] That was the view of the Chancellor in 1949, four years after the war. In 1955, six years later, in a supplementary Budget, he does exactly the same thing.

Clause 3 is the Lloyd's underwriters' Clause. As my right hon. Friend has made clear, we started with a considerable element of good will towards these proposals. They were, after all, a continuation of the policy started by Sir Stafford Cripps. As we proceeded to examine them we found that no clear reason was given by the Financial Secretary why these measures have been brought forward at this time and in this Bill. The Financial Secretary seemed to have no idea at all about it. On the Second Reading, and now again on the Third Reading, he told us that these measures were necessary to safeguard our balance of payments position by providing an incentive to Lloyd's underwriters to increase their dollar earnings, but when we asked him about the dollar earnings he had not any figures to give us and he had no idea what the effects would be.

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

The total foreign exchange earnings.

Mr. Wilson

The Chancellor will no doubt be able to help us when he winds up the debate, although it is getting rather late. What we wanted to know, what my hon. Friend the Member for St. Pancras, North (Mr. K. Robinson) was particularly anxious to know, was were we losing dollars at the present time and was it a fact that the underwriters in this country could only get the dollar business which the United States underwriters would not touch?

Mr. Osborne

No.

Mr. Wilson

This point was put to the Financial Secretary and we have not had an answer, but once again I take an authoritative version from the hon. Member for Louth.

Mr. Butler

The Financial Secretary did give figures.

Mr. Hugh Gaitskell (Leeds, South)

He said about half.

Mr. H. Brooke

I answered that point entirely. I certainly told the hon. Member for St. Pancras, North (Mr. K. Robinson), who suggested that London only got the insurance business that American underwriters would not touch, that that was absolutely not true. Everybody in insurance knows that it is not true.

Mr. Wilson

I can understand the Financial Secretary being in a bit of a spot in Committee, in giving that answer, but has he been able to check it, can he give us any information about it? Unlike the Financial Secretary, and most hon. Members, my hon. Friend the. Member for St. Pancras, North has had considerable and long experience of working in Lloyd's. I can assure the Financial Secretary that he knows even more about it than does the hon. Member for Louth.

Mr. Osborne

My experience was got from the underwriters in Wall Street and in this country and is a little more than the right hon. Gentleman has got, despite his clever talk.

Mr. Wilson

That was a very disappointing intervention. We always expect more from the hon. Member for Louth. No doubt he will share his information with my hon. Friend the Member for St. Pancras, North who really knows a lot about the subject.

The big decision we had to take in Committee was the proposal that this "incentive" as the right hon. Gentleman calls it, this concession, should be confined to Lloyd's underwriters with a record of dollar earnings so that it was not spread too widely. Here again, I think that the Financial Secretary's answers were profoundly unsatisfactory. I put it to him that he ought to realise that when a special and unique tax concession is made to a small group of the community he must make the case out on national grounds, and prove the case right to the hilt.

I come to Clause 4, on dividend stripping, and right away I would say that on this side of the House we welcome these provisions. We welcome any measure to, protect the Revenue against ingenious tax evasion. We would have welcomed a much broader attack on other forms of evasion by which taxable income is converted into tax-free capital gain. It would be out of order on Third Reading to say anything about what these forms of legal tax evasion amount to.

We must be forgiven for still having some suspicion about the Government's approach to the question of dividend stripping. This practice, this "Indian rope trick," is a major and costly racket, as the Chancellor confirmed earlier. On Second Reading, as I have reminded the House, the Financial Secretary said it amounted to a loss of revenue running into more than six figures. He later corrected that and gave an estimate of £4 million for the last financial year. For reasons which I have already given to the House, I have suggested to the Government—and I have had no answer to this at any stage—that although the estimate of £4 million is much bigger than the Financial Secretary's original estimate, it is still by far the smaller part of the cost of the racket at present.

I ask the House to bear with me while, once again, I examine the basis on which this calculation was made. Once again, I will take the figures which the Financial Secretary gave on Second Reading. He took the case of a company which buys up for £100,000 the shares in another company which has a large liquid balance of undistributed cash reserves. He assumed in this example that £92,000 was stripped out of these reserves by payment of a dividend and the shares were then sold back for £8,000—or not necessarily sold back; they might have been sold to someone else.

The purchasing company, being a finance-dealing company, dealing in securities, treats this £92,000 loss as a trading loss which arose because it bought shares for £100,000 and sold them for £8,000. It claims Income Tax relief at 8s. 6d. in the £. It will be clear to the House that on £92.000 that represents a tax reclaim of £39,100. Those are the Financial Secretary's figures.

I put it once again to the Government that this is only a smaller part of the loss. In very many cases, and I guess the majority of cases, the initiative was taken not by the finance-dealing company but by the original company who were piling up these liquid cash reserves and wanted to get rid of them in some way to avoid liability to Surtax. In the case which the Financial Secretary took, the vendor company has avoided Surtax by selling these shares.

At Question Time one day, the Financial Secretary said it would be impossible to estimate the loss on Surtax account because we do not know what particular rates of Surtax would be applicable to the vendors concerned, but in the example which I have taken—and so far the Government have not disagreed— I have assumed that the vendor company consists of three shareholders and that their Income Tax and Surtax position is such that they will be liable for 9s. 6d. in the £ on Surtax. If that is so, the Revenue would have got £79,000 in Surtax if they had distributed the cash reserves in the first instance.

If we look at the operation from the vendor's end and not from the purchaser's end, the Revenue has lost £79,000 in addition to the tax reclaimed. The total loss to the Inland Revenue has been £79,000 Surtax avoidance and £39,100 tax reclaimed, giving a total of £118,100, or about three times as much as the right hon. Gentleman calculated. That is why I personally put his £4 million, as the loss in a full year, in fact nearer £12 million to £15 million in a full year.

As I pointed out earlier, it is no secret that this racket has been going on for a considerable time. My hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) has referred to it in the past, and it was the subject of comment in the financial journals some time before the April Budget. It has been increasing in magnitude. I must point out to the House once again, because I cannot accept the Financial Secretary's simple assurance, that the Chancellor must have realised before April that it was going on and he must have been aware that it involved a heavy loss to the Treasury, even if he could not exactly measure the amount of the tax reclaimed.

Yet he entirely failed to include it in the April Budget, and I suggest that the reason was this: now that we have seen the Government's proposed measures for coping with this racket, they are obviously rather tortuous and long and might have been subject to considerable amendment; and it would not have suited the Government's purposes to have introduced them into a pre-Election Budget because they might have held up the House so that the Government could not have gone to the hustings at the time most convenient to them.

If that suspicion is true and the Chancellor tells us that that is why he did not introduce the proposal in his April Budget, then he has lost about £6 million to £7 million to the Revenue by delaying this action by six months; and that £6 million to £7 million, being six months' loss, is about the amount which he is trying to claw back from the housewives with the extension of the Purchase Tax range. The Chancellor has some explaining to do and I hope we shall get it from him.

Mr. R. A. Butler

The Economic Secretary answered this point and gave a very full reply to the right hon. Gentleman's insinuations.

Mr. Wilson

With great respect to the Chancellor, the Economic Secretary, whom we miss from our proceedings this afternoon, did not give a full answer; he merely denied it.

Mr. Butler

That is a full answer.

Mr. Wilson

I hope we shall get a rather fuller answer this evening from the Chancellor.

Let me put these questions to him: did he or did he not know about it in April? After all, it was in the taxation journals, and I presume that he reads them in order to maintain what the Minister of Education calls his professional status. If he reads these journals he must have known that the racket had been going on for a considerable time. At any rate, the City community expected legislation to be introduced. If that were expected, why did not the Chancellor introduce it? Do not his officials read these journals? Had they any ideas on the matter? Did they deny that this was going on, or did the Chancellor accept that it was going on and was unwilling to introduce the legislation? If so, why was he unwilling to introduce it? I have put those questions to him and I suggest that, unlike normal Cambridge practice, he is expected to answer all the questions and not the three which suit him best.

I turn to Clause I and the First Schedule. The provisions relating to Purchase Tax have been the main subject of our debates in Committee. What the Government have done is quite simply to increase the 25 per cent. range to 30 per cent., the 50 per cent. to 60 per cent. and the 75 per cent. to 90 per cent. In the 25 per cent. range there is a considerable number of household goods already. The 50 per cent. range, now 60 per cent., includes cars, radio sets, and so on, but there are very many things in it which are of great value to the household. The 75 per cent. range, which was fully debated, deals with more expensive stationery, cosmetics, and so on.

Another thing the Government have done, as we have pointed out to the Chancellor, was their decision to introduce a new range of Purchase Tax items. The Financial Secretary was using extraordinary language a few moments ago when he said that these had been omitted only "by chance." That really is a reflection on this House as the items were omitted by deliberate decisions of this House in Finance Bills from 1946 to 1951. Yet the right hon. Gentleman tells us that they were omitted by chance. It certainly is not by chance that they have been introduced in this Bill.

In what was almost a new argument at a very late stage of our proceedings, the Chancellor said he was widening the basis of taxation and hence started all the speculative talk about sales tax. He even went so far as to say that we on this side of the House will thank him in due course, when we take over the responsibility of Government, for having widened the basis of taxation. May I once again assure him that although we have every intention of taking over the responsibility of Government at the earliest possible moment—we would be doing it right away if there were a General Election now—we certainly do not intend to take advantage of what he has done by widening the basis of taxation, as we consider that his decision on this matter is wrong.

On a number of occasions we have asked why the Government have taken these measures to introduce these items into the tax range. The Chancellor said that it was to strengthen the £, but those of us who have looked at the financial accounts this morning find that the £ is now one-third of an American cent—to be exact 11/32—above the level to which Sir Stafford Cripps devalued it in 1949. Of course, the real test of the Chancellor's economic policy is the effect of these policies on our exports and imports and the latest figures published this morning show no improvement whatever; imports are at the highest level ever. I do not intend to develop that argument further, Mr. Deputy-Speaker, but I hope that we shall have an opportunity at a later stage to go into it because throughout the Committee stage of the Bill there were many boasts by hon. Members opposite that our economic position was improved by the Budget. Once again the export and import figures completely belie that particular boast.

On previous occasions I have referred to the arguments put forward by the Economic Secretary in support of these things—arguments which have been proceeding in ever diminishing circles as the Committee stage went on. By this time I think we are familiar with his and the arguments of the Financial Secretary about Purchase Tax. The arguments of the Financial Secretary are perfectly coherent; we know exactly what they are and what he means by them. On the Report stage, as he reminded us this afternoon, he made a concession about brushes, brooms and mops. On behalf of my hon. and right hon. Friends I wish to say that we sympathise with him that, having got a new item in his tax range, he has to give it away and relinquish his grip upon it. I wish to congratulate him on the manful and courageous way in which he sacrificed his principles on that occasion and parted with them. We recognise that it was not easy for him and, of course, we know it will spoil his Christmas.

We were interested in the argument the right hon. Gentleman used. He commended the views of one of his hon. Friends who said that no one bought brushes, brooms and mops for the sake of "keeping up with the Joneses." That is certainly true, but it has a much wider application. For instance, what about pot scourers, which are in this Bill? Does the right hon. Gentleman think that the Smiths rush out and indulge in a spending orgy because the Joneses have bought a pot scourer, or that the Browns go out and buy a new cinder sifter or chamber pot because the Joneses have one? Do the Robinsons buy a baby's bath from a sudden upsurge of competitive emulation? I would inform the right hon. Gentleman that my hon. Friend the Member for St. Pancras, North bought a new bath because his wife had a baby and that. because of the Budget, it cost him more. In any case, we all thought that this philosophy of "keeping up with the Joneses" was the whole spirit of the new Toryism in the competitive, over-advertised age in which we are living.

Whatever are the arguments of the Government, the plain fact is that Clause 1 and the First Schedule will not restrain inflation, but will intensify inflation, as many hon. Members opposite have said. The Chancellor is, in fact, fighting the rising cost of living by putting it up. He is mending the hole in the purse by enlarging it. On a number of occasions in the debates there has been a reference to the effect on wages. This is a tax on necessities. The Economic Secretary has told us that the idea is not to reduce consumption of necessities, but to nip off a little more purchasing power every time necessities are bought. As we have pointed out, it is an equivalent to a poll tax on every family in the country. Exactly the same argument as the hon. Gentleman used could be used to justify a tax on bread. We may be hearing that argument before long—not, I hope, to justify a tax on bread, but to justify any intention the Chancellor has of reducing the subsidy on bread.

This tax is even more regressive than a poll tax. There are very many poorer taxpayers, and those living in country districts, as was pointed out in the Committee stage, who, under this Bill, will be paying more tax than taxpayers who are better off. Most rich people have a bath built in, and tax free in a flat or a house, whereas many poor people, relying on the use of a tin bath, have to buy a new one when the old one wears out or starts to leak. They will be paying the tax, but no corresponding tax will be paid by the rich.

The same is true of the whole range of items which are used for home washing—the washboards, irons, iron shields, and all the rest. Anyone who can afford to send washing to the laundry will not have to pay this tax, but people who do washing at home will have to pay it. It is doubly regressive as is the abolition of the D Scheme, which the Financial Secretary thought was widely accepted, but which will make dearer clothing cheaper and cheaper clothing cost more.

It is not only the tax on necessities in this Budget which is resented all over the country, but at this Christmas season it is right to recall the words of my hon. Friend the Member for Liverpool, Exchange (Mrs. Braddock) who, during our all-night sitting, three or four weeks ago, made what I thought was one of the most moving and effective speeches in our debates. She referred at that time to the amount available to hospital matrons for expenditure at Christmas time on very small luxuries and pointed out that the money will go less far. She referred to toys and pointed out that under the Bill children's tea sets, which cost 12s. before the tax, will now cost 14s. 5d., a doll costing 25s. 11d. will cost 26s. 8d. and a toy car costing 10s. 11d. will cost I Is. 3d. This is a very serious thing the Chancellor has done at the beginning of the Christmas season. We cannot help remembering that last May the Chancellor was posing as a Father Christmas: in December we find him a Scrooge.

To sum up, the Government have produced this Bill because of the failure of their economic policy, because of their doctrinaire refusal to tackle the real causes of the economic crisis. It is because of their disastrous policies that the country is facing a crisis and they then produce this Bill which, with characteristic irrelevance, throws the greater share of the burden on ordinary families. We on this side of the House, and, I believe, the vast majority of people in the country, reject the Bill as politically unnecessary, as a doctrinaire and irrelevant gamble of a Chancellor whose policies have led the country into an unnecessary economic crisis. We reject it economically as a Bill which does nothing to help exports, which does nothing to bring imports into balance and which, so far from restraining inflation, will intensify it. Finally, we reject it socially and morally in that it places a heavy burden on those least able to bear it, especially upon that wide section of the community who have gained least and suffered most from these four years of Tory Government.

5.0 p.m.

Sir Robert Boothby (Aberdeenshire, East)

I intend to keep the House only a few minutes in order to make one observation. I listened with great interest to the speech of the right hon. Member for Huyton (Mr. H. Wilson) and my answer to him would be this. Given the premises of the Government, this Bill is at least understandable and perhaps unavoidable. These premises are that we have now become a free trade country, with free imports; and, at the same time, we have a fixed exchange rate for the £ sterling. Therefore, we are, in effect, on a form of rigid Gold Standard, without any flexibility at all; and we are also a free trade country.

I say, of course, that these premises are false. I take a quite different view on this matter, and I say that as a country we can no longer afford either of them. We can no longer afford to be—

Mr. Deputy-Speaker (Sir Rhys Hopkin Morris)

I must remind the hon. Member that the only thing that can be discussed on Third Reading is what is actually in the Bill.

Sir R. Boothby

Yes, Mr. Deputy-Speaker. I am well aware of that; but I am merely following the point made by the right hon. Member for Huyton when he said that what we were suffering from at the moment was, above all, an excess of imports, which, I think, is true. He asked, rhetorically, what this Bill would do to alleviate this problem of the excess of imports into this country in relation to our present exports.

The right hon. Member for Huyton said that he did not see what the Bill did to rectify that situation. All I am pointing out is that I do not see what it does to rectify it either, or what it does to solve the basic economic problem confronting this country, which is the problem of the balance of payments. The balance of payments problem at the moment arises, as the right hon. Gentleman again pointed out and as has been pointed out through these debates, not so much from our failure to export enough, because our export figures are remarkably high. It arises from the fact, as was evidenced in the Press this morning, that we are still continuing to import too much.

Mr. Deputy-Speaker

The hon. Member is widening the debate far beyond the provisions of the Bill.

Sir R. Boothby

I do not think I am widening the debate all that much, because the right hon. Gentleman himself referred to the figures of imports as being directly relevant to the Bill.

All I am saying is this, and it is my last point; at the end of this, I shall sit down. I believe that the fundamental choice confronting this country is between, on the one hand, free trade, restriction and higher taxation, which is the policy which this Bill puts into force. We are, in fact, raising taxation in the Bill. The major proposals in the Bill are to raise taxation, to raise Purchase Tax and to raise the Profits Tax. I do not agree with either of those two things, but that is the proposition. I say that the reason for this Bill, and for the increases in taxation now put forward, and for the policy of restriction, which are part and parcel of the general policy, is the fact that we refuse to face up to the fact that we must exercise some control over imports if we are to survive as a nation.

I say that the fundamental choice before this country is between free trade, restriction and higher taxation, which is the policy of the Bill, or protection, internal expansion and lower taxation, which is the traditional policy of the Tory Party. I am absolutely certain that my right hon. Friend the Chancellor of the Exchequer who has, understandably, left the House at this juncture, will ultimately be forced to adopt the second alternative. Nevertheless, my loyalty to the Government is such that I intend to vote for the Third Reading of a Bill of which I most heartily disapprove.

5.5 p.m.

Mr. Eric Fletcher (Islington, East)

It would obviously be improper for me, Mr. Deputy-Speaker, in view of your Ruling about the restricted nature of the debate, to enter into a controversy with the hon. Member for Aberdeenshire, East (Sir R. Boothby) about the general economic situation of the country. We on this side, however, are glad to know that the hon. Member, like practically every other Tory back bencher who has spoken in these debates, has condemned the Budget and the Finance Bill which were introduced by the Chancellor of the Exchequer. Nothing is more significant of this Budget than that it has been so wholeheartedly condemned, not only by the Opposition, but by practically every back bencher who has spoken in these debates and by nearly every section of the Tory Press.

Neither the Financial Secretary nor the Chancellor of the Exchequer, nor anybody on the Treasury Bench, can take very much credit for this miserable Bill, to which they are asking the House to give a Third Reading this afternoon. We have had a most lamentable performance, not only in the contents of the Bill itself, but in the manner in which it has been handled since its introduction. I do not suppose that ever within living memory there has been an occasion when a Finance Bill, through glaring incompetence on the part of the Government, has disappeared from the Order Paper during its passage through Committee. Over and over again we have heard the Financial Secretary and the Economic Secretary contradicting themselves in the arguments they have given to the Committee in support of various propositions in the Bill.

We have had the lamentable spectacle of the Chancellor of the Exchequer having broken his hitherto unblemished record of not having closured any of our debates during the Committee stage. He, at least, will have learnt a lesson as a result of that singularly unhappy performance on the night of 16th November. I do not know whether it was his fault or that of the Patronage Secretary, but I hope it will be a lesson to the Government for all time that they must not, in Committee on the Finance Bill, give assurances that there will be full opportunity for matters to be discussed and then go back on those promises by closuring our debates.

One Minister who, perhaps, comes out of these debates with some credit is the Attorney-General. It is noteworthy that he has throughout maintained a discreet silence on the Bill from start to finish. I have no doubt that one reason the right hon. and learned Gentleman was stopped from saying anything is that in previous Finance Bill debates when the Attorney-General has addressed us, we have had the spectacle of him giving an explanation on a Clause and then finding at the end of it that he has given an explanation relating to a totally different Clause. The Attorney-General was probably very wise to maintain silence on this occasion.

When all is said and done, what does the Bill amount to? My right hon. Friend the Member for Huyton (Mr. H. Wilson) has with devastating effect criticised seriatim the four Clauses in the Bill. Dealing with them in the reverse order, I fully agree with what my right hon. Friend said about Clause 4, which seeks to put an end to what is colloquially known as the "Indian rope trick." As my right hon. Friend said, we have heard no reason from the Government why this obnoxious device was not stopped long ago. It must have been known to the Government.

It has cost the Revenue, in loss of taxation, not only the very large direct sums which have been made as a result of this double device of taxation, but it has also cost them, as my right hon. Friend pointed out, a further sum as a result of loss of Surtax by the vendor, who in a great number of cases must have initiated this device. Indeed, my information is that there have been a good many cases in which one and the same person has been twice interested, first as the controlling owner of the company which has sold the shares in a concern swollen with dividends, and, secondly, because he has an interest in the finance company which acted as the purchaser.

It looks very much as if the fear of the Government to introduce this Clause to stop this device in the April Budget was entirely due to their anxiety to drive the April Budget and consequent Finance Bill through Parliament to have a quick Election for their own partisan purposes. I am by no means satisfied that the Clause in its present form will carry out its objectives, and be sufficiently tight to stop further manoeuvres of this kind.

As my right hon. Friend also said, in connection with Clause 3, the only Clause which gives any concession to anybody, a concession, significantly enough, to the already privileged and limited class of Lloyd's underwriters, while it appeared to us at first sight that it could be justified, the more we looked into it the more we realised it was very difficult to justify. I have yet to hear from the Treasury Bench why it is impossible to tie this Clause with a condition whereby the benefit is given to Lloyd's underwriters only if they are able to show they do a sufficient amount of dollar business and thereby earn dollar revenue for this country.

I hope that when the Chancellor replies to the debate he will deal with this point. It was made over and over again in Committee, when the Financial Secretary sought to justify the Clause. It is a very unusual Clause to insert in a meagre Bill like this, unless it has some relation to the avowed purpose of helping our dollar earnings. We have had no explanation why the Clause cannot be amended so that the very considerable tax concession which is conferred on this privileged class of Lloyd's underwriters is tied up with an obligation on their part to secure for the country a certain amount of dollar revenue.

Like my right hon. Friend, I feel we must insist upon figures being given to justify the Clause. The Financial Secretary told us in Committee that he could not give us the actual figures about the dollar earnings by Lloyd's underwriters because they fluctuated so much. That, obviously, was a sham, hollow excuse, because if he knew the figures fluctuated he must have known what the figures were. What we want is some figure, approximate though it may be, of the amount of dollar earnings which are to be expected because of the Clause.

All I would say about Clause 2, dealing with Profits Tax, is that, in our opinion, this slight increase in Profits Tax is not nearly enough to fulfil the result, which the Government obviously intended by some increase in Profits Tax, of offsetting what we regard as the scandalous and quite unjustifiable increases in the Purchase Tax.

I offer just three comments on the evils of the Purchase Tax increases, as they appear to me. In the first place, it seems to me quite impossible on any ground of logic or of a rational system of taxation to justify the existence of five different rates of Purchase Tax, whereby some goods are taxed at 90 per cent., others at 60 per cent., others at 30 per cent., some at 10 per cent. and some at 5 per cent. If anybody were to pick up for the first time the schedule of articles ranging from motor cars to Christmas cards, and were to try to discover a rational basis for these widely differing and arbitrary rates on this immense category of commodities, I would defy him to find it.

I do not suppose for a moment that the Chancellor regards these arrangements as permanent. Indeed, I was rather disturbed by what the Financial Secretary said just now about the concession which he has made in Clause 1 as a result, I think, of an Amendment I tabled. It struck me that he made a rather grudging recognition of the importance of the concession which we had exacted from him. It is obvious, from the fact that the Bill as originally drawn was aimed at giving the Government power to vary these rates up or down from one figure to another by Statutory Instrument, that it was the Government's intention to try to manipulate these rates without recourse to further legislative action. We are glad to know that that now cannot be done except at the figures already authorised by Parliament, but it does show that the Government cannot regard these present Purchase Tax rates as permanent.

Nobody expects that they will be. Of course, one result of that is to produce a widespread feeling of uncertainty not only in the minds of the public but in the minds of the wholesalers, retailers and all other dealers. Furthermore, it seems to me that a further incidental result of this inevitable lack of permanency in these Purchase Tax rates must be that retailers and wholesalers will protect themselves to the disadvantage of the public, the consumers, by wherever necessary increasing their prices so that they do not suffer. Indeed, that is already taking place. It has already become apparent throughout the country that the prices of commodities to the public have not only gone up by the amount of the Purchase Tax, but also by an additional amount to give the retailer some further profit.

Our next serious objection to these Purchase Tax increases is that, in our view, they will not achieve the result which is claimed for them. It is said that they will prevent inflation. As the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) pointed out—and I agree with him—these increases in Purchase Tax, so, far from preventing inflation, will produce inflation. In so far as they tend to absorb purchasing power, the wage earners will demand higher wages to balance the loss of purchasing power arising from the increased Purchase Tax. That is what the noble Lord said and I agree with him, but I go further.

I think that not only will the increased Purchase Tax produce rather than check inflation but that it will have a most serious effect on that section of the community which cannot counter-balance the increased cost of living by demands for higher wages. I refer to the old-age pensioners and all the other sections of the community living on pensions and fixed incomes who are not able by collective action to seek wage increases. In my view, that is the most serious aspect of the Bill.

In effect, what the Chancellor has done by deciding to raise this vast sum of money by increased rates of Purchase Tax and bringing many new commodities within the range of the tax is to collect by indirect taxation approximately the same amount of revenue which in the April Budget he gave away to Income Tax payers in relief from Income Tax. I am not an economist, but it must be obvious even to the simplest of us that whereas Income Tax is a tax on income and is payable by those who can afford to pay it, because it is related to the income which they earn and is therefore just, revenue raised by Purchase Tax has no relation to anybody's capacity to pay. It is determined entirely by one's obligation to buy the necessaries of life. Therefore, it falls on rich and poor but, of course, bears most unjustly and most harshly on the poor, because they have less margin within which they can afford these additional prices for the necessaries of life.

I very much hope that this simple lesson will not fail to sink into the minds of the public. We on this side of the House believe that on every occasion a Budget should be used not only as a means of raising revenue, but also as an instrument for removing inequalities and producing more social justice. We believe that the Budget is par excellence the handiest instrument available to the Government of the day for producing a much greater degree of equality among all sections of the community.

We condemn this Finance Bill not only because it fails by that standard, but because it deliberately flouts that principle which we believe to be self-evident and to be one of the cardinal principles of social justice. I should like to think that those Conservative Members who have spoken and condemned the Budget would join with us in rejecting on Third Reading a Bill which we regard as harsh, muddling and unjust.

5.23 p.m.

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

The Bill has certainly received a full measure of opposition in the Chamber. Indeed, it was the subject of criticism before it was born, because the right hon. Member for Leeds, South (Mr. Gaitskell) said on 27th October that Chancellors of the Exchequer should limit themselves to one Finance Bill a year unless there were quite abnormal international developments, which were not apparent in this case. That may have been so in the days when I was young and the right hon. Member for Leeds, South was very young—the days of the Gold Standard. I suggest to the right hon. Gentleman that that view is quite out-of-date today when we are on a full employment standard.

I think that most of us in the House believe in an expansionist policy to maintain employment, which means that we must always be on the edge of inflation. I know that the right hon. Member for Leeds, South does not like metaphors, but perhaps he will allow me one on this occasion. If a car is driven at 20 m.p.h. it requires an unusual emergency for it to be necessary to apply the brake, but if it is travelling at 100 m.p.h. the driver must be prepared to put his foot on the brake at any moment, and the passengers must not mind if sometimes he does it at rather short notice. In the same way I believe that the Chancellor was right, in a modern expansionist policy, to have the Finance Bill and to be prepared to have one whenever the situation demands it.

Mr. Ede (South Shields)

Once a week.

Mr. Spearman

There is moderation in everything. I do not think that the Chancellor would agree to that.

The Financial Secretary to the Treasury told us today that the object of the Bill was to mop up purchasing power. Hon. Members opposite sometimes seem to be uncertain whether they think the object of a Finance Bill should be to attack inflation or to attack a rise in the cost of living. They are very different things. As I understand it, inflation is a rise in money incomes, and a consequence of which is a rise in the cost of living. If we stop inflation we stop a rise in the cost of living, but if we stop a rise in the cost of living by controls or by a remission of taxes we increase inflationary pressure and thereby run into a balance of payments crisis which would be even more disastrous than a rise in the cost of living.

I support the Bill because I think it helps to get the balance between national money incomes and national resources, and I believe that it is absolutely essential to have that balance. Indeed, the only year since the war when we had that balance was the only year when there was no more than a moderate rise in the cost of living.

Sir R. Boothby

Which year was that?

Mr. Spearman

It was 1953–54. I am happy to be able to say that under the Conservative Government production has gone up a great deal, but there can be no violent adjustment upwards of production, and therefore to keep the balance it is necessary to cut demand. Many of my hon. Friends say that we should obtain that cut in demand by cuts in Government expenditure. Quite clearly, this is not the moment to expound that subject. I am sure that there are instances of extravagance in Government expenditure. I know of one about which I shall tell the Chancellor and which I hope he will stop, but I do not believe that there can be any major economies in the Government's administration without harming either defence or the Welfare State, neither of which most of us are prepared to see harmed. It has been said that the cut in demand should come not through higher taxes but by cutting back investment.

Mr. Deputy-Speaker

The hon. Member seems to be making proposals alternative to those which are in the Bill.

Mr. Spearman

I am sorry, Mr. Deputy-Speaker. Perhaps I can say that the alternatives of cutting Government expenditure or investment are not enough in themselves. Therefore we must resort to taxation, which is what this Bill is mainly about. If we are to cut demand it seems logical that we should impose taxes which discourage spending; in other words, indirect taxation rather than direct taxation discourages production and savings. For that reason I support the Purchase Tax proposals in this Bill.

The right hon. Gentleman the Member for Huyton (Mr. H. Wilson) paid a tribute to the speech of the hon. Lady the Member for Liverpool, Exchange (Mrs. Braddock). I listened to that speech and I thought it was perhaps more unbalanced than other speeches from the other side of the House. The hon. Lady used these words "positively disgusting and almost obscene" about the Purchase Tax increases. Words used in that way begin to lose their meaning, and I would like to discuss what it is that she thinks is almost obscene.

Today consumption is running at about £10,000 million, whereas the amount of fresh Purchase Taxes raised by this Bill is £75 million. The increase in consumption in the last four years under a Conservative Government has been round about £1,000 million, of which £75 million is a very small fraction. Today the country is spending more on buying sweets and ices than on bread and milk. This shows that these relatively small tax increases can hardly be said to be crippling. Ever since the end of the war there has been an average rise in the cost of living of about £500 million, although of course in some years it has been more and in some less. If the addition of taxes to the extent of £75 million makes any appreciable contribution to checking that rise, I maintain that this Budget is well worth while.

Viscount Hinchingbrooke (Dorset, South)

Would my hon. Friend not recognise that since the war taxation has been swinging, and that every time taxation has been increased the cost of living has also increased?

Mr. Spearman

I am sure my noble Friend would agree that if those taxes had not been imposed more money would have been available for spending and costs would have gone up even higher. The only way to prevent that happening would have been to impose price controls, and that would have meant a greater home demand, which, in turn, would have meant less exports with the possible loss of our export markets. I would like to pursue that point, but it will have to be done on another occasion, because I see that Mr. Deputy-Speaker is almost on his feet.

Mr. Rankin

Not yet. Go on a little further.

Mr. Spearman

As I have said, this Bill has engendered a good deal of heat in this Chamber, but I believe that it is unrepresentative of the feelings in the country.

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

Do not believe it.

Mr. Spearman

I believe that in a month there will be little worry in the country about this Budget. Indeed, I wonder whether the cause of all this heat and excitement is that the country has become so accustomed to continued remissions of taxation under a Tory Government that when for the first time it is impossible to continue them, the shock is out of all proportion to the tax.

Mr. Houghton

Is the hon. Gentleman suggesting that people will not notice it and that, therefore, they will not pause to think?

Mr. Spearman

I am saying that I do not believe that people are nearly as worried as it suits hon. Gentlemen in this Chamber to suggest about these Purchase Tax increases. I have suggested that the Purchase Tax costs £75 million, according to the Government estimate, and that in the last four years consumption has increased by £1,000 million.

I believe that this Finance Bill has had, and will continue to have, a fortunate effect on world opinion, because it has shown the world and this country that my right hon. Friend is prepared to do everything to support sterling, and to do everything he can to check inflation, even if it means taking measures unpopular in this House. It is because this Finance Bill, together with other measures taken by the Chancellor, will make a real contribution towards reducing inflation that I support it warmly.

5.36 p.m.

Mr. Douglas Houghton (Sowerby)

The most impressive thing about this Bill is the enthusiasm of the Economic Secretary for it. Had we not seen it with our own eyes, we would have thought that this Bill was one which not even the Chancellor could love. Yet on more than one occasion the Economic Secretary has been not only eloquent but enthusiastic in his belief in this Bill, and, before we part with it finally, we are entitled once more to ask ourselves what it tries to do.

The hon. Gentleman the Member for Scarborough and Whitby (Mr. Spearman) ventured a metaphor about putting on brakes. I agree that in this Bill the Chancellor is putting his foot on the brake, but unfortunately other people's feet are on the accelerator, which is the danger of this Bill. The Bill is full of contradictions. There are about as many contradictions in it as there are Clauses.

and I think that the House might once more examine one or two of them in the light of the latest comments of the Financial Secretary.

The hon. Gentleman said substantially that the purpose of the Bill was to suck away excessive purchasing power which otherwise might press upon inadequate resources. The words that struck me most were "suck away." They conveyed the impression that there would be a tremendous sucking up of purchasing power, and yet the hon. Gentleman had hardly used that picturesque phrase when he went on to tell us that this only amounted to 4d. a week for each household at the beginning and that it would be only 31½d. at the end.

This is such a contradiction that it does nothing except irritate and aggravate. Certainly it does not make many people pause to think. The hon. Gentleman said that this would cause people to pause and think before, presumably, going into a shop to buy. It would be like a nervous patient on the threshold of the dentist wondering whether to go in or not; pausing to think about what awaited him when he got inside. Will an extra few pence on some household utensil, or even a few shillings on something more ambitious, achieve anything when, as the right hon. Gentleman himself had to admit, there is no sign in this' pre-Christmas period of anyone pausing to think? People are falling over each other to get inside the shops. They are rushing up and down Regent Street, even when the shops are closed, and even on Sunday, which suggests that many people are most anxious to get on with their Christmas buying.

Earlier the Chancellor said that the additions would bring home to people the difficulties confronting the nation. I do not think that Purchase Taxes of these dimensions will cause people to think or will bring home very much. I do not know what the people will think while they are pausing. They might think about the Chancellor or the general economic situation.

What they could also think about is that the shopkeeper will work out his profit margin on the new total price. That is worth thinking about. The imposition of Purchase Tax on goods which does not have the effect of slackening demand represents additional profit to the trader. If the present addition does not slacken demand, all the Chancellor would have done is to put more profits in the hands of the traders.

The total amount of money which the Bill will suck up in relation to Purchase Tax is about one-tenth of the wage increases granted during 1954. This is not a serious attack on the problem of inflation. If the Chancellor regards this kind of tax as an effective weapon against excessive consumer demand, he must wield it with courage and almost savagery. He must put goods beyond the reach of people. That is the only way the tax can be used without serious risk of inflationary consequences.

If the tax is of such dimensions that it does not slacken the appetite for consumer goods but merely erects a slightly higher hurdle which the bulk of wage earners believe they can overcome by another push in the upward movement of wages, that is what they will try to do. There were times in the past when taxation was used to cut demand and it was salutary in its effects, people not only pausing to think but ceasing to buy certain things.

As to our criticisms of the Purchase Tax proposals, the Financial Secretary talks of sucking away excessive purchasing power and then says it will amount to only 3½d. per week per household. When he said that, we asked what all this was about. Has the Chancellor incurred unpopularity to any good purpose? We all sympathise with the Chancellor who, doing what he believes is right, goes on with it notwithstanding public opinion. If one believes that he is doing the right thing, and doing it courageously, one can admire him, if only for his courage. However, it seems that the additional tax on consumer goods is so slight, taken over the whole field of purchases, in relation to the resources available that he has gone through a very tiresome and unpleasant time for very little economic advantage.

Another contradiction about the tax concerns its universality. The Financial Secretary said it would have been wrong and unfair to have confined the increases to the goods previously within the tax. The Chancellor has spoken of broadening the base of the tax. Yet a good deal of discrimination is still left. The tax is not really universal. The Chancellor has picked out goods which he thinks ought not to bear tax. Thus, we have all the difficulties of arbitrary distinction and definition in the proposals for an enlarged field of tax. Fireguards, except those incorporating heating elements, are still out. Hot water bottles and stoppers are still out. Industrial clothing lockers are still out. The Chancellor has left a lot out; he has still discriminated. The Financial Secretary can hardly claim any virtue for having removed any unfairness or wrong in the scope and area of the tax which he felt originally it may have contained.

There is contradiction even in the Clauses dealing with tax avoidance. The Chancellor has belatedly dealt with that evil at a time and in a Bill when he is levying additional taxation on other people. There is no doubt that the dividend strippers have got away with something that they ought not to have done. On a previous occasion I expressed some sympathy with the Chancellor about the long, complex Clauses in Finance Bills dealing with tax evasion and tax avoidance. I said that the Chancellor naturally holds his hand on these tedious exercises until he feels that he must take steps to stop whatever the practice may be. Here it seems that either the dividend strippers were getting away with it longer than they should have done or the incidence of avoidance grew so rapidly that the Chancellor had to take emergency steps in an emergency Budget to put an end to it. We have not had a very full and frank explanation of just how the loss of revenue mounted in the months before the Chancellor reached his decision to include some provision in this Budget.

When one comes to pass judgment on the Bill as a whole, it is, I suppose, the judgment of the right hon. Gentleman and his advisers against that of hon. Members on this side of the House, who take a different view. When using the fiscal weapon for economic, as distinct from revenue, purposes, there are obviously dangers, risks and uncertainties which no Chancellor can completely set aside. It is difficult to know whether one is doing enough, just about enough or too much in the economic direction which is the purpose of certain proposals in the Finance Bill. There is the difficulty not only of degree but of the choice of instrument for whatever economic purpose the Chancellor feels it necessary to serve.

There is no doubt that the Chancellor's freedom of action in this Bill was seriously curtailed by the action he took in the Budget earlier this year. There is no question that he was obviously inhibited in many ways from using the weapon of direct taxation. At the time that he came to make the proposals in the Budget he was up against certain administrative difficulty. It would have been possible for a new Government, coming into office at the end of May or even at the beginning of June, to have seized the opportunity to increase direct taxation with effect from the current financial year, even for P.A.Y.E., had the Chancellor been moved to do so.

Mr. Spearman

Does the hon. Gentleman realise that the increase in consumption in the second quarter of this year, after the reduction of Income Tax, was very much smaller than the increase in consumption in the same quarter last year? The big increase in spending has been in investment and not in consumption.

Mr. Deputy-Speaker

I must remind the hon. Member that he is now dealing with alternative proposals to those in the Bill.

Mr. Houghton

I am trying my best to avoid the pitfalls of order in what I am saying. The hon. Member for Scarborough and Whitby, in his intervention a moment ago, referred to the rise in investment. This Bill directs itself against excessive consumption. It is a weapon against consumer demand very largely, and the Purchase Tax proposals do not really curtail investment, nor, for that matter, presumably, does the additional tax on distributed profits curtail investment.

I think that the Chancellor of the Exchequer in the Purchase Tax proposals aimed at the heavy pressure of consumer demand against resources which ought either to go more freely to export, or raw materials which ought not to be converted into consumer goods at all but should go into other directions for export. That, as I understand it, was the main purpose which the Chancellor had in mind in imposing these increases in Purchase Tax, unless it was his desire to chose something which would attract public notice—something which would bring home to people generally our own difficulties, something that would make everyone pause to think and reflect on the economic situation.

Unless it was the desire to attract widespread public notice—and I think that there was more in it than that—then quite clearly the Chancellor's aim was to depress consumer demand. I think that where we quarrel with him most seriously in these proposals is that we do not think that he will depress consumer demand, but may, on the contrary, excite a demand for higher wages in order that people may avoid giving up anything to which they have become used, or the postponement of the purchase of things on which, perhaps, they have had their eyes for some time past. Other measures might have greater effect in depressing consumer demand than Purchase Tax increases.

I agree that part of our difficulty in discussing the Finance Bill in isolation is that we cannot at present, certainly not on Third Reading, link it up with other measures taken with regard to the credit squeeze which, combined with this, might eventually, although it might take some time, work out in the Chancellor's favour. It is a matter of judgment whether it is going to be so or not, and it will be a matter of experience to show whether it has done so or not.

I think that the Chancellor has perhaps one advantage, and that is his next Budget, in the normal course of events, will come soon enough for him to take further measures if, in the intervening period, he sees that the ones which he has now taken are not achieving the desired result. We on these benches must still dissent strongly from the Chancellor's way of doing this, and the timing of his proposals. I have the most serious misgivings about the effect of the Budget in more than one direction, and I can only hope that these fears will prove to be unfounded, because none of us wants to see further difficulties in the economic situation.

There is no pleasure in seeing the country in difficulties, because we know that is bound to entail unpalatable measures of one sort or another, whether we agree with them or not. I think that if the Chancellor's proposals do succeed, he will he relying on other people's appreciation of the economic situation and the judgment and wisdom which they must bring to bear upon it rather more than he is entitled to. There again I hope that these wise counsels will prevail, because it is important that we should keep our economy on an even keel.

That is all the more reason why the Chancellor should pay heed to other people's judgment and opinions, because he is going to rely upon their goodwill and wisdom and even their co-operation, and so, when the Chancellor has taken the best advice that he can, and when he is making up his mind what he is going to do, he must have regard not only to the opinions of hon. and right hon. Members opposite, but also to what the great masses of the workers of the country and their families are going to think, and who for the most part are represented by hon. and right hon. Members on this side of the House.

This does, therefore, become a two-way traffic. The Chancellor must design his proposals to secure the maximum acceptance of his economic measures. People must accept his diagnosis of the economic situation, they must be convinced of the fairness of his proposals, and they will want to see in them some sign of affective results. We do not find that in this Bill, at any rate not on these benches, and nor do we find it, I think, in the country generally.

I do not agree with the hon. Member for Scarborough and Whitby who said that the country generally is indifferent to this Budget. It is not. If I were to make any comment on the attitude of the public outside, it is that they have an exaggerated idea of the Budget's effects upon their spending power. They believe that it does more than it really does. They believe that it will affect them more than it really will, and that is a condemnation of the Budget and of the Bill. I shall not be like the hon. Member for East Aberdeenshire (Sir R. Boothby), who condemns the Budget but will, nevertheless, vote in favour of the Bill notwithstanding his criticism of it. We on these benches are in a far happier position. We can not only oppose the Bill but we can vote against it as well.

5.58 p.m.

Viscount Hinchingbrooke (Dorset, South)

I endeavoured to intervene on Second Reading and Committee stage on a number of points concerning this Bill, and I will not weary the House by going over them again. I have notes on the Profits Tax, dividend stripping and the psychological effect of the Budget, but these I will try to leave aside in the interests of those hon. Members who still want to speak.

I do, however, want to say something about the growing inflation in the country and the demoralising effect of it. I would not have hesitated for a moment to vote for this Budget and the Finance Bill at every stage had it not been for my conviction that the Budget is no longer an element of policy so far as the resisting of inflation is concerned. It is a distributive agency, an agency for raising revenue for government. It has all its old characteristics, but with over-full employment the days when any Budget could have any effect on the inflationary position are past.

It is because the taxation weapon as an instrument of arresting inflation has failed that I have not hesitated to speak and vote against it; because the inflation which is afflicting society at the moment is the most demoralising and terrible characteristic of our age. Everything we read in the papers that we do not like, every police court case we do not like, which we find distasteful and disagreeable, has as its basis people's sense of lack of security, lack of stability and purpose in our society. The Budget fails to give that sense of security and stability, for the reasons I have sought to give.

In fighting the last Election, I drew up a graph which showed the rising cost of living and the even faster rising wage rates. The rise in the cost of living was not significant, because people could get bigger wages and prices by the steadily widening gap between the rising cost of living and the still more rapidly rising level of wage rates. It is that widening gap, the margin between the cost of living and wage rates, the increasing standard of living which is so important to our society and that can be maintained in a society which is no longer inflationary. Therefore, it is not the cost of living which is the factor in the situation but this steady deterioration in our society because of inflation.

I shall speak for two minutes more and then sit down. The House of Commons must become a council of the nation on this issue. It is no good going on with the automatic alignment of party policy for the very reason that the Civil Service will always produce a new Budget which increases taxation for the purpose of creating its strength and numbers while it spends the proceeds. My hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) referred to taxation absorbing purchasing power. It absorbs purchasing power and transfers it to the Civil Service, which then proceeds to spend the money. It will be seen that in the last 12 months the National Debt has increased by about £200 million. If my right hon. Friend would use the money for a reduction of the National Debt we might get increased stability, but unfortunately the position is that the money is spent.

If the Civil Service does not give instructions to the Government, it puts forward proposals which are adopted by the Government which has an automatic majority behind it. It was the same when hon. and right hon. Gentlemen opposite were in power. They produced proposals steadily increasing the power of the Executive, and every time those proposals were voted for in the House of Commons, because they had an automatic majority behind them. That means that unless we do something as a House of Commons, as back bench Members right round the Chamber, to arrest the increasing power of the Executive, we will never bring stability and inflation to all. On the contrary, we will see a steady advance of totalitarian methods. It is of the utmost importance that the House should act as a council of the nation and redress grievances as before and that we should return to our previous function as private Members and representatives of our constituents who are overwrought and anxiety-ridden by this terrible and growing evil of inflation.

6.5 p.m.

Mr. John Cronin (Loughborough)

I understand that in Third Reading debates it is customary to distribute congratulations with facility. I have sometimes heard it referred to as a prize-giving. I should like to distribute some congratulations to the Government Front Bench, but in attempting to do so I find myself in some embarrassment. The Financial Secretary has just congratulated the Chancellor on his courage and I am prepared to agree with that, although it is not the kind of courage that some of us would like to have.

I regret that I cannot congratulate the Financial Secretary on his speech. Apart from its unceremonious brevity, it contained some extraordinary statements. One of the things he told us was that it is unfair to confine Purchase Tax to articles which are already subject to Purchase Tax. That seems to be an extraordinary precedent and it is rather surprising to hear it. If we apply that to other sources of revenue, such as Income Tax or Purchase Tax in the future, it would mean increasing the scope of those taxes and bringing in the people who do not pay tax.

The Financial Secretary also said in a most emphatic way that the rise in the cost of living produced by the Finance Bill would not justify any wage claim. That seems most extraordinary. I was always under the impression that wage claims were negotiated by trade unions with employers or associations representing employers. I had no idea that the Financial Secretary could make such ex cathedra statements about wage claims. It will be very interesting to those unions now pressing wage claims.

The Finance Bill belongs to a category of Bills in which one can largely assess to what extent it has succeeded or failed even before it receives the Royal Assent. The Finance Bill has achieved one success which I will concede and to which my right hon. Friend the Member for Huyton Mr. H. Wilson) has already referred. That is the improvement in sterling. Since immediately before the Budget, sterling has improved by 25/32 cent. That is a real achievement, but one's felicitations should be qualified by the fact that one should investigate why sterling deteriorated.

The Financial Secretary will agree that the deterioration of sterling this summer was largely due to the indiscreet handling of the conference in Paris, in June. I think he will have to accept that when it was stated in Paris that the £ would have to vary between wider margins that caused a gross fall of international confidence in sterling and produced the present situation.

Mr. H. Brooke

If the hon. Member is suggesting that the Chancellor of the Exchequer committed any indiscretion in Paris, my right hon. Friend has absolutely denied that in the House and will, if he thinks it necessary, deny it again this evening.

Mr. Cronin

I am obliged to the right hon. Gentleman for that information, but I always understood that the delegates in Paris were under the Chancellor of the Exchequer's control and that he was responsible for them.

When we have departed from that solitary success which is, after all, merely retrieving a previous defeat, we have to examine what the Budget has so far achieved. We have already had some reference to the very large spending on Christmas shopping. There is every evidence that this will be a record Christmas for spending. The Financial Secretary tried to cover that point in his speech and pointed out that there will be no real decrease in spending until present stocks are decreased. But what he omitted to say is that on stock figures available we find in most firms that stocks have not decreased in general at all. In spite of the spending there has been a steady build-up of stocks. It suggests strongly that the business community are expecting more and more spending.

We have the question of hire purchase to consider. If the Financial Secretary will look at the figures for hire purchase, he will see that they are increasing. Hire purchase is on the ungrade all the time. The most sensitive galvonometer of our economic life is the Stock Exchange. There we can see whether inflation is expected or whether inflation is taking place almost to a decimal point. The Financial Secretary will know that since the Budget and in spite of Clauses 1 and 2 of this Bill—particularly Clause 2—there has been a considerable increase in equity value. The Financial Times have indices based on a large number of companies. The industrial ordinary shares index on 25th October, the day before the Budget, stood at 187.9. The last figure available, that for 9th December, was 199.7 which shows a move up of ten points in spite of a Budget designed to combat inflation and reduce dividends. That is a measure of the success achieved so far.

We already have the figures for exports and imports given by my right hon. Friend the Member for Huyton. It is clear that the financial affairs of this country are going steadily downhill so far as they are concerned. I hope that the Financial Secretary will not say that it is too early to assess that. He certainly made that point about Profits Tax. During the Second Reading debate he said that the Profits Tax would not bite so much this year, but that it will bite more next year and increasingly more the year after. I suggest that the last time the Purchase Tax had a real bite was when my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) was responsible for the financial direction of the country, and that it is the Chancellor of the Exchequer who has reduced the bite of Purchase Tax. Not only did the right hon. Gentleman take away the teeth from the Profits Tax, but he is now supplying very inferior broken dentures which will not achieve the desired effect at all.

Of course, the major effect of the Finance Bill is that it has created increased wage claims. We all know that there has been a very great increase in wage claims. We have had notices of wage claims from the railwaymen, the miners, the transport and general workers and from a host of unions. It is a measure of the further inflation that we must expect as a result of this Finance Bill.

I should like to go into the psychological effect of the Bill, and particularly of Clause 1. The House is entitled to expect that the Chancellor of the Exchequer will have some knowledge of industrial psychology. Every business man knows that labour relations are vitally important. It is clear that if a business man does not consider the reactions of workers he will run into trouble. Before the war, it was quite easy. Workers were compelled to go on with their job whether conditions were good or not, because the alternative was to draw the dole. But now conditions have changed and employers have to study the psychological effect on their workers of every decision they make.

It is quite clear that the Chancellor has not succeeded in assessing the psychological effect of this Bill. It is evident that he has caused an outbreak of real wrath and dudgeon on the part of the unions concerned because of this Bill. As a result we have these wage claims made in quite a heated manner, and we have the Trades Union Congress condemning this Bill as strongly as possible. One cannot help feeling that this Bill has had a psychological effect which is calamitous. I submit that it has probably been the most tactless Bill since the Townshend Duties in 1767, which resulted in the American War of Independence.

Mr. Collins

There is now a tax on teapots, too.

Mr. Cronin

This Finance Bill will produce the first steps of what will prove to be a cold class war and the responsibility for that must lie entirely with the Chancellor. There is another aspect of Clauses 1 and 2—

Mr. H. Wilson

Although the Townshend Duties created very serious trouble on the basis of, "No taxation without representation" I hope that my hon. Friend has not missed the point that in the case of this Bill the House has been denied its time-honoured right, which was given at the time of the Townshend Duties, to vote separately against having duties imposed by the Government of the day.

Mr. Cronin

I am obliged to my right hon. Friend for drawing the attention of the House to that consideration.

There is another aspect of the Bill which merits some discussion, and that is its effect on the business community. I know that protecting the interests of the business community is something which largely occupies the minds of hon. Members opposite, but I think something should be said for the business community in this House. There is no doubt that this constant change of policy forced by successive Budgets must be embarrassing to the business community, to industrialists and business men. After all, with the co-operation of the workers, industrialists and business men earn our bread and butter for us in this country and overseas and they are entitled to some consideration. They are certainly not getting consideration from the party which appears normally to occupy itself with their interests to a large extent.

Now, when planning ahead, the unfortunate business man has not only to think in terms of a Budget every year or so, but more than one Budget occurring in a year. He has this constant embarrassment. We hear from the Financial Secretary that worse is to come. In addition to all the complexities and changes produced by the Profits Tax and by the abolition of the D Scheme and the changes in the Purchase Tax, the unfortunate business man must expect more changes in a few months, because the Financial Secretary says that the present Profits Tax does not permit the Chancellor not to bring in certain recommendations of the Royal Commission on the Taxation of Profits and Income—

Mr. Deputy-Speaker

Order. The hon. Gentleman must not discuss what the Chancellor intends to do.

Mr. Cronin

I beg your pardon, Mr. Deputy-Speaker. I am trying to suggest what is the effect of Clause 2 of the Bill, but on your instructions I will leave the question of the perplexities of the business man at that. I should like the House to realise that Clauses 1 and 2 or the Bill are having a severe effect on business men's decisions and that, as a result of what the Financial Secretary has already said, they can expect no relief.

There is another aspect of the Bill which we have to consider as responsible people, and that is the ethical side of it. I do not propose to go into the ethics of the Chancellor's action in introducing this Bill. That has already been dealt with by my right hon. Friend the Member for Leeds, South. He produced a very powerful indictment of the Chancellor with which I think most hon. Members on this side of the House would agree. There is, however, an ethical aspect about it which applies to us all and not merely to the Chancellor of the Exchequer, namely, the good repute of all Members of this House.

From the earliest times of democracy it has been accepted that to serve one's country or community in politics is a noble career, and it has always been thought in democracies that a politician is a person who is entitled to some honour from the rest of the community. That was the teaching of Plato and Aristotle, and of the early Stoic philosophers, and of Cicero and the Romans, in the time of the Republic. When democracy was restored to this country in the seventeenth century Members of this House had the highest reputations. In the last century they were regarded in much the same way as film stars are regarded now.

Mr. George Chetwynd (Stockton-on-Tees)

But not as well paid.

Mr. Cronin

That is true. But Gladstone could command an audience of 5,000 quite easily at a public meeting That is certainly not the case today, except, on television, which is the addendum to an entertainment.

There is no escape from the fact that during the inter-war years there was some deterioration in the public esteem of hon. Members. Since 1945 there has been some improvement in the status of politicians, but what will the general public think of this latest financial sleight of hand? In 1952, the Chancellor reduced Profits Tax and produced the Excess Profits Levy. Then, with some manipulation, next year he withdrew the Excess Profits Levy. That made people wonder whether it was really a sound practice. On this occasion the Finance Bill has been introduced after an April Budget had handed out to the community a large amount of money. This Budget will now take back a large proportion of what was handed out. What will the general public really think of that?

How will it affect our reputations? Between the wars one used to hear the phrase, "Politics is a dirty game." That is a crude way of expressing what the public felt, but the public does express itself crudely, and it is important for us to maintain our reputations with it. Hon. Members opposite must realise what they are doing if they vote for this Bill. They may excuse themselves by saying that conditions have changed since April, and that the Chancellor was completely justified in handing out large sums of money before the Election and taking them back again after it. But there is a very important principle, which was enunciated by a former Lord Chief Justice—Lord Hewart—to the effect that not only must justice be done but it must be manifest that it is done. It is clear in this case that it manifestly has not been done.

I hope that hon. Members opposite will think well when they are going into the Division Lobbies. They are persons of considerable repute in their constituencies Perhaps I should have said that they should think before going into the Division Lobbies, and they should also think while they are in there, because by doing so we may avoid future occasions like this. Politically, they are the senior people in their constituencies. They have their Conservative associations, which contain many honourable men, who presumably regard them as people of some distinction. Most of all, hon. Members opposite have the people of their constituencies to think about. I ask them most seriously to consider what their reputations will be if they vote in favour of the Bill.

6.25 p.m.

Mr. Godfrey Nicholson (Farnham)

The hon. Member for Loughborough (Mr. Cronin) made a speech which I thought was not quite worthy of him. I am sure that his intelligence goes further than his statement that an unpopular Budget will bring about a cold class war. He is not doing himself justice when he warns hon. Members to think before they cast a vote of this importance. He is doing an injustice to the rest of the politicians, about whose repute he appears to be so anxious. I have always found that I have had the respect among my constituents which I deserve—although it may not have been very great respect. I should have thought that all politicians find the same.

I shall have no difficulty whatever in justifying my vote upon this occasion. If I did not think that the Government were right in introducing this Budget I should not merely speak against it, and vote against it; I should leave my party and work as hard as I could to bring about a General Election.

Third Reading debates are rather curious affairs. We are in a strait-waistcoat as to the subjects about which we can talk; the speeches are generally dull and have no influence upon the course of events, and one wonders why there are often so many speakers. I can easily explain my reasons for supporting the Government; they are quite simple. I believe that this Budget must be judged by one criterion, and one only. It should not be judged as to its details. I have yet to meet any hon. Member who liked every detail of a Budget, and I am not pretending that I like every detail of this one.

This Budget, above all others, however, has one great criterion or touchstone by which it stands or falls. If, in my estimation, it fell, I should leave my party. I have asked myself whether this Budget is an attempt merely to patch up or tinker with the inflationary system under which we have existed since the war, or is the first round of a battle to the death against inflation. Upon my answer to that question depends my vote tonight and my continued membership of the Conservative Party. I attach such vital importance to my answer to that question because I believe that this country, as a great trading nation, will go to its doom fairly rapidly unless inflation is curbed.

Moreover, I believe that this Government and every succeeding Government will stand or fall, when a subsequent General Election comes, by the measure of its success or failure in dealing with the cost of living. What has surprised me about the interesting and often warm debates which we have had upon this Budget is that a very large proportion of speeches have not been directed to that aspect of the matter. I speak of hon. Members on both sides of the House. In the prevailing state of our economy I cannot understand why Members have become so heated about little Committee points.

I like the kind of speech that we had from the hon. Member for Sowerby (Mr. Houghton). I do not necessarily agree with everything he says, but his speeches are always honest attempts to arrive at an appreciation of our economic position as a whole, and not in relation to one section or one party. There have not been as many speeches of that nature from hon. Members on this side of the House as I should have liked, but that is probably due to the fact that hon. Members supporting the Government are anxious to expedite the business and not waste time with speeches. That is not quite the motive of hon. Members opposite, and that is as it should be.

I have satisfied myself that this Bill is a beginning of a battle to the death against inflation, and that is why I shall support the Budget in the Division Lobby tonight and have no hesitation in justifying my actions before my constituents. This Budget is intentionally a very shrewd first blow against inflation. It has convinced the world outside this country that the Government are seriously attempting a remedy and it is beginning to convince the people within the country.

I am sorry that I have to agree with my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) that the country is more or less indifferent to the Budget. I would far rather see deep feeling aroused either for it or against it. I do not believe that the country is yet ready for the full measures that will have to be taken to deal with inflation. They will be painful, hard, and unpleasant, and call for sacrifice all round. But I cannot develop this theme, or I shall be called to order.

I repeat that one test that every hon. Member should apply to the Budget is, "Is it an effective step against inflation? Is it a first step in an all-out attack?" As a Conservative, I say that this Budget is proof that my own party puts first in its economic aims the achievement of stability. Because I believe that, I shall vote for the Bill.

6.32 p.m.

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

A lot of time has been spent in the last few weeks in discussing this Bill, and especially Clause 1. Reviewing what we have done, I think Clause 1 has been something of a red herring to keep our attention occupied while other measures which have been brought into operation outside the House have been "carrying on the good work," shall we say?

I am not saying that I do not wish the Chancellor of the Exchequer success in his efforts against inflation. I hope that he succeeds and that when he comes to his normal Budget in April next year he will be able to say to us, "I told you so," because the measures he has brought in will have done the trick. According to our interpretation of what is going on and the experience that we get in our own businesses, we must assess and put honestly to the House of Commons what we think about the Budget.

I am in the woollen manufacturing business, as probably many hon. Members know, and I will ignore the politician element for a moment. I was interested in what the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) said to the effect that the House of Commons has increasingly less effect on the economics of the country. I take it that that was what he meant. Let us think practically about it, and ask a couple of questions of the Chancellor of the Exchequer, shall we?

If the autumn Budget has been brought in to damp down expenditure on consumer goods—I make consumer goods—how is it that little attention has been paid to the formula by which indirect taxation is imposed on the goods that manufacturers of consumer goods supply?

Let me put it more simply. Presumably the tax on woollen goods is to influence me as a manufacturer to export more.

On made-up cotton goods there is a tax of 5 per cent. On made-up woollen goods there is a tax of 5 per cent. and, in addition, a tax of 10 per cent. on goods sold by the yard. There may be a reasonable explanation for that, as I have read twice that the Chancellor said that it would be administratively impossible to control the situation vis-à-vis the small, unregistered traders. I suppose they are the unregistered tailors. Many of my hon. Friends have said, "Away with the Purchase Tax and a retail sales tax," and so on, but for a long time to come the Government of the day, whichever party may be in office, must have a sales tax or the Purchase Tax as a weapon in the armoury of the Treasury against inflation.

It is a question of marrying-up the regression of a sales tax, which hits, unfortunately, people who are not in the general swim and able to exert influence on other folk to raise their wages, as distinct from those who, as soon as there is a threat to their cost of living or the amount of money they have to spend, can immediately exert political or economic pressure. The difference between cotton and wool is the difference between 5 per cent. on made-up cotton garments, and 10 per cent, on the cloth sold over the counter. Having got agreement, I hope, from the Government Front Bench that producing more exports is the sort of influence that this tax will bring to bear, let me examine the position.

I looked up the record of the wool trade in exports. The exports to the U.S.A. of textiles from the United Kingdom amounted, in all, to 191 million dollars.

Mr. Osborne

When? Last year.

Mr. Rhodes

Yes, in 1954.

In comparing industries to see which is more valuable to the economy, we see for instance, that the export of spirits amounted to 73 million dollars. We have often heard in this House from the hon. Member for East Aberdeenshire (Sir R. Boothby), who has just left the Chamber, of the virtues of Scotch whisky. The woollen industry tops the lot in individual items. In point of fact, only two commodities imported into the U.S.A. beat our woollen cloth, and they were from Canada. One consisted of wood and things made out of wood, and the other of nickel; but they are not in the sterling area.

I then had the textile element of 191 million dollars broken down, and I was given the following figures: cotton yarn, 6 million; cotton manufactures, 17 million; jute and jute manufactures, 5 million; flax and hemp and manufactures thereof, 23 million; raw wool partially processed, woollen yarn and all other woollen manufactures, 122 million dollars. The rest consisted of a collection of sundry fibres.

If any industry needed discipline and impetus in the way of a Purchase Tax imposition so that it would export its goods, surely it was the cotton industry, because during 1954 it exported goods worth only 23 million dollars. So on what basis did the Treasury impose the 10 per cent. tax on woollen cloth sold over the counter? The truth is that the Treasury does not know. We should like to know what formula it used in imposing a tax to produce a given effect in terms either of damping down purchases to stop inflation or of stimulating production to achieve greater sales abroad. Let us have the answer. We have not had one so far.

The absence of an answer to that question tonight will, without doubt, reveal what a small amount of economic information the Government has compared with the amount of commonsense information which should be applied to our economy, whether the Conservative Party or the Labour Party is in office in the future. We may differ on political matters which also effect our economy, but there is no difference of opinion anywhere in the House about the desirability of getting the best information about the measures that we can take to promote full employment, and what I am talking about is the economic information necessary to maintain full employment.

Having in mind the effect of Purchase Tax on the economy as a whole, and particularly the industries which must be directly affected by it, I should like to know what the Government's view is on the effect on capital investment in the industries concerned. Let us look at that problem for a moment. I hope we may be given an answer. If it is the ambition of industry to manufacture good articles at prices which will stand competition at home and abroad, the one thought that must be in the forefront is how industries are to spend their money so that their capital investment has the biggest effect on the price of their goods. I agree that that is elementary and a platitude, but it is worth considering for a minute.

I go back to personal experience. My factory has been able to take up the last three wage increases and the last two increases in the cost of coal without increasing the prices of its manufactures. I am not in a combine or monopoly. This has been done by effective measures taken in the factory, by investing capital to produce more cheaply.

The difficulty about the American and Canadian markets is to get in at all and to keep in. Those who have had no experience of going round with a bag in America or Canada ought to have a go.

Mr. Osborne

The hon. Member should tell his Front Bench that.

Mr. Ede

The hon. Member ought also to tell the Government Front Bench.

Mr. Rhodes

If they did perhaps there would not be so much cheap sneering about the few dollars that one gets with which to do it.

We can only get into those markets if we pursue a constant policy in our businesses with the object of cutting costs, but there must be a plan and a programme. One cannot mess about in a business like the Government mess about with taxation, putting a tax on woollen goods in September, taking it off in April, and all the rest of it. One cannot possibly conduct businesses on that basis.

We must bear in mind the information and general economic necessity for investment in certain specified industries. The House will have a tremendous amount to say about investment selectivity in years to come, especially when the Labour Party returns to power. There is no question that more impetus will then be given to the provision of capital expenditure for fighting for export markets than there has been while the Conservative Government have been in office.

It is necessary to obtain trade in the dollar countries, and the woollen industry is doing that. It has topped the lot, and I am very proud of it, so is it logical to impose a 10 per cent. tax on the woollen industry to give it an impetus to export? We do not need that. What we need is a clear statement on the investment side. Do the Government want us to continue with the export drive in America? You say you do not, and see what will happen to you.

Mr. Speaker

Order.

Mr. Rhodes

I beg your pardon, Mr. Speaker. There is no need for a penal 10 per cent. tax imposition. It has been traditional that we export to America. So the Government of the day must discriminate. This sort of legislation and this sort of a Budget are absolutely hopelessly out-of-date, and they should take a little notice, as the Member for Dorset, South said earlier, of the need for a new plan. What is the use of squeezing the credit of a firm which you are trying to encourage to export try this Bill? The two things—what is done inside and outside the House—have to be correlated.

I say quite definitely that this is one of the last Budgets when so little information available to the Treasury to make decisions will be tolerated. As time goes on there will have to be information available which will do the trick for any Government, whether it is composed of hon. Members opposite or of hon. Members on this side of the House, and the sooner we get to that position the better.

I ask the Government to tell the House: on what basis do we assess the amount of penal taxation to give an industry the impetus to export? On the other hand, what sort of liaison is there between what happens in this House and what happens outside the House to allow an industry to carry out an ordered investment programme?

6.52 p.m.

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

I hope that the hon. Member for Ashton-under-Lyne (Mr. Rhodes) will forgive me if I do not follow him in his argument, but I think that at this juncture in the debate it would be a discourtesy to follow him without saying that on both sides of the House we all recognise that there is a great deal of sense in what he says.

We on this side of the House must be particularly glad, if I may say so, to see that for once the authoritative voice of leadership in industry speaks from the benches opposite, even if we do not agree with everything the hon. Member said.

As I have a duty to make a criticism—in my view, an extremely important and serious criticism—of this Bill in one respect, I want to say straight away that I am not one of those who oppose the Bill, but do entirely support my right hon. Friend, and not only with my vote.

I must, first, turn to the point of criticism I have to make and deplore that we should be giving the Third Reading to this Bill while it contains a very serious defect to which I shall draw attention. As it happens to be a point of detail I must refer to paragraph (6, 1) of the First Schedule, the effect of which is to increase from 3 ins. to 12 ins.—it may sound a small point, but it has important repercussions—the width of textile fabrics on which tax is charged, and proceed to explain to the House the serious anomaly to which it will give rise.

Obviously, it is intended—and we accept it, if we accept the Bill—that fabrics within the narrow range of widths are to be taxed, as opposed to the fabrics within the broader range, which, in general, are to be free of tax. My right hon. Friend the Chancellor may not be aware of it, and I should be grateful if my hon. Friend the Economic Secretary would draw his attention to it, but there is one class of fabric falling unquestionably within the broader range whose tail gets caught in the door. I am referring to shelf oilcloth, a very important article of manufacture in Lancaster, a constituency I do not have the honour to represent but on behalf of which I wish to say a word tonight. Oilcloth, by tradition, is manufactured in a certain series of widths and that implies the existence of stocks and the existence of machinery such as printing rollers. Those widths are 11 in., 13½ in., 18 in., 27 in., 36 in. 45 in. and 54 in. All, the House will observe, are exempt, with the sole exception of the 11 in. width, which constitutes the tail caught in the door.

Let us be quite frank about this. We know quite well that the Government have to legislate on broad lines, and there are bound to be some anomalies, and any anomalies mar a Bill. But I suggest that the House would be wrong to acquiesce too lightly in this proposal. Perhaps my right hon. Friend does not realise just how serious are the results of this particular anomaly. In the first place, the 9 in. shelf is the traditional and most common width. Therefore, the 11 in. width of oilcloth is the one which finds most favour with people shopping for their houses. With the 13 in. untaxed and the 11 in. taxed at 10 per cent., the price of the two will be almost precisely identical and the 13½ in. width will drive the 11 in. width out. Therefore, there will be great waste of stocks and of money invested in machinery.

Secondly, and this is much more important, oilcloth is in direct competition with plastic, and plastic is not taxed. Therefore, we are carrying forward an inequity in this Bill which brings a very hard and unfair condition to bear on one section of industry in competition with another. I would ask my right hon. Friend to recognise this, and I hope the House will support me in maintaining that—considerations of equity apart—it constitutes a very severe blow at a traditional industry in the town of Lancaster. I would not be in order at this stage if I were to suggest that anything might be done in this Bill to relieve this state of affairs, but perhaps I would not be out of order if I asked whether, in replying to the debate, we might be told as a matter of information whether it is possible or impossible by an administrative Measure to correct this anomaly.

I thank the House for its patience in listening to my point of criticism because, possibly, it is not a matter altogether in keeping with the tone of a Third Reading debate, but I happened to be sick and in bed during the Committee stage and I wanted to make that point.

Now, I think it is only fair for me to say that I accept this Bill, and I believe, the country generally has come to accept it and to understand what lies behind it. I think that on mature reflection the country has realised three things about it. It realises that the reason for this Bill is that the booming condition of our country is making too much demand on our resources in materials and manpower.

I think it recognises, also, that the object of this Bill is three-fold. First, it is to maintain our attack upon inflation, though it is open to debate, certainly—and, heaven knows, we have had enough—whether this or that particular weapon is the right one to maintain that attack. Secondly—I do not think that this is so debatable, and with special reference to the Purchase Tax it is certainly much less debatable—the object of the Bill is to improve our balance of payments position. Thirdly, its object is to maintain the strength of sterling, without which we cannot carry out our duties to the rest of the world.

Finally, I think that the country realises that the methods which have been employed in the Budget and this Bill, are not unfair to the consumer. Do not let us under-rate the intelligence of the consumer. On taking a sample of opinion in all sections in my constituency—whether they support me or not—I have found that the public understands that they should not take a pinhole view of this matter and see it in terms of Purchase Tax and Purchase Tax alone. It is right that the consumer should take his share because, if he does not, the burden will fall exclusively on investments, and I do not think that anyone can maintain that that would be a good thing.

Having said that, I suggest that we are entitled to recognise that the Bill is the result of an emergency Budget and that it is, therefore, right that we should have in our minds and should voice most seriously our reservations, of which I have two. [An HON. MEMBER: "Only two?"] No doubt the hon. Member for Northfield (Mr. Chapman) will supplement any inadequacies I have on that point, but I modestly voice only two.

One is a general one, but it is important and concerns both sides of the House. I think we all recognise that our present task as the House of Commons is to devise means whereby we may combat the prevailing and endemic disease of our age—inflation. As politicians, we have a particular difficulty here because we are faced with a dilemma. On the one hand, there is the danger that we may genuinely try to explain this obscure subject to the general public but fail to be understood; and, on the other hand, is the danger that we may oversimplify it and so mislead the public. I think we will find, as politicians, that it will be the test of our democracy in the years to come whether we can persuade the public, upon whose support we depend, of the merits of our proposals about inflation, whether people agree with them or not, whatever action may be taken by this side of the House—or the other, if our fortunes change—in trying to cope with this situation.

My second reservation is this. We must recognise that the action, we hope it will be effective, which has been taken in this Finance Bill to cure our inflationary difficulty is one which must in some small degree at least add to the cost of certain things. In so far as we add to the cost of anything at this stage, there is one class of our society which will suffer irremediably—that is, those living on small fixed incomes.

We may say to them, "If we do not take this action, you will suffer more as a result of the inflation that will ensue." None the less, they will suffer just a little because of the attempt at the cure that we are making; and we cannot make up to them for any single part of the suffering, however small it may be, which we impose upon them in the process of seeking for a remedy. We ought to realise that the real victims of this whole situation are those who are living in retirement and on fixed incomes. In history one cannot get away from the fact that there is always someone who gets the muddy end of the stick.

Mr. E. G. Willis (Edinburgh, East)

It is always the poor.

Mr. Iremonger

The hon. Member says that it is always the poor. That is a slightly unworthy remark.

Mr. Willis

It is true.

Mr. Iremonger

The hon. Member, with his broad perspective of history, will, I think, recognise the justice of this analysis. It might well be maintained that in the supremacy of Whig industrialism, it was indeed the poor under-protected wage earner who suffered—and nobody on the Tory benches will blush at that either.

But if we are to recognise that the victims in the nineteenth century, upon whom, let us face it. our prosperity today is based, were the employed, we must equally recognise that they are today in a particularly privileged position—no one would wish it to be otherwise—owing to the power that they have through the power of the trade unions. Nobody would grudge it to them. I merely say that in every period of history, someone gets the muddy end of the stick. Those who got it in the last century are not getting it now, and it is only fair to recognise just who is getting it now. In an inflationary situation it is those in retirement or living on small fixed incomes—the sort of people who did not get the muddy end of the stick in the nineteenth century—who get it.

Therefore, on their behalf, we should say to my right hon. Friend that we recognise the thought behind these proposals, for I am one of those who is prepared to support my right hon. Friend, but we are bound, at the same time, to express the hope that the cure works. If it does not, and if this happens again, those who suffer now will suffer again, and they are the ones who today have the least effective weapons with which to fight.

We should support the Bill and give it a Third Reading—on this side of the House, at any rate—not from any motives of blind loyalty, but with reasonable faith in my right hon. Friend the Chancellor of the Exchequer, for whose skill the country has reason to be grateful and—I observe with regret that there are no Wykehamists at present on the Front Bench opposite—in whose integrity we have absolute confidence.

7.5 p.m.

Mr. George Chetwynd (Stockton-on-Tees)

I find it hard to believe that the hon. Member for Ilford, North (Mr. Iremonger) really supports the Bill, for he did not seem too happy about the support he was giving to it and the reservations he was making. I also found it difficult to follow his thesis that it is a privilege for people to work these days and to be protected by trade unions. I should have thought it was a normally accepted right that the worker was fully entitled to possess.

The other point I want to ask at this stage is whether this Finance Bill was really necessary. We have had it with us now for a considerable time. I am quite certain, from the attendance of hon. Members opposite and from their speeches when they have intervened to make them, that it is clear that many of them do not think that the Bill was necessary and that many of them would rather have done without it.

Squadron Leader A. E. Cooper (Ilford, South)

The hon. Member refers to the attendances of hon. Members on this side of the House. It is fair to point out that there are at the moment more hon. and right hon. Members on this side of the Chamber than there are on his own side.

Mr. Chetwynd

That is a powerful argument for supporting the Government, I must say. If we recall the very thin state of the ranks of the Government throughout the Committee stage, the whole point I was making is amply borne out.

Mr. Raymond Gower (Barry)

The speeches from the other side were so boring.

Mr. Chetwynd

One hon. Member opposite tonight made the excuse that the reason why Conservatives were not speaking on the Bill was that they wanted to expedite business. The real reason, I think, was that they had been told to keep quiet, otherwise many of them would have been voicing their objections to the Bill.

What we must decide at this stage is whether the Budget which introduced this Bill was a panic Budget, as I think it was, or whether it was a natural consequence of the blatantly political Budget which was introduced last April. Its purpose has been adequately described by most speakers as being, first, to deal with inflation; secondly, to increase exports; and, thirdly, to cut down imports. We would like at this stage to have some information as to how the Bill is improving our balance of payments position. If we could be given some information in the Government winding-up speech, it would be very helpful.

It seems to me that the Government have been labouring under two inherent contradictions between the two main objectives of the Bill. At one stage, we are told that the Government's object is to cut down consumption so that more goods can go for export and fewer essential materials will be imported at the cost of dollars. The truth is that the people who have the money will go on spending that money on all the nonessentials whose purchase we are supposed to be deterring. As far as I can see, there has been no sign whatever that people of that kind have been deterred by the extra Purchase Tax from making those purchases, and they will still go on making them.

Are people to have their excess purchasing power sucked up—I believe that that was the elegant expression used by the Financial Secretary—by the increased Purchase Tax? Here again, we are in the dilemma that the Purchase Tax falls mainly upon essentials; and whether people want to stop buying or not, most of them have to purchase these articles because they are necessary. Once again, will the Government please tell us at this stage whether they want to stop people from spending or whether they want to encourage people to spend so that they can have less to spend on other things? I agree with the hon. Member for Ilford, North that these tax increases and additions will hit hardest those who are least able to bear them.

In his speech today, the Financial Secretary made great play with the fact that the additional cost to the household arising from the Purchase Tax on essentials would be only 3½d. a week. There was an Italian film the translation of the title of which was, "Twopence worth of hope." For many families in this country this Budget is threepence-halfpenny worth of despair. Let the Chancellor make no mistake about it. He said that 3½d. is not a very big sum, but it has to be added to all the other different cost increases which have taken place during the administration of this Government, and altogether they amount to a fairly substantial sum. The Bill may prove for many families to be what the last straw proved to be to the camel's back.

We cannot view the proposals in the Bill in isolation, and the question we have to ask is, where the surplus purchasing power is which the Chancellor wants to suck up. I cannot find anybody in my constituency who says, "I have too much money. Please take it away from me." Most people in my constituency complain that they have not enough money. So we must ask ourselves where is this surplus purchasing power the Government are trying by this Measure to suck up.

The Financial Secretary said the Bill was designed to make people pause to think. He painted a wonderful picture of people clashing up Regent Street to purchase things before the increased Purchase Tax was put on them. It seems to me that people are pausing to think in the middle of Regent Street, because it is almost impossible to get through the traffic there these days. However, people are pausing to think. What are they thinking? What they are thinking is not any good of this Government.

Coming to the House today I overheard a conversation between two ladies on the bus. One said to the other, "I really cannot manage any further. I have had to ask my husband for another 10s. this week to buy essentials." Her companion asked, "What did he say?" I cannot repeat exactly what he said, but it came to this, "How can I give you another 10s. this week? Where am I going to get it from?" His wife told him how to get it—by asking for a rise in pay at work. Whereupon, she said, her husband replied, "How can I do that? I am not in the kind of job where I can get an increase."

An hon. Member opposite talked about fighting to the death against inflation, and said that this Bill was the first blow being struck, and that he would support the Government because this was the first blow against inflation. It seems to me that the Government have cut their own throat with this first blow, because the Bill will bring about the very inflation it was designed to prevent. It will bring it about by causing increased demands for higher wages. The Bill is bound to have that effect. That is perfectly clear, and no one should say that, because we on this side say that, we are inciting wage demands. We are simply stating what is a fact, that those wage demands will be made.

Considering the details of the Purchase Tax, I think that the present Chancellor will go down to history as the dustbin Chancellor. In view of the wholesale criticism that has been made of the Bill, in view of the patent lack of support and enthusiasm for it among his hon. Friends, I should think it is high time it was put into the dustbin and taken away.

People are talking about the "three bees" of the Treasury—Butler, Brooke and Boyle—because they have been so busy looking round in the Treasury hive for things which they could tax. The Financial Secretary said today that it was unfair not to put tax on essential goods, as some of them already bore tax. I should have thought that, because some of them were free of tax, the best thing to have done would have been to have taken tax off all. But no, the Chancellor says that because some bear tax all must bear tax, or nearly all.

It seems to me the Bill will not succeed in its main objects. Meanwhile, the Chancellor has entered into the silence which precedes his next Budget statement. Between now and next April his reply to any suggestion we may make to him will be the time-honoured phrase that he cannot anticipate his next Budget statement. All that I can hope at present is that the Chancellor will not have an opportunity to make another Budget statement.

7.15 p.m.

Squadron Leader A. E. Cooper (Ilford, South)

It must be very unpleasant for the Chancellor of the Exchequer, and, indeed, for any Minister, to have to sit through nine days of debate on a Budget and hear a great deal of criticism from his own benches, but it should be pointed out very clearly that the criticism from these benches has been entirely different from the criticism which has been levelled against the Budget from the benches opposite.

Some of us feel that the thinking about our economy has to be started afresh. We have pointed out during these debates that from the end of the war until the present time, as our production has fallen behind our demands, one Chancellor after another has found the same remedies to deal with the ensuing inflationary situation. I have pointed out myself that this remedy has always succeeded temporarily, but that, after a little while, we have found ourselves caught up again in this same merry-go-round of increased taxation in an attempt to suck up the surplus spending power.

I should like to hear an argument from the Economic Secretary in justification of this policy, but I cannot believe that it can possibly be right or helpful to our economy that we should have some products carrying a tax burden of 30 per cent., others a burden of 60 per cent., others a burden of 90 per cent. That must distort the economy. I am consistent in my argument for I have been saying that ever since I have been a Member of this House. It is all very well for the hon. Member for Stockton-on-Tees (Mr. Chetwynd) to talk about reducing taxation, but once upon a time the hon. Member sat on these benches when Amendments to reduce Purchase Tax were moved from that side of the Chamber, but he then always supported his own party.

We really have to think again whether Purchase Tax at these fantastic levels is right. The Chancellor, in presenting his Budget, said that the situation we had to correct was, as we all knew, an inflationary one, and I think we must address ourselves to the argument whether to increase taxes still further does what the Chancellor wants. There is a very powerful school of economic thought in this country, a school one can see growing if the technical Press is anything to go by, which supports the view that increasing taxation is itself inflationary and that what we need is a policy of reduced expenditure which in turn will bring about reduced taxation.

We have heard a very interesting speech, full of common sense, by the hon. Member for Ashton-under-Lyne (Mr. Rhodes), and I would say, as he said, that many of those gentlemen who tell us to go out and about and sell our goods ought to go to America themselves and try to sell. They would find, when they came up against the harsh realities, the facts of life rather different from their theories. The economic facts of live are not all learned out of a book. Far too many people in this House bring their theories before us and tell us how life can be ordered, but theories are often divorced from the realities of the harsh world outside.

Mr. Houghton

Would the hon. and gallant Member give us the benefit of his own experience?

Squadron Leader Cooper

I would not presume to do that, but I could give quite simply one or two instances of how the Treasury, not only under the present Chancellor but under previous Labour Chancellors, has not been helpful to British industry. However, I should be very much out of order if I were to embark on that subject at this stage.

I believe in much of what the hon. Member for Sowerby (Mr. Houghton) had to say in what I thought was one of the most constructive speeches made in this long series of debates. We have to accept the basic fact that the whole of the prosperity of our country, the whole of our social services and everything we have, come to us out of the proceeds of industry and in no other way. But to listen to some hon. Members opposite, one would imagine that industry was a general mulch cow out of which one could draw anything whilst giving it very little to live on. The present level of company taxation is excessive and the method of taxation is wrong.

I am not trying to make a party point, and I should like hon. Members to consider this matter objectively. We should accept the basic fact that we depend on industry for everything we have.

Mr. John Rankin (Glasgow, Govan)

On labour.

Squadron Leader Cooper

I include that in the all-embracing term "industry." If we accept that basic fact, we must ensure that industry is left with the money which it needs to re-equip itself. This is where I find myself up against the policy of the Chancellor in this Budget. It is true, of course, that in the past year the amount of investment in new development has been very heavy indeed. I think that it could have been controlled rather better than it has been controlled.

Mr. Donald Chapman (Birmingham, Northfield)

"Controlled"—that is a naughty word.

Squadron Leader Cooper

It is fundamentally wrong that we should stop investment in industry at present.

Mr. R. A. Butler

We are not stopping investment.

Squadron Leader Cooper

I mean slowing it down to an extent which may make difficulties for us in future. Chancellors have always tried to reduce consumption by adopting almost a Canutelike attitude to the situation. I believe that the people's demands will continue to increase no matter what we do in the House. The rising standard of living will in itself ensure that that will be the case. Since that will be accompanied by an increase in imports of raw materials to satisfy consumer demands, it will mean a great emphasis in turn on exports and we shall find ourselves once again in the same position.

If the analysis is correct, we should be seeking at present not to curtail consumption but to see how we can increase productivity. The Budget and all the Government's economic measures must be judged against that one fact. Do these measures tend to increase production and will they give us what we need to satisfy rising demands at home and increasing export demands?

The result of the new thinking which I hope will come in due time will be to the effect that reduced taxation is the objective towards which we must strive. Whichever way we turn in the argument we face certain risks. If we adopt the Chancellor's policy of increasing Purchase Tax and other taxation, I believe that that in itself will be inflationary. I believe that the whole weight of the Budget is inflationary and in turn will bring about greater demands for wage increases. If we go the other way and reduce taxation we again create an inflationary situation, because we give money to consumers which the Exchequer may think they ought not to have. I ask the Government to consider which is the lesser of these two risks. I believe, as I think many people are beginning to believe, that a policy of reduced taxation is the safer road for this country to tread.

7.26 p.m.

Mr. John Rankin (Glasgow, Govan)

I believe that when the hon. and gallant Member for Ilford, South (Squadron Leader Cooper) said that everything came from industry he had the approval of everyone in the House, but I felt that when he used those words he was rendering the thought in somewhat different language from that which would have been used from these benches. It passed through my mind that if on Sunday last the hon. and gallant Member had visited a Socialist Sunday school in his division he would have learned that one of the precepts taught there was that labour is the source of all wealth. I believe that the hon. and gallant Member agrees with that precept but prefers to render the truth in somewhat different language.

The hon. Member did so because it was his intention to appeal for the reduction of company taxation, whilst the Chancellor is taking the other course and applying increased taxation to those who actually produce wealth and increase that productivity which I agree the country needs. That is the real solution to the difficulties facing the Chancellor. His is the problem of securing increased productivity from those on whom we are imposing the taxation and who are the source of all wealth, and bringing that production into line with the purchasing power that is prevalent throughout the country today.

So many bits and pieces have cropped up in debate today that I hope I shall be pardoned if I refer to one or two of them. It was worth while noting that the hon. Member for Scarborough and Whitby (Mr. Spearman) said, that the Chancellor ought not to be tied merely to the production of one Budget per year but that he should bring in a Budget whenever he felt it necessary.

Mr. Deputy-Speaker

We are limited on Third Reading to what is in the Bill.

Mr. Rankin

I am very sorry, but I thought that if the hon. Member for Scarborough and Whitby could make the suggestion, which was made without any criticism from the Chair—

Mr. Deputy-Speaker

I heard that speech and I intervened in the course of it.

Mr. Rankin

My recollection is that when you intervened, Mr. Deputy-Speaker, you did not do so at that point, because I was drawing attention to the fact that while the hon. Member for Scarborough and Whitby seemed to fear that you might intervene you did not actually do so. However, I accept your Ruling and leave the matter at that. Perhaps, however, we may hear more later on about that interesting suggestion.

I listened to the Second Reading debate and endeavoured to speak on it. I sat through nearly all the stages of the Committee examination of the Bill and also the Report stage. Now I am beginning to wonder what the Government proposals mean. Earlier today the Financial Secretary told us that they did not mean anything so far as Purchase Tax is concerned. Taking the total amount which is being extracted from the community by way of Purchase Tax, he said that the average amount per household was only 3½d. as a result of the changes which had taken place in the Finance Bill between its introduction and Third Reading. So this 3½d. per household will not do the things we were told that it would do. It will not reduce the determination of people to continue spending as they have been doing. The Budget seems to have failed before it has even passed through the due processes necessary in this House. It was meant to reduce spending to some extent, yet the Financial Secretary tells us that the cut is so small that nobody will notice it, and of course we have proof of that.

When I was at home over the weekend the central streets of Glasgow were almost impassable through the multitudes of people who were seeking to spend money last Saturday morning and afternoon. They were not conscious that there had been any change in their financial position. As we have been told from the Treasury Bench, the 3½d. has had no effect on public spending at this time. We are told in the Press that perhaps this Christmas and New Year will see a greater spending festival than any other Christmas and New Year within recent times, despite the fact that this Government, through the Chancellor, have increased Purchase Tax.

It makes me wonder what the 3½d. per household really means. Has the public thought more about the £75 million than about the 3½d.? As my hon. Friend the Member for Sowerby (Mr. Houghton) asked, has the effect been more psychological than material? Has the £75 million gripped the minds of people and thus appeared as a tremendous demand which the Government are making on the spending public and has the 3½d. passed completely unnoticed?

Yet the result may be serious because in today's Press there is a demand for increases in wages to the extent of £30 million as a result of the psychological effect of this Bill on our working classes. They do not think anything about the 3½d. but they think a great deal of the £75 million, and so already three unions alone are asking for a £30 million increase in wages.

After all that the hon. and gallant Gentleman the Member for Ilford, South has been saying tonight, I wonder why he supports the Government and sits on the benches opposite? He gave us Socialist Sunday school precepts, of course in modern Tory terminology, but nevertheless founded on the things that are taught in Socialist Sunday schools. So he agrees to tax the producers while pleading that the entrepreneur should be let off with a smaller tax on his income. I suggest that, as a result of the policies which the Government are pursuing in this Finance Bill, they will heap up far more troubles for themselves in the future than they can hope to cure by the fiscal methods they are now employing.

I wonder if the £75 million is a facade, a financial smoke-screen which the Government are creating so that all over the country and in this House we think in terms of Purchase Tax and perhaps fail to observe the real policy which they are pursuing, the dangerous policy? Here, Sir, I crave your indulgence for a moment or two, not to embark on a discussion of the point but to allow me to use an illustration.

Mr. Deputy-Speaker

I hope the hon. Member will not warn me beforehand that he is going to use an illustration which has no relevance to the Third Reading of this Bill.

Mr. Rankin

It has complete relevance, but I am using it purely as an illustration. I am wondering if this Purchase Tax is a facade on which the Government are concentrating attention, not only within the House but outside, in order to hide the menace that lies in this Budget. I take the example of Glasgow which was the first local authority to go into the stock market for a year in order to raise £5 million for 13 years—

Mr. Deputy-Speaker

Order, order. I have heard the hon. Member use that illustration in Committee and it has no relevance to this Third Reading debate.

Mr. Rankin

I am not very good at getting round the Chair, Sir, and if you rule me out of order, I do not know what to do. I was not going to say much, I was only pointing out that Glasgow went into the money market but failed to get what it wanted. That might be a warning of what will happen to other local authorities. If Glasgow had not got that money, unemployment might have followed—

Mr. Deputy-Speaker

Order, order. The hon. Member is now using the illustration.

Mr. Rankin

I have finished with it, Mr. Deputy-Speaker, but the real danger is that unemployment may arise from that source. That is why my hon. Friends and I have repeatedly said that the Bill may produce unemployment. I am sorry that I cannot develop my point further.

Finally, I want to make a plea. I hope it is not too late, because it concerns something which still remains in the Bill, a tax which I sought to remove in Committee. I am pleased that children's cots are free of tax, but a child's cot is of no use to anyone unless it contains its little mattress, pillow, blanket, sheet and quilt.

Squadron Leader Cooper

And the child.

Sir Frederick Messer (Tottenham)

Is there any Purchase Tax on the child?

Mr. Rankin

Of course there is tax on children. The Government are making the cost of living so dear that they may, as a consequence, limit the number of children brought into the world. We are grateful to the Government for not taxing the child's cot, but it is completely wrong that tax should be applied to the pillow, the mattress, the quilt and the sheet, without which the cot is useless. I know my hon. Friends agree with me that this should be remedied, and I hope that all hon. Members opposite will also agree. As long as this provision remains in the Bill, I hope we shall all strive to remove it.

I do not understand the Government's attitude in trying to make us believe that a cot is free of tax while all the things which are necessary if it is ever to be brought into use are still taxed. In those circumstances, one cannot say that the cot is really free of tax. I hope it is not too late for the Government to make what one of my hon. Friends described as a harsh and unjust Bill a little less harsh and a little more just by removing this iniquitous tax upon our children.

7.44 p.m.

Mr. Cyril Osborne (Louth)

I sometimes wish that we had in this House the same system as exists in another place, where the Members have some idea when they will be called upon to speak or whether they will be called. The longer I am in the House the greater I find the strain of sitting here not knowing whether or not I shall catch your eye, Mr. Deputy-Speaker.

The hon. Member for Govan (Mr. Rankin) said that the central streets of Glasgow were crowded with people bent on spending and that the Budget had not deterred them at all. If it is true that they have so much money and are so bent on spending it, that is a great tribute to the Government for having put them in possession of so much money to spend and for having filled the shops with goods on which they can spend their money.

Mr. Rankin

Will the hon. Gentleman give way?

Mr. Osborne

No.

Mr. Rankin

That is unfair. The hon. Member has misinterpreted my point.

Mr. Osborne

The hon. Member also said that the Budget had given rise to wage demands totalling £30 million. I think that the hon. Member for Sowerby (Mr. Houghton), who knows more about these affairs than either the hon. Member for Govan or myself, would agree that those wage demands would have been made even if the Budget had not been introduced.

The hon. Member for Stockton-on-Tees (Mr. Chetwynd) asked whether the Bill was necessary. We ought to try to answer that question. Looking at this side of the House, one would not say that the Bill is one which is likely to save the national economy. Looking at the Opposition benches, one would not believe it to be an act of great social injustice. There is as little interest in the Bill in this House as there is outside.

Mr. Rankin

There is far more interest in it on this side of the House than there is among hon. Members opposite.

Mr. B. T. Parkin (Paddington, North)

There was more interest in the Bill during the Committee stage, when the hon. Member for Louth (Mr. Osborne) was not here. Was he abroad?

Mr. Osborne

It happened that I had to go into hospital for an operation. Perhaps the hon. Member will withdraw that remark.

Mr. Parkin

Certainly. I am glad to see the hon. Member restored to his usual health.

Mr. Osborne

The hon. Member should not sneer about my going abroad for holidays when I was actually in hospital. If hon. Members opposite talked only about what they understand they would keep quiet.

It has been said that this Bill was designed to cause people to pause and think. If the Bill has been unjust, as hon. Members opposite believe, and has caused people to pause for only one week, I am informed that the saving represented by the cessation during that week of the purchase of goods affected by the Bill amounts to about £12 million. Therefore, if the Bill has, as hon. Members opposite suggest, shocked people and caused them to pause from buying, it represents a saving in a month of £50 million. If it were possible to assume, which I doubt, that that £50 million saving on purchases at home could be sent abroad, it would do the trick that the Budget seeks to do.

However, the trouble about the Budget is that it is only part of a bigger policy—on Third Reading we cannot discuss the remainder of it—that my right hon. Friend is following with his credit squeeze, and so on. The hon. Member for Ashton-under-Lyne (Mr. Rhodes), who spoke so well, said the Budget had been produced to keep the House quiet while the other measures which the Chancellor was pursuing were quietly carried through. He had the good sense to add that he hoped the Chancellor would succeed. I hope so, too, because if the policy of checking inflation does not succeed by means of the Budget and the other steps the Chancellor is taking, it will be the poorest of the poor who suffer most. There is no denying that. Above all, it is the old people and the people on National Assistance and pensions who will feel the inflation hardest.

I would put it to hon. Gentlemen opposite and to the Chancellor that we do not generally realise how very little control what we in this country do has upon inflation. We import the whole of our raw materials and 40 per cent. of our foodstuffs. They are factors in this great problem of inflation. Nothing that this Bill can do can affect the price of our imports, and they, I believe, are a more important factor in the inflationary movement than is generally realised. I should like to know whether we can be told to what extent the forces in inflation will be affected by this Bill, and how much of the inflationary force that is affecting our economy lies outside our own control. That is a factor, and I should like to know what it is.

Before we can really judge whether these measures will control inflation—and it is only a matter of checking them, in my opinion, since the world movement is towards greater and greater inflation; there is no hope of our reversing—

Mr. Deputy-Speaker

The hon. Member is quite in order in discussing how the Bill will affect inflation, but other factors are outside the scope of the Bill.

Mr. Osborne

I realise that, Mr. Deputy-Speaker, and I will not trespass against your Ruling, but I think you will admit that we cannot visualise how far this Bill will affect the whole inflationary force of the country without knowing how much of the inflationary force is affected by outside factors, and I think that information ought to be supplied to us by the Treasury.

Mr. Deputy-Speaker

No doubt it can be supplied on a proper occasion, but do not think that it can be supplied on Third Reading.

Mr. Osborne

Then I will pass to this. The hon. Member for Stockton-on-Tees asked: "Is this Bill necessary?" As I understand, we are very much in the same position as we were in 1949. Then we were importing too much or exporting too little to pay for our imports. It is as simple as that. Because we were doing that, there was a steady fall in the confidence of the foreigner in our currency. I would remind hon. Members opposite that in 1949 we had to devalue our currency, and that was a tragedy for this country—a great tragedy. In July and August of this year there were rumours in America and on the Continent that we were going to devalue the £ again. I think that that is absolutely relevant. Mr. Deputy-Speaker. This Bill is one of the steps which the Chancellor is taking to scotch the rumours which would do such great harm to our economy and standard of life. Surely I am entitled to give these reasons why I support the Bill.

At that time forward sterling rates had slipped a good deal below 2.80 dollars, and if they had been allowed to slide still further we should have been forced to do what the Labour Government did in 1949—devalue our currency—and that would have been a tragedy. This is one of the Measures taken against that possibility, and because of that I support it. I should have thought that hon. Members opposite would have done the same.

The best speech that I have listened to so far—and I think that I have listened to them all—was that of the hon. Member for Sowerby. I should like the Economic Secretary to listen to iris plea, because I want to reinforce it. This Bill cannot be successful unless its aims and objects have the support, as he said, of outside forces. These outside forces, of course, although he was too modest to say so, are the T.U.C., of which he is so distinguished a member.

The hon. Member for Sowerby said that if the Government were claiming the support of the T.U.C. for Measures like this they had to convince the workers that what was being proposed was fair. It is no good bringing in a Bill like this and talking over the heads of the workers unless we explain to them why we are doing these things. I beg my hon. Friend to do whatever he can in the coming weeks to see that the reasons this Bill has been introduced, why it was necessary, and what effect the Government hope that it will have, are fully explained and fully understood. Unless that is done, it is unreasonable to expect right hon. Gentlemen opposite and hon. Gentlemen like the hon. Member for Sowerby, with his colleagues on the T.U.C., to support this policy. We have to go a long way to educate the masses in what we are doing and why we are doing it.

Sir F. Messer

The hon. Member will have to go a long way to go where the workers want to send him.

Mr. Osborne

I will not bother about that.

One hon. Member opposite made this important point, which I should like to support. He said that from a trader's point of view it was unfortunate to have a Budget of this kind. He said that it unsettles especially those who are in the home trade, it unsettles our production, and it adds to the difficulties immensely. That is true. I think that this came rather ill from the other side of the House, because we had two or three emergency Budgets when hon. Members opposite were in power. They brought them in not because they wanted to, but because they had no option, and the lesson which both sides of the House can draw from that is that there are external factors over which neither side has absolute control.

Mr. H. Wilson

The hon. Member is correct in saying that we had two supplementary Budgets. One was in 1945 to mark the end of the war, and I do not suppose that he will quarrel with that. The other was in 1947, after the convertibility crisis. Would be not agree that the reason for the 1949 devaluation was the change in American economic conditions?

Mr. Osborne

That only underlines the point which I am making.

Mr. Deputy-Speaker

I am seeking to keep this debate to the Third Reading of the Bill.

Mr. Osborne

This Bill proposes the imposition of certain additional taxes on our people, and I am pleading that the reasons why these extra taxes should be imposed should be thoroughly explained in simple ordinary terms to the people who have to pay them. I was trying to make the point that the reason for the taxation is partially, if not largely, due to external factors over which this Government have no control, and over which a Government composed of hon. Members opposite, if they were in power, would have no control.

The right hon. Gentleman the Member for Huyton (Mr. H. Wilson) said that we on this side of the House were not supporting the Bill, and he jeered at us because he said that that was despite the fact that there would be jobs going because of a change of composition of the Government. I should have thought that he would have been the last person to say anything like that. At least, we have not ratted on a friend when he is in difficulties, and changed places to keep a job because the other man is going to come out on top.

Mr. H. Wilson

Will the hon. Member justify that remark or withdraw it?

Mr. Osborne

I will justify it. Previously, the right hon. Member for Huyton supported the right hon. Member for Ebbw Vale (Mr. Bevan), who is now down the sink.

Mr. Deputy-Speaker

This has nothing to do with the Third Reading.

Mr. Wilson

The hon. Member for Louth (Mr. Osborne) has made a most offensive and inaccurate statement. There is nothing to justify it, except his reading of Cross Bencher in the Sunday Express. He should withdraw that statement. If it was out of order to make it, I suggest that he should withdraw it if he cannot substantiate it.

Mr. Osborne

I do not wish to go against your Ruling, Mr. Deputy-Speaker, but it was the right hon. Member for Huyton who started this.

Mr. Deputy-Speaker

I know nothing about how this originated, but it clearly has no reference whatsoever to the Third Reading of the Bill.

Mr. Osborne

At least, I say—[HON. MEMBERS: "Withdraw."] A personal attack was made by the right hon. Gentleman and I am entitled to reply.

Mr. Deputy-Speaker

I have just said that this is nothing whatever to do with the Third Reading.

Mr. Osborne

Very good, Mr. Deputy-Speaker. I will close by saying—

Mr. Sydney Silverman (Nelson and Colne)

On a point of order. The hon. Member for Louth (Mr. Osborne) may have been dealing with a subject with which he had no right to deal, but in the course of what he said he made a personal attack upon my right hon. Friend. He based that attack on what he no doubt believed to be the facts, but which my right hon. Friend has repudiated. In those circumstances, the charge having been made and not having been substantiated, should it not be withdrawn?

Mr. Deputy-Speaker

If it were a personal attack, certainly it should be withdrawn. The hon. Member for Louth would be well advised to withdraw a personal attack.

Mr. Silverman

I do not know whether you heard the words or whether I heard them correctly, Mr. Deputy-Speaker, but I thought that the hon. Member for Louth said that my right hon. Friend had ratted on a friend.

Mr. Deputy-Speaker

That is an expression which the hon. Member should withdraw.

Mr. Osborne

On your instructions, Mr. Deputy-Speaker, I unreservedly withdraw it. If I may be allowed to say so, I have always understood that free speech has been allowed in this House and that when an hon. Member is attacked he is entitled to reply.

Mr. Deputy-Speaker

The withdrawal having been made, I think that we will return to the Bill.

Mr. Osborne

The last thing I want to say about the Bill is that I thought that my hon. Friend the Member for Ashton-under-Lyne really stated the case—[An HON. MEMBER: "Your hon. Friend?"]—yes, he is my hon. Friend —when he said that he hoped that the Bill would succeed. In that he stated much more fairly than did the right hon. Member for Leeds, South (Mr. Gaitskell) the opinion of the country. When the right hon. Member for Leeds, South spoke recently, he indicated, if he did not say it outright, that he hoped that the Bill would lead to further wage demands than would have been made had the Bill not been presented. That was one of the worst things I have ever heard him say. I shall support the Bill because it is part of the policy which the Chancellor is pushing through. I support it because I am certain that the Chancellor knows that in so doing he is making himself extremely unpopular, and it takes courage for an hon. Member to do that. I hope and believe that the Chancellor's efforts will succeed and will stem inflation, because for that we shall all be grateful.

8.4 p.m.

Mr. Donald Chapman (Birmingham, Northfield)

Despite the unfortunate intervention of the hon. Member for Louth (Mr. Osborne), the debate has followed the lines of all our debates on the Bill while the hon. Member has been away ill. If he has been ill, as he says, we are glad to see him back. We always look forward to his interventions which provide a certain amount of humour and riot in the House, which we would miss if he were no longer here.

The debate has followed the line of other debates on the Bill and, indeed, we now have an incredible situation. If the Division lists for the earlier proceedings on the Bill are examined, it will be found that in any one Division there have been 20 or 30 absentees or abstentions on the other side of the House. The majority of the Government has fallen from the 70s, which is normal, to as low as 37 and regularly to the 40s. There is now the incredible situation that the country is faced with a Budget which is hated on the other side of the House.

After all, the Finance Bill is supposed to be the key Measure in any one year of any Government and we are now in the position that this Finance Bill is openly disliked by 20 or 30 and secretly disliked by perhaps 50 or 100 hon. Members opposite. It is a strange situation in which the House of Commons has been placed. It almost raises constitutional questions, because in times past, if a Government had been subjected to this sort of humiliation on important stages of their Finance Bill, the Government has been reconstructed or has resigned. Indeed, I can remember occasions in history where a lesser revolt on the Finance Bill has done greater harm to a Government than this one is admitted to have done so far. I hope that tonight we shall hear from the Chancellor about the situation.

There is not only the constitutional position. We have a situation where in the country as a whole there are wage demands totalling about £300 million a year. If they are granted, they will make nonsense of the Budget and of the Chancellor's figures. The Economic Secretary has told us often that the new impost of Purchase Tax will be about £75 million, and I estimate that present wage demands as a direct result of the Budget will be more than £100 million and will cancel it out immediately.

Mr. John Arbuthnot (Dover)

No.

Mr. Chapman

The hon. Member says, "No." He should read some of the ways in which wage claims are being stepped up as a result of the Budget.

Each time a wage demand is made it is considerably stepped up beyond what was expected and the excuse given is the Government's present budgetary and financial policies. If the total is not yet an extra £100 million, it will be £100 million before the end of the financial year.

Mr. Arbuthnot

The hon. Member is being quite frank in saying that it is an excuse.

Mr. Chapman

I am sorry if I used the wrong word. The hon. Member for Dover will not catch me as easily as that. If I did not use the word that conveyed my meaning, I will replace it and say that it was a justified reason for the demand. If that does not help to, get it straight, I do not know what will.

Mr. Geoffrey Stevens (Portsmouth Langstone)

In the Budget of April, 1951, when the hon. Member's right hon. Friend the Member for Leeds, South (Mr. Gaitskell) was Chancellor of the Exchequer, greater additions of taxation were imposed than have been imposed by my right hon. Friend in this Autumn Budget and at the same time there was a call for wage restraint. How would the hon. Member reconcile the statement in April, 1951, that there should be wage restraint despite tax increases with the suggestion now that because of tax increases there should be wage demands?

Mr. Chapman

It is, of course, the burden of my whole complaint against the Bill. The Economic Secretary and I have often talked this over and I do not want to go over the ground again. The answer to the hon. Member is simple, namely that if there is a context of general restraint in the economy, one can expect imposts like Purchase Tax to be accepted and not fought again. If now there is a general atmosphere of absence of restraint and a general free for all, no worker and no trade union leader will find himself at the end of the race. The answer is very simple. It is the difference in context of acceptability or otherwise of the Government's general economic policy to the trade union movement and the workers generally.

I really rose to say one or two other things before coming to the general point which I should like to develop. In moving the Third Reading this afternoon, the Financial Secretary made the well-worn statement that the impact of the Purchase Tax increase as a result of the Bill will be only 3½d. a week for the average family. I want to nail this one right now, because up to now the Government have got away with this nonsense about this 4d. a week or 3½d., or whatever the figure may be. If we take the average effect of the £75 million per year taxation that is to be imposed, the first qualification is that within that general figure there has been a redistribution of taxation with the abolition of the D Scheme and the imposition of a sales tax. Although it may be 4d. on average, let us look at some of the working-class families shopping in the textile markets. We have made these points before, but they bear repeating.

If we take as an example a working-class family which includes some children or teenagers, we find that the purchases amount to perhaps a shirt a week or a pair of trousers every week. The impact on that family under the present proposals does not represent a matter of 4d. a week. That is the average. But there has been a redistribution of tax from the luxury articles to the essentials. The result is that a cheap shirt selling at about 25s. shows a tax increase of 6d. where no tax was paid before, and that, of course, is counter-balanced within the Financial Secretary's figure of 4d. by a reduction of 3s. on a 50s. shirt.

Again, let us take a suit, or rather, let us take a simpler example like a pair of trousers. The sales tax on a cheap pair of trousers is now going to be 1s., 1s. 6d. or 2s. That will be counterbalanced in the average figure by a reduction in the case of the more expensive trousers of about 4s., 5s., 6s. or 7s. The Financial Secretary cannot get away with this 4d. a week stuff with us. In an average working-class family, such items as I have mentioned have to be bought every week, especially in a family where the man is employed on work where his clothes wear out rapidly or where the wife goes out to work or the family includes teenage members. Every week they will have to find some small item of clothing the increased cost of which is entirely masked by the average figure which the right hon. Gentleman gave this afternoon.

In terms of Purchase Tax, the household equipment used in a working-class home is a much more marginal matter than in a rich household. In the poorer household it is more frequently necessary to replace pots and pans and ordinary domestic small-scale household equipment. In a richer household such purchases can be laid off for quite a time, because the stocks are greater and the equipment itself may be more durable and expensive and therefore last longer. Every week, or every other week, the average working-class family must purchase some small item of household equipment which it must have, so that this impost will have a much more important effect on those families than on the richer families. I could go on like this, taking item after item in the present Purchase Tax range, and it will be seen that the impact on a working-class family is much greater than is suggested by this nonsensical average figure of 3½d. a week.

Throughout the stages of this Bill we have asked what is the Government's answer to the question of the effect of Purchase Tax on wage claims. I asked that question on at least four occasions, and I think that my hon. Friends have asked it on forty occasions; and with cowardice—I do not think that is an un-Parliamentary word—we have had no response at all from the Treasury Bench. Not once has the Chancellor dared to give this House an honest comment on the result of this Budget on wages. I do not know whether we shall hear anything new tonight. By the time we reach the Third Reading debate I begin to doubt whether we shall hear anything more of interest at all from the right hon. Gentleman. But I think the House is entitled to say that it is a fantastic situation, when the major Bill introduced in any session is discussed, and its greatest impact referred to time and again, and yet not one reply is given from the Treasury Bench. If it is not cowardice on the part of the Government, it indicates a complete admission that there is no answer, and that the Government will only make maters worse if they try to deal with the subject.

I said some time ago that the effect of the Budget would be reflected in wage demands which, if granted, would add £300 million to our wage bill, and that is indeed the situation. But it has gone one stage further now. If hon. Members read the newspapers last week they will have noted that one of the greatest of our trade unions, which so far had proved one of our biggest bulwarks in the attempt to keep restraint and steadiness in the economy, has now, belatedly—and because it was forced to do so by this Budget—come out in the open against wage restraint. I refer to the statement issued last week by the Transport and General Workers Union. The Government has cause to be thankful that, under the leadership of Mr. Arthur Deakin, that union has been one of the most statesmanlike in the whole of the industrial field. But now this union has been forced to issue a statement in these terms: During the period of the Labour Government, the T.G.W.U., in common with the trade union movement in general,"— and here is the answer to the hon. Member for Langstone (Mr. Stevens) who interrupted me— supported a policy of wage restraint, recognising the soundness of this policy in the setting of the economic policies then being pursued, and above all, the determined attitude at that time to share equitably the burden as between wages and profits. These policies have now been reversed by the Government of the day, and while it is not the wish of the council"— that is the Transport and General Workers Union Council— to chase an inflationary wage spiral, it is equally not prepared to accept the principle that the proper living standards of the members of the union shall be wholly dependent upon higher productivity and particularly so when it is appreciated that productivity in the accepted sense of the word cannot be applied to the large sections of the union membership employed in road transport and ancillary fields. The crucial part of this statement is in the first part. The net effect of this Purchase Tax in a policy of general absence of restraint has begun to force the last union, so to speak, to stand for restraint and the encouragement of steadiness in the economy, to come right out into the open against wage restraint. If the hon. Gentleman is proud of that, and if the Government are proud of it, then it is about time we heard so in the form of an honest answer to those criticisms which have gone unanswered at every stage of this Bill.

Mr. Stevens

The hon. Gentleman has referred to a very important statement. Would he be good enough to comment on that part of it which says that increases in wages so far as that union is concerned cannot be wholly dependent upon an increase in productivity? Does he agree with the suggestion that there should be no increased productivity by members of that union?

Mr. Chapman

The statement does not say that there can be no increase in productivity by members of that union. The hon. Member really drives me beyond words. The statement says that productivity in certain sections cannot easily be measured.

Mr. Deputy-Speaker

The question of productivity is not in order. What is in order here is the question of the effect of these provisions upon wage restraint, and nothing else.

Mr. Chapman

I am much obliged, Mr. Deputy-Speaker. I do not want to trespass upon the rules of order; I was merely answering the hon. Member, who has completely misinterpreted part of the statement which I have just read out. It is an attempt on his part to draw us away from the main part of the statement, which openly castigates Government policy and says that at last that union, too, must come out against it because the Government have driven it beyond all possibilities of further restraint.

The answer to the many questions which have been put by hon. Members opposite as to what happened in 1950 or 1951, when the Labour Government imposed Purchase Tax, is that the weapon of Purchase Tax is available for use against inflation only if there is a general spirit of restraint, which is recognised as restraint, and a spirit of fairness which is known to be fairness in the economy. Then, as my right hon. Friend did, it is possible to use the weapon of Purchase Tax. He did so quite successfully, with the good will of the trade union movement.

Mr. Stevens

Successfully?

Mr. Chapman

Yes. Figures can be brought to show how consumption was halted.

Mr. Stevens

What about the gold reserves?

Mr. Chapman

I am not going to be drawn into a discussion about the gold reserves: I am talking about the purchase of goods, and inflation. By contrast, this weapon is not available for use if those general conditions do not prevail.

The Economic Secretary answers our questions about how far the Budget will force round upon round of wage demands by saying, "What the Budget and the Bill will do is so to disinflate that less profits will be available. It will be less easy to make profits, and then everybody will not be shouting for wage demands, and they will not readily be conceded." The question which we desire answered is how far that disinflation has to go before it will have this effect upon the economy.

I, and many of my hon. Friends, believe that if we have full employment we shall always have a tendency to inflation. Inflation is an inevitable concomitant of full employment, and it will always be with us throughout such a period. In the circumstances, we want to know how far this Bill is intended to disinflate. If it maintains full employment, as we hope it will, it will not solve any of the problems leading to the present round of wage demands, because increased profits will continue to be made. In an economy like this there will still be a tendency towards increased profits, and even slight inflation. In those circumstances, this Bill will really not have even the effect that its authors claim for it.

Let us consider the engineering industry as an example. In 1947 its profits amounted to £129 million. In 1953 they were £291 million. In vehicles alone the profits in 1947 were £57 million, and in 1953 they were £113 million—and there have been increases since then. Does the right hon. Gentleman think that the Purchase Tax Clauses of this Bill will have any effect upon that stupendous advance of profits in the engineering industry? Does he really think that it will slow down the advance of engineering profits to the sort of rate which will discourage wage demands? Nobody believes that. The advance in profits is going on merrily at 12, 15 and 20 per cent. every year, and the measures contained in the Bill will not have the slightest effect upon those profits.

The effect of the Bill will be not that firms will sell less, but that delivery dates for exports will be advanced. It may be that more goods will be exported, and firms will not be losing business so quickly because they can promise earlier delivery. But trade will not disappear; the amount of goods sold will not disappear; profits will not decline—and the result will be that the spiralling of engineering profits will go merrily upon its way. It must be remembered that this industry is the key industry in our economy, and so long as profits in it continue to rise at that rate wage demands will follow. Does the right hon. Gentleman believe that the amount of disinflation introduced by the Bill will have an effect upon this industry such as can lead to wage restraint, because of a general reduction in profits?

Even the Government's own justification for the Measure does not stand up to examination. First, we make our charge as to the effect of this Measure, and then they countercharge with the story about its effect upon profits and profitability, which is easily exposed as bogus in large sections of our economy. Wage demands will come, and they will be settled, and once again there will be a substantial effect upon inflation.

In the 1920s our great financial and economic struggle was in getting full employment, or any employment at all. Hon. Members opposite and their supporters then said that the aggregated individual actions of individual employers would bring the optimum level of employment. I remember the Macmillan Committee and all the rest in the 1920s. It was then said, "You must not interfere. Leave the individual business man to make his decisions, and you will get an optimum level of employment." That was the great mirage of the 1920s.

The exactly parallel situation in the 1940s and 1950s is epitomised in this Bill. The great point of dispute in our economy today is whether the aggregated individual decisions of employers of labour in the matter of exports and imports, and the use of our resources generally, will give us the optimum level not of employment but of balance in our trade with the rest of the world. The existing situation is exactly parallel to that with regard to employment in the 1920s.

We say that, just as the Conservatives did in the 1920s, this Bill is abdicating the power of decision over this very necessary part of our existence to individual men, and is saying, "It will all come out right in the end if you leave it to them." We say that, just as we had to have State intervention, guidance, control, exhortation and planning in order to get full employment, so the same struggle is now on to get that kind of intervention to secure a proper balance in our balance of payments and prevent Britain going bankrupt in the way in which we used to have unemployment.

A number of Government supporters, by their opposition to the Bill—they have been opposed to it throughout—have secured that the Chancellor of the Exchequer will never again introduce a Budget of this kind. The Chancellor has managed to weather the storm of continual opposition of about 30 to 40 Government supporters openly fighting him. We now have the situation where it may be the end of the Chancellor as well as the end of his policy.

If it is that, and I believe it is, Government supporters should reflect on the remarks of the hon. Member for East Aberdeenshire (Sir R. Boothby) that the economic policy of our country could not be successfully pursued without controls of some kind, and that we had reached a stage where there had to be a mixture of the freedoms that Government supporters want and some of the controls that we want.

Mr. Deputy-Speaker

I intervened on that speech, too.

Mr. Chapman

In the debates on the Bill we have had the opposition between the so-called freedom in the Bill and our demand for alternatives. We can have a marrying of those two policies for the good of Great Britain. It may be a mixture of freedom and exhortation with a minimum of control. In the end, that will be the only way out that Great Britain will find successful.

8.31 p.m.

Mr. William Shepherd (Cheadle)

The hon. Member for Northfield (Mr. Chapman) has had another outing on the Finance Bill. Every time I came into the Chamber during the Committee stage it seemed that he was giving vent to his views. Today he has given us more, and has managed to graft upon them, with some dexterity, a Fabian lecture. I do not want to follow him in that lecture, because I should get into difficulties with the Chair.

I go with the hon. Gentleman to the extent of saying that I do not think that the problem confronting the country can be solved entirely by economic or fiscal means and that unless there is a desire on the part of the whole nation to meet the situation and deal with it—

Notice taken that 40 Members were not present;

House counted, and, 40 Members being present—

Mr. Shepherd

I was saying, when that unseemly interruption by the hon. Member for East Ham, North (Mr. Daines) took place, that it would not be possible to solve all our problems by economic or financial means without the desire of the whole community to do something to get the country out of its present position.

There are certain economic measures that have to be taken. I can understand the attitude of many hon. Members to the proposals of my right hon. Friend, but we must look at the background to the Finance Bill. I sometimes feel that hon. Members are not really conscious of the position in which we find ourselves. I do not refer only to hon. Members on the Opposition side. This may be a disagreeable Finance Bill. I do not think that it adds to the popularity of my right hon. Friend the Chancellor, but it takes place under entirely exceptional conditions. I wonder whether hon. Members have pondered how exceptional those conditions are.

In times past we have increased our production considerably. People outside tell us that we increased it at a faster rate than we are doing it today; but we have never attempted an expansion of our economy under present conditions. It is true that in the back end of the 1930s there was a rapid advancement in productivity, but it was done with a big reserve of unemployed, while the standard of living for the vast majority of the people was relatively much worse than it is today.

What are we attempting to do today? We are attempting to increase the economy while providing a very high standard of living for a large number of people. We have never attempted to do this before in our history and as far as I am aware no other nation has attempted to give this measure of full employment and this high standard of living while providing, at the same time, the measure of investment at which we are aiming.

It is against the background of this exceptional endeavour that we ought to consider the Bill, because unless we realise the exceptional nature of the circumstances in which we are operating we cannot realise how necessary is this disagreeable Bill.

Mr. Wilkins

That was known in April.

Mr. Shepherd

I will deal with that point.

I reiterate that never in our history have we attempted to provide this measure of expansion and, at the same time, maintain so high a standard of living for the majority of our people. In the past there have been periods of rapid expansion of the economy at the expense of a relatively low standard of living of the workers. When people say that this Bill is unnecessary, they are surely ignoring the fact that we are operating in most exceptional circumstances.

I agree that there are other ways of doing what the Bill does—methods other than those chosen by the Chancellor. It might be easier to do away with Purchase Tax—

Mr. Deputy-Speaker

I have been trying to prevent that from being discussed. Other methods of dealing with the situation are out of order. The provisions of the Bill as it stands are the only methods in order.

Mr. Shepherd

I did not propose to suggest alternative methods nor to digress from the rules of order. All I was saying was that there may be methods more easily applied, but they would sacrifice the freedom which the economy enjoys under the present Administration. I am prepared to accept some of the imposts which the Bill involves because I want to see a free economy. I believe that a free economy is the most vital economy and that it is essential for such a country as this.

I have listened today to the most footling arguments advanced by the right hon. Member for Huyton (Mr. H. Wilson) about the effect of Purchase Tax. Let us face this frankly; the standard of living in this country is so good on the whole that the effect of these taxes on the majority of people is insignificant.

Mr. Cyril Bence (Dunbartonshire, East)

What about the old-age pensioners and the housewives?

Mr. Shepherd

The Bill is unpopular because people are much happier in shouting their grievances than in accepting their responsibilities. I am not being partial, because we have the same sort of talk by company chairmen. It is not only the housewives who make the complaint. The company chairman complains about the increase in the Profits Tax. But they are both enjoying a prosperity which will be endangered if present tendencies continue. They are both benefiting by the economic circumstances, but complaining when any restraint is applied.

I say without hesitation that unless my right hon. Friend applies restraint to this situation, where we are enjoying a high level of investment and a high standard of living and attempting expansion in conditions we have not known before, we shall head for disaster, because we face the additional difficulty of resolving the balance of payments problem. It is not only the housewife about whom I complain, for I complain equally about company chairmen who say year after year, as their profits rise, "Dear, dear. We cannot carry on. We are almost hopelessly bankrupt"; and in the next paragraph they complain that they cannot get delivery of the capital equipment which they need.

Mr. Chapman

The hon. Gentleman should tell that to his right hon. Friends.

Mr. Shepherd

This Bill is necessary because we are attempting something exceptional in the life of our community. Company chairmen, on the one hand, and housewives and working men, on the other, have really to appreciate that something has to be done if we are successfully to conduct this experiment and get our country out of its present economic difficulty.

While dealing with the question of housewives, I wish to say a word about something else. Although we have complaints from housewives, they do not necessarily relate to the wages paid to the men. I believe that one of the reasons we have complaints about Purchase Tax is that men do not give sufficient to their wives out of the wages they earn. [HON. MEMBERS: "Oh."] Five or six years ago I wrote an article on this matter in the Star and I was astonished at the letters I received from housewives—pathetic letters in cases where earnings were very high, but the amounts paid to housewives were so low that they could not carry on. I suggest that some of the complaints about Purchase Tax would not be so definite if, as a whole, men gave their wives a proper share of their earnings.

Sir F. Messer

May I interrupt the hon. Member by asking how he justifies the fact that a utility leather sheepskin-lined jacket which cost £4 is now to cost £6? Is he aware that that industry will go out of existence?

Mr. Charles A. Howell (Birmingham, Perry Barr)

Will the hon. Member also agree that the majority of women go to work because their husbands do not give them enough out of their wages?

Mr. Shepherd

I believe that the reasons why women go to work are varied—

Mr. Deputy-Speaker

I hope that we are not going too far into these domestic arrangements.

Mr. Shepherd

I am sure that if I went into the very interesting reasons why women go to work, and the psychological reasons, I would certainly be out of order. I do not propose to do that tonight, but I reiterate that one of the reasons why housewives feel the increase in Purchase Tax is that in too many cases they are not getting a proper share of their husbands' earnings.

I want to turn to the Purchase Tax changes, because the hon. Member for Tottenham (Sir F. Messer) asked how I justified them. It is hopeless trying to justify anything in terms of Purchase Tax. It is most illogical because the whole application is bound to be arbitrary and, despite the ingenuity and sincere effort of the Customs and Excise, they are faced with an almost impossible task. I do not attempt to justify this sort of discrimination, but I think my right hon. Friend has done a good job in starting to broaden the basis on which the tax is to operate.

I know that the hon. Member for Ashton-under-Lyne (Mr. Rhodes) complained about this and produced some very partial figures about the export of woollen goods, very partial indeed. I would remind him, coming from a cotton town, that if we leave the dollar area exclusively aside and deal with cotton exports we shall find that they are not very far behind woollen exports.

Mr. Rhodes

Those are the very areas where there is a deficit.

Mr. Shepherd

That is true, but I think it is right to point out that the differential in the dollar area is not reflected in the total of world trade. I approve of these changes. I hope that it will be possible to broaden the basis upon which Purchase Tax is levied, not that I think we should revert entirely to a sales tax. I do not think that is necessary. I feel that the Purchase Tax can be used as an economic weapon, it the case of motor cars, at the present level, but as far as we can we should try to broaden the basis so that people do not ask how we justify the tax and have a 5 per cent. tax which is purely a revenue tax in its purpose.

There is an additional reason why I support the Bill. I support it because I believe that in recent years, and particularly in recent months, we have had too much emphasis on the monetary method and that a fiscal change is clearly necessary. I do not like credit restrictions and monetary methods too much. Why I prefer what is in the Bill is because, on the whole, credit restriction tends to keep the big firm continuing to progress and makes it much more difficult for the smaller firm. I hope, therefore, that my right hon. Friend will pursue the policy of dealing with this question on a fiscal as well as on a monetary aspect, because, on the whole, it is the more healthy for our economy.

I have given the reasons why I have no hesitation in supporting the Bill, although, perhaps, with one or two of the details of Purchase Tax I may have some of the reservations of other hon. Members. I reiterate, however, that the Bill comes into operation in an economic climate quite exceptional to this country and that unless we all accept our responsibilities—whether the company chairman, the housewife, or a Member of this House—this great experiment of trying to maintain a high standard of living while having a high standard of investment and expansion will not succeed.

Therefore, we ought as far as we can to push back our personal ideas. The company chairman ought not to spend three-quarters of his speech decrying the level of taxation, for at this stage, obviously, increased taxation on companies is inescapable. The housewife ought not to complain about having to pay an extra ½d. or ¾d. for a pot scourer. We all ought to realise that we are part of a considerable experiment, which we hope will succeed but which we have no certainty will succeed, and that unless everybody is prepared to exercise a reasonable degree of restraint, the objective for which both sides of the House seek will not be obtained.

Mr. Edward Evans (Lowestoft)

Did the hon. Member propound that theory before the Election?

Mr. Shepherd

I have always propounded that theory.

8.48 p.m.

Mr. Jack Jones (Rotherham)

As one who has not taken too great a part in the discussions on the Finance Bill, I should like to spend a moment or two on the major objective of the Bill. We have heard a lot about the "yawning gap" and a terrible lot about the cost of imported steel, in particular, and of coal. As one who comes from the great steel industry, I should like to talk about the effect of imported steel.

During the last 12 months, we have brought into this country some 1 million tons of American steel. When it arrives here, its cost is probably in the region of £60 per ton. If the rate of exchange is just under three dollars to the £, it looks as though we are importing some 170 million dollars worth of steel. Every dollar's worth of that steel is merged into the price of our home-produced steel. The effect is that we put something like 35s. to £2 a ton on our home-produced steel and we have to sell it back to the places from which we import the steel. It is a real fairyland of economics.

Who is responsible for the need to import this steel? The fact is that the Tory Party has never in its history planned to meet the full employment and an expanding economy with the maximum of exports. Had the Tory Party done so, we would not have needed to bring in this tremendous amount of steel from abroad.

The hon. Member for Cheadle (Mr. Shepherd) talked about people making a bigger effort. He is in good company, for some of us have been talking about a bigger effort ever since we have been Members of this House. It is no use talking to the workers of this country about bigger efforts at production while at the same time producing Bills which make them disgruntled, which cause them, after chatting at home with their wives about the increased cost of things in everyday use, to go back to work not in a mood to make a greater effort.

I am not concerned with the penny on the bucket or the 10s. 3d. on the dustbin. I am concerned with the biggest thing of all, the psychological effect of the Bill on those who do the producing. That cannot be assessed in £ s. d. In the industry with which I am most concerned, ever since the beginning of the war the men have continuously worked a working week of 168 hours out of 168 hours—every week all the year round. They have accepted various increases in production capacity, bigger furnaces and so on, and they have produced almost 1½ million extra tons of steel, with the same number of men. It is of no use to talk to those fellows about producing more.

I come from a mining and steel constituency and some of us have had the painful duty of chatting about production to our constituents who are miners. We find this attitude among them. They do not feel inclined to make the response the Chancellor wants when they see the Chancellor giving £140 million back to the big boys, as he did a few months ago, and yet, as he is by this Bill, putting up the cost of living for the wives and families of the coal miners and the steel men.

I would advise the Chancellor, if he wants to get better results from our people, to go about getting them in a different way. If he wants to get wealth, he should go where the most wealth is to be got, and, instead of putting a wholesale tax on goods which everybody must have, put the absolute maximum of tax on profits. Let him do that if he wants to bring in more money, and if the national economy is in the state in which I believe it to be. Let the Chancellor consider leaning on the speculative sharks on the Stock Exchange, rather than on the fellow in the workshop who may, possibly, be leaning on his shovel, though he ought not to be.

That is what the workers think about it. They cannot understand it, cannot argue about it, cannot put it into so many words, but that is how they view it. They cannot understand it when they see profits soaring but the demand on the housewives' purses also increasing. My advice to the Chancellor, if he wants peace in industry, and greater output, and greater harmony between all those concerned in it, is that he should stop pin-pricking the housewives and make his demands elsewhere.

The men of my own union are the most peace-loving people in the world, the most tolerant of people. They have proved it. Yet under the pressure of the economy they have had to ask for less hours and more money and, indeed, pension schemes. When those people, who are some of the highest paid workers in the country, start doing that, it is not to be wondered at if the lower-paid workers do so. If the Chancellor is not careful he will reap a return he does not expect and sooner than he thinks.

8.54 p.m.

Mr. Hugh Gaitskell (Leeds, South)

There is one thing at least on which all of us, I think, can agree, and that is that no Finance Bill for many years has been so universally condemned as this Bill has been. The Chancellor has hardly had a friend even on his own side of the Chamber. Despite this, I am sorry to say, he has made during the passage of the Bill remarkably few concessions.

It is true that the Chancellor hastily withdrew the ill-conceived attempt to slip in more power for the Treasury. It is true that, owing to the energetic advocacy of my hon. Friend the Member for Shoreditch and Finsbury (Mr. Collins), he was obliged to withdraw the tax again from shopping baskets and bags, and brushes and brooms and mops, but that was as far as he went. No, I am wrong. There was one further concession. There was the concession for the fur-trimmed slippers. I would ask the Chancellor, regarding these bootees, whether the Order which he promised has yet been made. I think that he said he was not going to make any change in the Bill for technical reasons, but he promised that he would immediately lay an Order which would reduce the tax on these articles to 5 per cent.

On the basis of the arguments, there can be no shadow of doubt that far more concessions than these would have been justified. Indeed, in my opinion and in the opinion of my right hon. and hon. Friends, on the basis of the arguments the whole of Clause 1 could certainly have been withdrawn altogether. If there is any doubt in the Chancellor's mind about the power of our advocacy, I would draw his attention not only to the number of speeches that were made but also to the very high quality of them. We have had even today, after all these many days of debate, a series of excellent speeches from a number of hon. Members. I thought that the speech which my right hon. Friend the Member for Huyton (Mr. H. Wilson) made, when unfortunately very few hon. Members were in the Chamber, was a most sparkling and effective performance.

Unfortunately, despite the arguments, we have not succeeded, because so many hon. Members opposite seem to think it perfectly natural to get up and denounce the Chancellor in the most unmeasured terms and then promise faithfully to follow him into the Lobby. We had another example of that this afternoon from the hon. Member for East Aberdeenshire (Sir R. Boothby). I expected that an hon. Member with his reputation for expressing independent views, now that the Government majority is rather larger, might at least have seen his way to come to the Lobby with us. But I am afraid that that is the typical attitude of these Tory back benchers. They are never prepared to carry their convictions into the Lobby.

It is perhaps some consolation to us that at least the Chancellor and the Lord Privy Seal and the Patronage Secretary between them evidently decided after one very ill-judged effort that, after all, they were not going to use the closure again. The whole House will recall that episode. Hon. Members will remember the Chancellor's very tough speech in which he threatened us with all sorts of dire penalties if we did not do just what he wanted.

Mr. R. A. Butler indicated dissent.

Mr. Gaitskell

The right hon. Gentleman will recall that we had an all-night sitting and that was quite enough for him. After that, it became perfectly clear that the closure was going to disappear with the Bill, which lapsed after that night. My hon. Friends can congratulate themselves on resisting so vigorously and effectively this attempt to impose restrictions on our debates.

After that episode, the Chancellor and his under-secretaries adopted different techniques. I am glad to see the Economic Secretary to the Treasury here. He has not been here most of the day. No doubt he has been doing important work. After that episode, we found the Economic Secretary suddenly starting to use every kind of blandishment. He flattered us all and told us what good speeches we were making. He exercised his quite considerable charm. Even the Financial Secretary to the Treasury, although rather grimmer in his outlook, in his vague manner, by showing his obvious incompetence at replying, almost softened our hearts at times, but I must tell the hon. and right hon. Gentlemen that we did not give way to these blandishments.

What happened simply was that the Chancellor decided to give us as much time as we wanted to discuss the Bill. That was why there was no further trouble, and that is a policy to which I would recommend him strongly to return. It is a good thing to keep the Lord Privy Seal out of this. It is a good thing to keep the Patronage Secretary locked up in his room when Finance Bills are under discussion. I congratulate the Chancellor on his determination, after that one unfortunate episode, to assert his own authority over these interlopers.

Now I turn to the detail of the Bill. There are only two Clauses in it which constitute what we usually describe as the Autumn Budget, namely, Clauses 1 and 2. The other two, Clauses 3 and 4, introduce minor changes into our legislation. I do not propose to spend much time upon them, but nevertheless there are certain things to be said about each.

First, as to Clause 4, it is right to emphasise once again the extraordinary scale of tax evasion through so-called dividend stripping. My right hon. Friend the Member for Huyton elicited some figures from the Financial Secretary which are striking. The right hon. Gentleman admitted that the amount of loss to the Treasury was no less than £4 million a year, and this did not include any loss from non-payment of Surtax but simply the claims made either for losses on capital account in the one case or for repayment of tax in the other.

My right hon. Friend pointed out quite fairly that this explanation, satisfactory as far as it goes, leaves out of account the substantial evasion which takes place through the sale as a capital asset of the company in question and the saving on Surtax and on Income Tax which naturally is then obtained by the persons who control that company, always on the assumption that they are not themselves a finance house and therefore liable to tax on capital gains. My right hon. Friend estimated, and I do not think the right hon. Gentleman challenged his figures, that the loss here might have been as much as £12 million a year. That is a tremendous figure for one type of tax evasion.

My second point is that the right hon. Gentleman the Financial Secretary said this afternoon that this Bill gave notice to quit to those engaged in this practice. In our opinion the notice is far too long. What has happened here is that the Bill does not catch any of those who have already begun this practice. It does not touch those who have purchased control of one of these companies but have not yet proceeded to take out the dividends or to resell it.

I still consider that the Amendment we introduced, which would have brought into the provisions of this Bill those who had before the Budget purchased the shares but had not gone so far as to take out the dividends and claim the tax repayment, was overwhelmingly justified. It only goes to show how tender are the present Government whenever it comes to a question of those who are evading tax. Some of us have not forgotten what the Government did through the Budget of 1951 and how they kept us up for a night fighting against the Clauses of the Bill which were designed to achieve, and indeed successfully achieved, the stopping up of tax loopholes.

My third point in connection with this Clause is that the loophole should have been stopped up last April. The very fact, admitted by the Financial Secretary, that the losses sustained by the Revenue are so high and so serious, points to the only possible conclusion, namely, that the Chancellor should have moved then. Once again I must ask him if he will give us any explanation of why he failed to do so. Was it really simply that he was frightened that we would delay the proceedings on that Bill and that, therefore, it would not be possible to start the General Election quite so soon? If so, I must tell him frankly that he was mistaken. We would have been delighted at that time to have assisted in stopping up this serious loophole in the law.

Was the Chancellor really prepared in April—there seems to be no other conclusion; presumably he must have considered this—to leave the loophole open for another year? Did he really consider the matter and come to the conclusion that he could safely afford what might be as much as £12 million a year in tax loss simply because it did not suit his political intentions to do anything then? If the right hon. Gentleman has anything to say about that now, I will gladly give way to him. There is always the possibility that he realised that there would be an Autumn Budget and that therefore he did not have to wait as long as a year. If that was the case, it is only one more piece of evidence in the story of his extraordinary performance during the last six months and the disingenuous way in which he has behaved in relation to the House and the country in general.

Clause 3 involves a very substantial concession to a very small number of people, Lloyd's underwriters, who will benefit from the Bill by about £500,000. They are enabled to escape payment of Surtax for that amount if they choose to take advantage of the provision and put a larger proportion of profits into reserve. I have never been able to understand the Government's argument for this. We accept the fact that the underwriters are in a special position because they are liable to Surtax whereas ordinary companies are not. We also appreciate that Sir Stafford Cripps when Chancellor in 1949 made some concessions to them, but the concessions in that case were relatively small, and the limits set to any advantage that might be taken of them were only £1,500 or 25 per cent. of the profits. The fact that Sir Stafford Cripps introduced that modest measure is no excuse—it is the second time in the history of this Government that it has been done—for increasing the concession substantially once again to the present limit of £7,000 or 50 per cent. of profits.

Furthermore, we have never had any explanation why a further change is necessary. We have never been given any figures for the net dollar earnings or other overseas earnings. After a great struggle, we managed to get from the Financial Secretary some figures of the income of Lloyd's underwriters from premiums from abroad, but we do not know how much of that is offset by payments in respect of claims. Unless we know what the net position is, it is impossible to judge whether or not a concession of this kind is justified.

The main point that I want to make in connection with Clause 3 is that I cannot understand why a measure of this kind is necessary in an emergency Budget. What possible reason is there for handing £500,000 over to a very small body of very wealthy individuals and rushing it through in an Autumn Budget? Clause 4 should have been dealt with in April, and Clause 3 could perfectly well have waited until next April, if indeed it is necessary at all.

I now turn to the main part of the Bill, to Profits Tax. We support this as at least some minor contribution to the present economic situation. We support it all the more because of the substantial concession which the Chancellor made to the companies in his April Budget. However, I must tell the Chancellor that he really has two things to explain here. One is his own conversion on the subject of Profits Tax. During Committee my right hon. Friend the Member for Batter-seas, North (Mr. Jay) quoted some comments made by the right hon. Gentleman in 1949. As, unfortunately, not very many hon. Members were present on that occasion, I propose to remind the House of the right hon. Gentleman's words. My right hon. Friend quoted the comments made by the right hon. Gentleman in 1949 on the Profits Tax increase introduced by Sir Stafford Cripps. The right hon. Gentleman said: … this measure, although it may appear small, and the 5 per cent. may not appear to involve a great deal of money, perpetuates an act of economic injustice, which is of no value to the country and which further perpetuates the Profits Tax on industry. This, as we have claimed, falls largely on the reserves, something which is not in the national interest at the present time. He went on to say: We believe that to transfer a certain proportion of the reserves of companies to the Government, to be spent perhaps in current expenditure—which will be the effect of this Measure—will, in fact, be an inflationary move. He finally summed it up as— a short-sighted step in the financial policy which the Government have so disastrously pursued for so many years."—[OFFICIAL REPORT, 11th November, 1949; Vol. 469, c. 1555–6. These were the Chancellor's views on an increase in Profits Tax in 1949, in circumstances, I may say, which undoubtedly called for action—no one would deny that for a moment—because of the much more difficult external situation which then faced the country. I think that the Chancellor owes us some explanation of why he has changed his mind. We are only too glad that he has. We welcome this conversion, even if it embarrasses him a little with his own followers.

The second explanation which he owes us is to justify, or to try to justify, exactly the opposite of what he was doing last April. Really the comparison here is quite remarkable, because he gave away in April in the reduction of Income Tax £40 million, which is almost exactly the same as he has now taken back from the companies in this Autumn Budget. It is very hard to understand why what was right apparently in the spring is wrong in the autumn and that what is right in the autumn is wrong in the spring. I hope that we shall have some attempt to explain this situation.

The truth of the matter so far as the Profits Tax is concerned is this. Year after year, the Chancellor in his policy has favoured the companies. I repeat something that I said earlier to which he took great exception, but which I believe to be true. They certainly were up to this Budget his favourite children, and the total amount conceded to them, and now admitted by the Chancellor, over the last three or four years was between £200 million and £250 million a year—and that in a time when total profits were, of course, increasing very substantially.

We say that a consequence of this reckless policy of helping the companies had the inevitable effect of stoking up increases in dividends and encouraging a Stock Exchange boom without parallel in our history and in consequently increasing the consumption which the Chancellor, at last, is trying now to bring down. One can only say that the Chancellor has apparently at last realised that this kind of indecent series of gifts to companies has had to come to an end. He has apparently begun to realise that in this field restraint really is necessary.

I turn to the most important part of the Bill, namely, the Purchase Tax changes. I think that the most interesting feature of our debates has been the variety of explanations given by the Chancellor and his hon. and right hon. Friends. The Chancellor himself during the later stages of the debates, when the flattering period was on, relied chiefly on arguments which he quoted from myself—ones that I had given in 1951. This would, of course, have been a most impressive defence if, in fact, the circumstances had been in any way the same or the changes I made in 1951 had been in any way the same. Of course that is not the case.

I said in 1951 that I believed that in the face of the need to carry the burden of a very large increase in the defence Estimates, at a time of considerable international economic difficulty, an increase in the Purchase Tax on some specific items, where their production competed with the defence programme, or where we could be reasonably sure of a swift expansion in exports if home consumption were to fall, was justified, and I still believe that that would be justified. I do not withdraw for one moment from what I said then, but I must remind the Chancellor that while I did put up Purchase Tax on motor cars, television and radio sets, I took out of Purchase Tax altogether a long list of household articles, even in that year.

It is very difficult to understand how he can base his defence on the same grounds as mine about a Budget which did exactly the opposite to what he is now doing. Of course the circumstances were wholly different, and of course the Budget of that time was wholly different. Not only were the measures in Purchase Tax which I introduced at that time of a highly discriminating character, and not only did that Budget include at least some assistance to the poorer people through the removal of tax from essentials altogether, but in addition the Budget as a whole was, if I may say so, very much more balanced than is his Budget.

It at least involved overwhelmingly that the burden, the regrettable but inevitable burden of increased taxation caused by the defence situation, did fall on the backs of those most able to bear it through the increase in Profits Tax and the increase, not the reduction, in Income Tax. The Chancellor's only other defence of which I am aware is his famous remark about broadening the base of the tax. We are much indebted to him for throwing some light on his intentions here, but I must say that I still find what he said on 28th November about this extremely puzzling. This is what he said: I make bold to suggest that tax critics and tax experts in the future will not be ungrateful to me for the singularly disagreeable task I have undertaken in broadening the scope of this tax."—[OFFICIAL REPORT, 28th November, 1955; Vol. 546, c. 2069.] Who will be grateful to the Chancellor for broadening the scope of the tax? I do not think that those who pay it will be grateful to him, although some of the officials who have to administer it may think that it will be rather easier. Actually to suggest that there is some virtue in making as many people as possible pay a particular tax seems an extraordinary idea. Had he in some way related it to capacity to pay, one would understand, but, of course, what he has done is based on exactly the opposite principle.

The Financial Secretary has put forward a different view. As a result of our debates, his theory has become generally known as the yawning gap doctrine. He has now chosen to adopt it, I think with a certain air of pride, as his signature tune. He certainly showed no shame this afternoon, and he went on to say, for instance, in defence of the yawning gap doctrine, that it would be unfair and unreasonable to leave out household goods. To whom is it unfair, and who will say that it is unreasonable to leave necessities out of taxation?

He went on to make the extraordinary statement that the previous Purchase Tax arrangements had been made only by chance. Does he really stand by that phrase? Does he really say that changes made, not only in the last few years, not only in the years since the war, but since 1940 by the House of Commons in successive Finance Bills have all been made by chance? I am bound to say that I think that he was a little less than polite to his right hon. Friend the Chancellor of the Exchequer and to his predecessors, whom we miss from these debates, the Minister of Supply and the Minister of Transport, because they have been handling Purchase Tax questions for four years. To say that they have been doing it with their heads in the air, without having any idea of what they were doing, and that it has all come out of some sort of lucky dip is really going much too far. I think that the right hon. Gentleman owes the Chancellor and his other colleagues an apology in this matter.

What exactly does all this lead up to? I must ask the question, What is meant by the phrase, "the yawning gap"? When is there a yawning gap and when is there not a yawning gap? At the present moment no cotton goods pay Purchase Tax. Does the Financial Secretary say that this is or is not a yawning gap? If he says that it is a yawning gap—it certainly is a big gap, whether it yawns or not—I am afraid that Lancashire is in for a difficult time and that if the right hon. Gentleman stays in office one thing is certain, that the gap will be closed in the next Budget and cotton will have to pay tax again.

Passing from the textile field, what about books for instance? There is no Purchase Tax on books. Is the right hon. Gentleman—who is a bit of an intellectual himself—going to suggest that this is or is not a yawning gap? And what about medicine? I could make some other suggestions to him. Reference was made this afternoon, I forget by whom—I am not sure that it was not the right hon. Gentleman himself—to the immense amount of money now spent by the British public on sweets and ice cream and soft drinks. They are all articles which one can purchase. There is a yawning gap, for no tax is imposed on them. I think that when the next Budget comes along the right hon. Gentleman will have a fine time in his efforts to close yawning gaps all round him.

I hope that he will not consider that this is in any way offensive, but I cannot help feeling that the Financial Secretary is, in a sense, an answer to the Civil Servant's prayer. Whatever the brief, he can be relied on to read it. He will take it word for word, he will never depart from it. I have the feeling that one of these days he will do what it is said that a Minister did in another place, when he read his brief through completely to the end including the words, "I think that ought to do for their Lordships."

The Economic Secretary, on the other hand, is a different kettle of fish—if I may use a metaphor for a change. His view is based on what we have now come to call "Boyle's law." It is a tough, scientific dogma. What we want to do, says the Economic Secretary, is to impose a tax, not in cases where people will buy less of the articles—that does not matter at all—but where they will go on buying just as much as before; they will pay up their money and they will have less money to spend on other things and so purchasing power will be mopped up.

This is a very interesting doctrine which leads to some peculiar conclusions. If I may say so, I feel that "Boyle's law" has not been developed quite so far as it might be, and I propose to try to help the hon. Gentleman to develop it a little. He says that he thinks taxes on necessities are a good thing because, of course, people will go on buying just as much as before but they will have less money to spend on other things. Why should we limit this to dustbins, crockery and pots and pans? Why not go much further and extend it to food, for instance? It would work wonderfully well if applied to bread. People would buy just the same amount of bread but they would spend more money. They might even buy more bread, which would be even better, because more purchasing power would be mopped up and there would still be less money available to spend on other things.

Exactly where do we draw the line? If the hon. Gentleman is advocating taxation of necessities, why does he limit it to these few household articles which we are told mean so little to the ordinary housewife? I can only conclude that some of the suspicions that passed through our minds at an earlier stage of these proceedings—that what had been contemplated when the Budget was being prepared included the abolition of the subsidy upon bread—had considerable substance in them. We shall see if we are going further in this development of Boyle's Law when we come to the next Budget.

The general argument is plain enough. What the Government are saying is that they are going to clear up anomalies; mop up purchasing power; drop all this nonsense about differentiating between luxuries and necessities, and argue that it is really of no great importance; that it does not matter, because this household goods tax is only 3½d. a week to the housewife. They are going to argue that on one day, and if there is any difficulty about that, they will take the other line and say how brave the Chancellor was to introduce such an unpopular tax.

I want to make our views quite clear upon this matter, and the reasons why we object to this type of Budget and, in particular, to these Purchase Tax changes. I think that the Chancellor would agree that it is possible to classify taxes into three groups—progressive taxes; proportional taxes and regressive taxes. By progressive taxes we mean those where, in proportion, the rich man pays a bigger share of his income than the poor man. By proportional taxes we mean those where each pays in proportion to his income, and by regressive taxes we mean those where, in proportion to his income, the poor man pays more and the rich man pays less.

Let us consider the present proposals in the light of that basis. There cannot be the slightest doubt whatever that if we take the last two Budgets together their consequence is a reduction in the amount of progressive taxation and an increase in the amount of regressive taxation. I have not yet heard any real justification from the Government why they are adopting what seems to us to be a peculiarly reactionary course. We do not deny that it is not possible in every case, with every tax, to apply the progressive system; I wish it were, but I admit the administrative and technical difficulties which are involved. But we say that, as far as possible, the tax system should move in the direction of progressive taxation and away from regressive taxation, and not in the opposite direction.

We say that for two reasons; first, because it is equitable that people should pay more, proportionately, according to the size of their incomes. In other words, the burden is more equitably shared on the lines of our system of Income Tax and Surtax than upon the lines of most of our indirect taxes. Secondly, we say that it is advisable to move in this direction because the consequences of regressive taxes are highly dangerous to the economy. There has been a good deal of discussion about the consequences of this Budget upon wage claims. I cannot believe that the Chancellor is now feeling very happy about what has happened in that connection since his Budget—and let him not say to me that any hon. Members on this side of the House had anything to do with this. Let him repeat his approval of what I said during the Committee stage, namely, that the trade unions would make up their own minds upon these matters without being influenced by politicians. [Interruption.] In my Budget speech I said that I believed that this would have very grave consequences upon the wage situation—a point of view which was echoed courageously enough by a number of hon. Members opposite. I must tell the hon. Member for Louth (Mr. Osborne) that we intend to continue to say what we think the consequences of this Government's policies will be upon one of the most important economic issues in the country. There can be no doubt that the consequences in this case have been pretty serious and certainly dangerous.

I conclude with these reflections. Nothing which has been said during these weeks of discussion has in any way weakened the overwhelmingly powerful case against the Bill or diminished in any way its unpopularity in the country. There are three reasons for this unpopularity. The first is the amazing contrast with the Budget of last April, and with all that was said at the time by right hon. Gentlemen on the Government Front Bench. We have had no real explanation of this extraordinary change round. It is no use for the Economic Secretary to say, "I do not believe that the Budget of April increased consumption in any way"; the real point he has to answer—I do not think there is any doubt about the answer—is, Suppose there had not been an April Budget, does he contend seriously that the level of consumption would be as high as it is today? Of course, it would not.

The Economic Secretary knows that when we give away £150 million in Income Tax reductions it increases the effective level of consumption. No sensible person can deny that. It is sheer evasion to talk in terms of the absolute level and whether it has gone up or not. The real point is that if the Chancellor had not recklessly given away that £150 million it is doubtful whether we would have needed an Autumn Budget at all.

The second objection is one to which I have just referred. It is all very well to argue on the theory, which I have called "Boyle's Law," of the mopping up of purchasing power. Nobody denies that, within its limits, there is some validity in it, but the hon. Gentleman, who continues to put it forward, overlooks, as he has been told many times, the indirect consequences of the increases in taxation. Those indirect consequences on the wage level constitute a far more serious danger to our economic situation than anything which the particular change could have cured.

There is every reason to believe that the way this Budget was framed has produced worse results. I am not saying that every change in taxation produces corresponding consequences upon wages, and I have never said that. I say that any Chancellor of the Exchequer has to ask himself, "How will the ordinary worker and trade unionist react? Will he, taking my policy as a whole, think that it is fair or unfair? Will he feel that this is a direct or unreasonable attack upon his standard of living?" If the Chancellor puts that question to himself, I do not think there is the slightest doubt what his answer will be.

Our third objection is to the gross unfairness of this Budget, taken with the last one. The right hon. Gentleman and his hon. Friends have now really got to the stage—we strongly object to it—where they are practically saying to us that taxes which mop up purchasing power must be those which the Chancellor called "broadly based," which means that the poor people have to pay for them, never mind what they got in the last Budget. At the same time, any suggestion that the situation can be dealt with by reversing the policy of last April is met with the retort, "That will be dangerous to saving. Taxation on the rich would not mop up purchasing power."

The Financial Secretary said the other day that there was a difference between us on progressive and proportional taxation. It is a fundamental difference, which illustrates the greatest difference of all, and that is that we regard the distribution of the wealth and income of this country as profoundly unfair, while the Chancellor and his hon. Friends are seeking perpetually to defend the present unjust system.

9.34 p.m.

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

It is usual on these occasions to pay compliments on the conclusion of proceedings and especially on a Third Reading debate. As this is rather a solemn meeting—I might almost call it an eve-of-the-poll meeting—I do not propose either to join in the problems of the party opposite, which would be quite out of place, or to distribute the largesse in compliments which is usual, for fear, perhaps, of being slightly unfair to one candidate or the other.

I will only say that the right hon. Member for Leeds, South (Mr. Gaitskell) managed to resume most of the quips, jokes, arguments and argumentation of our nine days' debate in his speech and that there is very little left for the Government to answer, as I think all of them have been answered before. I should like, however, to pay a compliment to what I might call the common man—that is, the ordinary M.P. I think our debates in the nine days have been made by the back bench M.P. speaking on behalf of his or her constituents. It has been for me, at any rate, an intensely human experience and, if I may say so with respect to the right hon. Gentleman, the more we can conduct our financial debates in the spirit in which eight days at least of these debates have been conducted, the happier I shall be.

The right hon. Gentleman was somewhat unctuous on the subject of the Closure. I have been responsible for this somewhat heavy job for four years and, as far as I know, the Closure has been used only once in four years, during which which we have had five Budgets.

The right hon. Gentleman had for the country the misfortune—or the fortune, one might almost say—to introduce only one Budget, and he used the Closure on that occasion, in that one Budget, 18 times. This lecture on Parliamentary behaviour, therefore, comes somewhat ill from him.

I repeat, however, that I welcome the spirit in which our financial discussions have been pursued. I think it is one of the priceless traditions of Parliament that if possible, and failing deliberate obstruction designed to stop the passage of a Measure, it is better that we should give ample opportunity for discussion on matters relating to finance. I am very glad that the House of Commons has returned to that atmosphere in the latter part of the proceedings on the Bill.

The hon. Member for Sowerby (Mr. Houghton) put the question I think very neatly and to the point by asking whether it was right to make use of the fiscal weapon, that is, the Budget, to deal with our economic troubles. My answer is that it is right so to do. This is also my answer to my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke), who has had the courtesy to inform me that he has had to go to another engagement. I therefore need not deal with his argument in detail, but will simply reply to the hon. Member for Sowerby by stating that the Government deliberately decided that to deal with the symptoms of inflation, which had become apparent, and to which I referred in great detail in my reply to the right hon. Gentleman on 31st October, it was necessary to include a Budget among our proposals. I draw hon. Members' attention to that speech of 31st October if they wish to read it again.

The difficulty which the House has had today on Third Reading has been that we are dealing with only one aspect of the Government's broad-based attack on inflation—namely, the budgetary aspect, which is by no means the whole of the policy. The rest is included in the credit squeeze, in dealing with local authorities, in the policy for housing and in many other ways. There are a great variety of methods of controlling expenditure and of dealing with the problems, but they are out of order on the Third Reading of the Bill.

We are, therefore, dealing with a small part of the Government's attack, and it is much easier for the Opposition to concentrate their attack upon this small sector of what is undoubtedly an unpopular Budget—I should be somewhat simpleminded if I described it as a popular Budget—than to attack on the broad front which I am sure the House as a whole wishes to succeed in order that inflation may be defeated once and for all. Inflation is our enemy today and if inflation is not defeated by this country the living standards of the people will be the first to suffer.

Today, according to the rules of order, we have to concentrate on the budgetary aspects of our attack on inflation. I welcome the support of my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) and my hon. Friend the Member for Cheadle (Mr. Shepherd). They certainly deserve an honourable mention in the course of our debates. They have agreed with the Government that a Budget should form part of our general attack. I said on 31st October that since the Budget in April the investment boom has been far more than anyone in this House imagined it would be. There is a very considerable increase in factory building, and in the equipment of factories, to an extent we all welcome, but it has imposed a very great burden on our materials and resources. There is at the same time a projected increase in demand which I described on 31st October as being an increase in consumption in the period ahead if no check were imposed.

That is my answer to those who say that all this could have been foreseen in April. In my opinion, in April the Government did the right thing in the Budget by bringing in incentives for greater production and greater personal efficiency. Hon. and right hon. Members opposite have never answered their own dilemma. I drew the attention of the right hon. Member for Leeds, South in the censure debate to the fact that it was impossible to say, in his own Election address, that the Budget was a rich man's Budget and also a popular Budget with which to win the Election. He has never answered that and never attempted to do so tonight.

What I would say in all seriousness to hon. Members is that there was a risk. I warned the country of the difficulties ahead. I said on 31st October, and repeat it now, that if there is a risk to be taken I am quite certain that the party opposite and all hon. Members with any humanity in their hearts would rather take a risk in the direction of anti-deflation—that is, a risk in the direction of fuller employment—than in the opposite direction. That I believe, is the sentiment of all hon. Members in their constituencies—and even as economists.

This Budget was introduced and is enshrined in this Finance Bill, because we find that action on all fronts is necessary to combat the inflationary pressure. It is true that whether we take our gold and dollar position—the background which has been discussed by the right hon. Member for Huyton (Mr. H. Wilson)—whether we take our deficits in the European Payments Union which have dropped from more than £30 million a month to less than £4 million in November, or whether we take the position of sterling, the position does look slightly more favourable.

The November trade figures, to which I am now coming, are, in my view, disappointing. I will refer to my hon. Friend the Member for East Aberdeenshire (Sir R. Boothby) before I sit down, as I think he reserves an honourable mention as well for his speech. Taking October and November together the total imports exceed total exports by an average of £61 million a month compared with an average of £75 million a month before. Although this result is disappointing we must not take the result of one month as conclusive.

What we must do is to realise that hon. Members opposite, or hon. Members on any side of the House, cannot have it both ways. They cannot say that things are bad and ask, why introduce a Budget? They must acknowledge that as there is still a great deal of work to do, despite the undoubted improvements to which I have referred, the Government have been perfectly right—unlike the Administration of hon. Members opposite—to take steps in time to put things right. That is what we have done, despite the unpopularity of the measures that the Government have introduced.

The contents of this Budget are summed up in two respects, Purchase Tax and Profits Tax. I welcome the speech of the hon. Member for Ashton-under-Lyne (Mr. Rhodes), who said that he thought the Purchase Tax would probably be an inevitable weapon in dealing with inflation for some years to come. That is an essential feature of the present problem.

The reason that the Government decided on the use of Purchase Tax was because it so happens that it is the most immediate weapon, which can be put in force almost the next day, for dealing with the excess of internal demand. The reason the Government chose Profits Tax—this is the answer to the right hon. Gentleman's question—is because we realised that a tax on distributed profits was probably the best way, in view of the undoubted pressure of rising incomes, to deal with a situation of boom and to limit the rise in incomes at the same time as the rise in demand.

However much the right hon. Gentleman may quote or describe previous remarks that have been made, I think it essential for anybody holding the sort of responsibilities that a Chancellor of the Exchequer holds to recommend to his Government, and be supported by his Government, in taking whatever measures he thinks are appropriate to deal with the national ills, whatever the consequences may be. That is precisely why we did these two measures in our Budget.

Let me deal, first, with Purchase Tax and then with Profits Tax. The Purchase Tax has led to a great deal of discussion lasting over a great time, and a great deal of misunderstanding has occurred. Last time I spoke, I quoted a letter which I received from a little girl about the bicycle she wanted her father to buy if I took off the tax. I have recently received a telegram which reads as follows: Why in the name of God, as Billy Graham would say, do you put a tax on babies' cots?—Editor, Perambulator Gazette. That is typical of the thousands of telegrams and communications which I have had which show that this imposition of tax on a wide range of goods is extremely difficult for the public to understand. I claim, however, that in this operation we have considerably improved the Purchase Tax as a whole.

The right hon. Gentleman referred to three kinds of taxation: progressive, proportional and regressive. Let me take two tests of the Government's record in the matter of progressive and regressive taxation. I will take Purchase Tax first. In 1951, after the right hon. Gentleman's Budget, about 45 per cent. of the Purchase Tax revenue came from goods which were then chargeable at the two top rates—66⅔ per cent. and 100 per cent., which, incidentally, were reduced by this Government. After this Budget, however, no less than 55 per cent. of the tax—a much higher figure than 45 per cent.—will still come from goods chargeable at the two highest rates. In that way, the Purchase Tax as arranged under this Budget is more progressive than it was under the right hon. Gentleman's administration.

Mr. Gaitskell

A comparison of that kind is valid only if the quantities of goods being taxed are the same in both cases. There is a notable difference in this case, because the output of motor cars for the home market—not for export—has enormously increased since 1951, and the tax paid on them has enormously increased, too. I have not the slightest doubt—I challenge the right hon. Gentleman to deny this—that this is the main reason for the change in the figures.

Mr. Butler

No, that does not completely account for the figures. There is no doubt that two points can be made for the Government. First, the percentage from the higher rates is greater than it was under the right hon. Gentleman's administration. Secondly, it is a gross exaggeration in the speeches of hon. Members opposite to make out that all this Purchase Tax is paid by poor people when large quantities are paid by those who can well afford to pay the Tax.

When we take another test of the progressive-proportional-regressive taxation, I remind the right hon. Gentleman and the House that if we look at the reliefs on Income Tax given in a series of budgets during our four years' Administration, we see that there has been no less than an 80 per cent. relief as compared with the tax of 1951–52 for incomes under £250 a year and a 50 per cent. relief as compared with the tax of 1951–52 for incomes between £250 and £500 a year and that the percentage relief for the higher figures is only 11 per cent.

This shows, therefore, that in his sweeping allegations at the end of his speech the right hon. Gentleman was quite wrong both as to the effect of our taxation and in his use of these extraordinary words, that "it is we who are progressive in our application of Income Tax and we who are progressive in our application of Purchase Tax."

The right hon. Gentleman the Member for Huyton asked some questions about the trades which had been affected by the Purchase Tax. There was a degree of uncertainty in the first stages of the application of the Purchase Tax which has now been removed in that connection. I regret any uncertainty which may have been caused, for example, on brushes and brooms being relieved from tax and because of the other concessions.

The right hon. Gentleman asked me a detailed point, whether the Order was laid about the tax on fur-trimmed slippers. The answer is that I have the Order in my hand. It is dated 17th November, and was laid as No. 1735.

I remind the House that we did also remove the tax on shopping bags and baskets. We were very glad to remove the tax on brooms, brushes and mops, largely because of the blind and disabled people working in those trades.

In general, the welcome given by the trades, and the results of the operation of the Purchase Tax, are as good as we can expect up to date. For example, in the Manchester Guardian for 8th December, it is stated: In particular, satisfaction has been expressed with the firmer tone of the raw material … and with the encouraging results so far of the abolition of the D Scheme. Sir John Reynolds, Chairman of the Combined English Mills (Spinners) Ltd., said on 30th November: The improved prospects for fine goods which have developed since the abolition of the D Scheme are one of the three encouraging aspects of the position at the present time.

I could quote from other similar sources in Lancashire and elsewhere on the subject of the cotton trade, indicating that there has been a good reception for the abolition of the D Scheme. That is the answer to the right hon. Member for Huyton and his remarks about the export trade. I hope sincerely that designers and manufacturers will now be able to plan without a D on a basis of quality goods for the home market and thus for the export trade. That was the object of the plan, and part of the general reform of the Purchase Tax, which we deliberately brought in.

Mr. H. Wilson

The right hon. Gentleman has now twice replied to questions which I did not put to him. I did not ask about the effect of the D Scheme abolition on the export trade. I pointed out to him that we opposed the introduction of the D Scheme at the beginning and that, therefore, we were only too relieved to see it go. What we objected to were the present levels of tax at 10 per cent. and 5 per cent. on textiles and clothing.

Mr. Butler

The right hon. Gentleman mentioned the export trade—I have a note of his remarks here—without actually mentioning it in connection with the D Scheme. At any rate, I think that that information may be of some interest to the House as a whole.

The other main one of the trades to which I will make reference is that of the retail sales of television sets, which reached a very high figure in October. Now that pre-Budget stocks have been exhausted reduced sales have been reported, and we anticipate that some effect already is being achieved in that sector by the operation of the Budget as a whole. Those are indications for which I was asked, in the course of the debate, on the effect of the application of the Purchase Tax reforms.

We have been very glad in the Purchase Tax reforms to deal not only with the D Scheme. We hope that the 5 per cent. and 10 per cent. tax, 5 per cent. on textiles, 10 per cent. on headgear, will be absorbed and taken by the trade and will not have the deleterious effect hon. Members opposite imagine. We have been very pleased to do our best for silver and cut glass, and we have been very pleased—the right hon. Gentleman referred to this—to arrange for that tax to be reorganised in a certain sector, and to be imposed where we think it will be much healthier not only for the tax but for the economy of the country.

I have nothing further to say tonight about the sales tax, because I have already given an answer on that subject and have said that we have no sales tax in our pocket and we have no sales tax plan arranged. The only extra remarks which I should like to make about the Purchase Tax are that I think it would be wrong for traders as a whole throughout the country not to realise that this Purchase Tax is an imposition which must remain as long as our inflationary difficulties remain, that any uncertainty about the tax is bad for trade and that it is much better to take a straight statement from me that this tax must stay, at any rate until we have got through our present difficulties. It is always a tax the revenue of which, in my opinion, will be vital to the United Kingdom economy. It is a tax which now brings in the best part of £400 million.

The right hon. Member for Leeds, South asked some questions about dividend stripping. He made an allegation, to which the Economic Secretary has already replied, that I and the Government were aware of this evil of dividend stripping before the April Budget and that we could have brought in the remedy in the April Budget had we not, to put the right hon. Gentleman's words in a nutshell, frankly been frightened of the political situation. That is nonsense. The Inland Revenue, whom I consulted, informed me that they were aware of this practice, and it was brought to my attention.

The scope of the practice and the extent of the losses was not realised until the May returns of repayment claims made by companies; this I have ascertained this afternoon. Therefore, it was impossible for the Government to obtain any idea of the potential loss from this source until after the April Budget, and, indeed, I never heard about it until after the General Election. I have taken an exceptionally early opportunity, namely, in an autumn Budget, to deal with this abuse, and the right hon. Member for Leeds, South might have been more generous about the Government's efforts in this matter.

A figure of £12 million is a great exaggeration. A figure of £7 million could only be worked out by dealing with the Surtax we might have got had the companies remained in the original hands—a point to which reference has been made in debate—but that we cannot calculate. The only sure figure that we can go on is about £4 million: that is the loss of which we were not aware until after the last Budget and with which we are dealing at the first opportunity.

The answer about Lloyd's is that my right hon. Friend the Financial Secretary gave the figures of premium income secured from overseas insurance by British companies and by Lloyd's. He said that about half Lloyd's premium income was in dollars. For reasons of State he was unable to give actual earnings, apart from premiums, and I support him in the language which he used on that occasion. The fact is that this is a very considerable matter for the United Kingdom's overseas balance and it is perfectly right for the Government to have taken this step. The language of the right hon. Member for Leeds, South about certain rich men getting benefits is beside the point when we are dealing with a matter of such importance to our economy.

I am left, in the time at my disposal, with the problem of the Profits Tax and with the general observations which have been made in support of and in attacking the Budget. I have nothing to add at the moment to what I have said about Profits Tax, except to say that part of the £220 million to which the right hon. Member for Battersea, North (Mr. Jay) referred is in respect of the investment allowance and the re-establishment of the initial allowances. I think that my hon. and gallant Friend the Member for Ilford, South (Squadron Leader Cooper) would have criticised us very much, and so would have other hon. and right hon. Members, if we had removed the investment allowance at present. The way to deal with investment in industry, which is still of vital importance, is through the credit weapon, and I am convinced that that will have its effect.

I think that we are right to put a tax on distributed profits which a company will pay only if it distributes the profits, and which will not have the effect on company reserves foreseen by hon. Members opposite. The position, as I see it, is that in the present state of the economy this tax, though regrettable, is essential. Therefore, we had to take that decision, however unpleasant. I think that it will have its effect upon the surge of incomes, which was accentuating the surge of consumer demand.

Now I come to the difficulty posed by my hon. Friend the Member for East Aberdeenshire, who said that he would vote for the Bill although he disliked it intensely. I shall vote for the Bill for the very reason that I brought it in, and because I think it is the right thing to do at present. My hon. Friend said that the choice was between free trade and higher taxation or protection, expansion and lower taxation. That is not the antithesis as I see it. This Government and the previous Government have in four years done more for the expansion of our trade and for the expansion of the human spirit than any two previous Administrations.

We have also done more to lower taxation in four years than any previous Government of the present time, and we now have the credit that when we see things have gone a little too fast in this expansion, and in the investment which hon. and right hon. Gentlemen asked for, we are taking steps to damp consumer demand and to limit the surge in incomes through this Budget as a regrettable necessity, because it is our duty to do so in the interests of the United Kingdom economy.

Sir R. Boothby

What about imports?

Mr. Butler

I conclude by saying that if we were to go back on our policy of free markets, as my hon. Friend recommended, it would be bound to have a bad effect upon the consumers of this country. It would be bound to lead to retaliation in world trade and it would very likely have severe effects on the employment of our people, especially if we limit the raw materials on which they depend.

I ask the House to give a Third Reading to this Bill, knowing that, fundamentally, the full employment of our people, their homes, their food and their wants are being met at the present time. The danger to our working population at the moment is inflation. Whatever have been our views, whatever have been the criticisms or personalities or rancours in this debate, let us now attempt, with the aid of organised labour, to lead to an understanding of our economic difficulties, to learn from each other, and to try to solve them together.

Question put:—

The House divided: Ayes 305, Noes, 248.

Division No. 79.]	AYES	[10.3 p.m.
Agnew, Cmdr. P. G.	Campbell, Sir David	Fleetwood-Hesketh, R. F.
Aitken, W. T.	Carr, Robert	Fletcher-Cooke, C.
Allan, R. A. (Paddington, S.)	Cary, Sir Robert	Fort, R.
Alport, C. J. M.	Channon, H.	Foster, John
Amery, Julian (Preston, N.)	Chichester-Clark, R.	Fraser, Hon. Hugh (Stone)
Amory, Rt. Hn. Heathcoat (Tiverton)	Cole, Norman	Freeth, D. K.
Anstruther-Gray, Major W. J.	Conant, Maj. Sir Roger	Galbraith, Hon. T. G. D.
Arbuthnot, John	Cooper, Sqn. Ldr. Albert	Gammans, L. D.
Armstrong, C. W.	Cooper-Key, E. M.	Garner-Evans, E. H.
Ashton, H.	Cordeaux, Lt.-Col. J. K.	Glover, D.
Astor, Hon. J. J.	Corfield, Capt. F. V.	Godber, J. B.
Atkins, H. E.	Craddock, Beresford (Spelthorne)	Gomme-Duncan, Col. A.
Baldock, Lt.-Cmdr. J. M.	Crookshank, Capt. Rt. Hn. H. F. C.	Gough, C. F. H.
Baldwin, A. E.	Crosthwaite-Eyre, Col. O. E.	Gower, H. R.
Banks, Col. C.	Crowder, Sir John (Finchley)
Barber, Anthony	Crowder, Petre (Ruislip—Northwood)	Graham, Sir Fergus
Barlow, Sir John	Cunningham, Knox	Grant, W. (Woodside)
Barter, John	Currie, G. B. H.	Grant-Ferris, Wg Cdr. R. (Nantwich)
Baxter, Sir Beverley	Dance, J. C. G.	Green, A.
Beamish, Maj. Tufton	Davidson, Viscountess	Gresham Cooke, R.
Bell, Ronald (Bucks, S.)	D'Avigdor-Goldsmid, Sir Henry	Grimston, Hon. John (St. Albans)
Bennett, Dr. Reginald	Deedes, W. F.	Grimston, Sir Robert (Westbury)
Bidgood, J. C.	Digby, Simon Wingfield	Grosvenor, Lt.-Col. R. G.
Biggs-Davison, J. A.	Dodds-Parker, A. D.	Gurden, Harold
Birch, Rt. Hon. Nigel	Donaldson, Cmdr. C. E. McA.	Hall, John (Wycombe)
Bishop, F. P.	Doughty, C. J. A.	Hare, Hon. J. H.
Black, C. W.	Drayson, G. B.	Harris, Reader (Heston)
Body, R. F.	Dugdale, Rt. Hn. Sir T. (Richmond)	Harrison, A. B. C. (Maldon)
Boothby, Sir Robert	Duncan, Capt. J. A. L.	Harrison, Col. J. H. (Eye)
Bossom, Sir A. C.	Duthie, W. S.	Harvey, Air Cdre. A. V. (Macclesfd)
Boyd-Carpenter, Rt. Hon. J. A.	Eccles, Rt. Hon. Sir David	Harvey, Ian (Harrow, E.)
Boyle, Sir Edward	Eccles, Rt. Hon. Sir David	Harvey, John (Walthamstow, E.)
Braine, B. R.	Eden, Rt. Hn. Sir A. (Warwick & L'm'tn)	Harvie-Watt, Sir George
Braithwaite, Sir Albert (Harrow, W.)	Eden, J. B. (Bournemouth, West)	Hay, John
Bromley-Davenport, Lt.-Col. W. H.	Elliot, Rt. Hon. W. E.	Head, Rt. Hon. A. H.
Brooke, Rt. Hon. Henry	Emmet, Hon. Mrs. Evelyn	Heald, Rt. Hon. Sir Lionel
Brooman-White, R. C.	Errington, Sir Eric	Heath, Edward
Bryan, P.	Erroll, F. J.	Henderson, John (Cathcart)
Bullus, Wing Commander E. E.	Farey-Jones, F. W.	Hicks-Beach, Maj. W. W.
Burden, F. F. A.	Fell, A.	Hill, John (S. Norfolk)
Butcher, Sir Herbert	Finlay, Graeme	Hirst, Geoffrey
Butler, Rt. Hn. R. A. (Saffron Walden)	Fisher, Nigel	Holland-Martin, C. J.
Hornsby-Smith, Miss M. P.	MacLeod, John (Ross & Cromarty)	Rodgers, John (Sevenoaks)
Horsbrugh, Rt. Hon. Dame Florence	Macmillan, Rt. Hn. Harold (Bromley)	Roper, Sir Harold
Howard, Gerald (Cambridgeshire)	Macmillan, Maurice (Halifax)	Ropner, Col. Sir Leonard
Howard, Hon. Greville (St. Ives)	Macpherson, Niall (Dumfries)	Russell, R. S.
Howard, John (Test)	Maddan, Martin	Sandys, Rt. Hon. D.
Hudson, Sir Austin (Lewisham, N.)	Maitland, Cdr. J. F. W. (Horncastle)	Scott-Miller, Cmdr. R.
Hudson, W. H. A. (Hull, N.)	Maitland, E. L. Patrick (Lanark)	Sharples, R. C.
Hughes, Hallett, Vice-Admiral J.	Manningham-Buller, Rt. Hn. Sir R.	Shepherd, William
Hughes-Young, M. H. C.	Markham, Major Sir Frank	Simon, J. E. S. (Middlesbrough, W.)
Hulbert, Sir Norman	Marlowe, A. A. H.	Smyth, Brig. J. G. (Norwood)
Hurd, A. R.	Marples, A. E.	Soames, Capt. C.
Hutchison, Sir Ian Clark (E'b'gh, W.)	Marshall, Douglas	Spearman, A. C. M.
Hutchison, James (Scotstoun)	Mathew, R.	Speir, R. M.
Hyde, Montgomery	Maude, Angus	Spence, H. R. (Aberdeen, W.)
Hylton-Foster, Sir H. B. H.	Mawby, R. L.	Spens, Rt. Hn. Sir P. (Kensgt'n, S.)
Iremonger, T. L.	Maydon, Lt.-Comdr. S. L. C.	Stanley, Capt. Hon. Richard
Irvine, Bryant Godman (Rye)	Medlicott, Sir Frank	Stevens, Geoffrey
Jenkins, Robert (Dulwich)	Molson, A. H. E.	Steward, Harold (Stockport, S.)
Jennings, J. C. (Burton)	Monckton, Rt. Hon. Sir Walter	Steward, Sir William (Woolwich, W.)
Jennings, Sir Roland (Hallam)	Moore, Sir Thomas	Stewart, Henderson (Fife, E.)
Johnson, Dr. Donald (Carlisle)	Morrison, John (Salisbury)	Stoddart-Scott, Col. M.
Johnson, Eric (Blackley)	Mott-Radclyffe, C. E.	Storey, S.
Jones, A. (Hall Green)	Nabarro, G. D. N.	Stuart, Rt. Hon. James (Moray)
Kaberry, D.	Nairn, D. L. S.	Summers, G. S. (Aylesbury)
Keegan, D.	Neave, Airey	Sumner, W. D. M. (Orpington)
Kerby, Capt. H. B.	Nicholson, Godfrey (Farnham)	Taylor, Sir Charles (Eastbourne)
Kerr, H. W.	Nicolson, N. (B'n'm'th, E. & Chr'ch)	Taylor, William (Bradford, N.)
Kershaw, J. A.	Noble, Comdr. A. H. P.	Thomas, Rt. Hn. J. P. L. (Hereford)
Kirk, P. M.	Nugent, G. R. H.	Thomas, Leslie (Canterbury)
Lagden, G. W.	Oakshott, H. D.	Thomas, P. J. M. (Conway)
Lambert, Hon. G.	O'Neill, Hn. Phelim (Co. Antrim, N.)	Thompson, Kenneth (Walton)
Lambton, Viscount	Ormsby-Gore, Hon. W. D.	Thompson, Lt.-Cdr. R. (Croydon, S.)
Lancaster, Col. C. G.	Orr, Capt. L. P. S.	Thorneycroft, Rt. Hon. P.
Langford-Holt, J. A.	Orr-Ewing, Charles Ian (Hendon, N.)	Thornton-Kemsley, C. N.
Leather, E. H. C.	Osborne, C.	Tiley, A. (Bradford, W.)
Leavey, J. A.	Page, R. G.	Tilney, John (Wavertree)
Leburn, W. G.	Pannell, N. A. (Kirkdale)	Touche, Sir Gordon
Legge-Bourke, Maj. E. A. H.	Partridge, E.	Turton, Rt, Hon. R. H.
Legh, Hon. Peter (Petersfield)	Peake, Rt. Hon. O.	Tweedsmuir, Lady
Lennox-Boyd, R. Hon. A. T.	Peyton, J. W. W.	Vane, W. M. F.
Lindsay, Hon. James (Devon, N.)	Pickthorn, K. W. M.	Vaughan-Morgan, J. K.
Lindsay, Martin (Solihull)	Pilkington, Capt. R. A.	Vickers, Miss J. H.
Linstead, Sir H. N.	Pitman, I. J.	Vosper, D. F.
Lloyd, Rt. Hon. G. (Sutton Coldfield)	Pitman, I. J.	Wakefield, Edward (Derbyshire, W.)
Lloyd, Maj. Sir Guy (Renfrew, E.)	Pitt, Miss E. M.	Wakefield, Sir Wavell (St. M'lebone)
Lloyd, Rt. Hon. Selwyn (Wirral)	Pott, H. P.	Walker-Smith, D. C.
Lloyd-George, Maj. Rt. Hon. G.	Powell, J. Enoch	Ward, Hon. George (Worcester)
Longden, Gilbert	Price, David (Eastleigh)	Ward, Dame Irene (Tynemouth)
Low, Rt. Hon. A. R. W.	Price, Henry (Lewisham, W.)	Watkinson, H. A.
Lucas, Sir Jocelyn (Portsmouth, S.)	Prior-Palmer, Brig. O. L.	Webbe, Sir H.
Lucas, P. B. (Brentford & Chiswick)	Profumo, J. D.	Whitelaw, W. S. (Penrith & Border)
Lucas-Tooth, Sir Hugh	Raikes, Sir Victor	Williams, Paul (Sunderland, S.)
McAdden, S. J.	Ramsden, J. E.	Williams, R. Dudley (Exeter)
Macdonald, Sir Peter	Rawlinson, P. A. G.	Wills, G. (Bridgwater)
Mackeson, Brig. Sir Harry	Redmayne, M.	Wilson, Geoffrey (Truro)
McKibbin, A. J.	Rees-Davies, W. R.	Wood, Hon. R.
Mackie, J. H. (Galloway)	Remnant, Hon. P.	Woollam, John Victor
McLaughlin, Mrs. P.	Renton, D. L. M.	Yates, William (The Wrekin)
Maclay, Rt. Hon. John	Ridsdale, J. E.
Maclean, Fitzroy (Lancaster)	Roberts, Peter (Heeley)	TELLERS FOR THE AYES:
McLean, Neil (Inverness)	Robertson, Sir David	Mr. Buchan-Hepburn and
Macleod, Rt. Hn. Iain (Enfield, W.)	Robson-Brown, W.	Mr. Studholme.
NOES
Ainsley, J. W.	Blyton, W. R.	Chetwynd, G. R.
Albu, A. H.	Bottomley, Rt. Hon. A. G.	Coldrick, W.
Allaun, Frank (Salford, E.)	Bowden, H. W. (Leicester, S. W.)	Collick, P. H. (Birkenhead)
Allen, Arthur (Bosworth)	Bowen, E. R. (Cardigan)	Collins, V. J. (Shoreditch & Finsbury)
Allen, Scholefield (Crewe)	Boyd, T. C.	Corbet, Mrs. Freda
Awbery, S. S.	Brockway, A. F.	Cove, W. G.
Bacon, Miss Alice	Broughton, Dr. A. D. D.	Craddock, George (Bradford, S.)
Baird, J.	Brown, Rt. Hon. George (Belper)	Cronin, J. D.
Balfour, A.	Brown, Thomas (Ince)	Crossman, R. H. S.
Bartley, P.	Burke, W. A.	Cullen, Mrs. A.
Bellenger, Rt. Hon. F. J.	Burton, Miss F. E.	Daines, P.
Bence, C. R. (Dunbartonshire, E.)	Butler, Herbert (Hackney, C.)	Darling, George (Hillsborough)
Benn, Hn. Wedgwood (Bristol, S. E.)	Butler, Mrs. Joyce (Wood Green)	Davies, Ernest (Enfield, E.)
Benson, G.	Callaghan, L. J.	Davies, Harold (Leek)
Beswick, F.	Carmichael, J.	Davies, Stephen (Merthyr)
Bevan, Rt. Hon. A. (Ebbw Vale)	Castle, Mrs. B. A.	Deer, G.
Blackburn, F.	Champion, A. J.	de Freitas, Geoffrey
Blenkinsop, A.	Chapman, W. D.	Delargy, H. J.

Dodds, N. N.	Lee, Frederick (Newton)	Robinson, Kenneth (St. Pancras, N.)
Donnelly, D. L.	Lever, Harold (Cheetham)	Rogers, George (Kensington, N.)
Dugdale, Rt. Hn. John (W. Brmwch)	Lever, Leslie (Ardwick)	Ross, William
Dye, S.	Lewis, Arthur	Royle, C.
Ede, Rt. Hon. J. C.	Lindgren, G. S.	Shawcross, Rt. Hon. Sir Hartley
Edelman, M.	Lipton, Lt.-Col. M.	Shinwell, Rt. Hon. E.
Edwards, Rt. Hon. John (Brighouse)	Logan, D. G.	Short, E. W.
Edwards, Rt. Hon. Ness (Caerphilly)	Mabon, Dr. J. D.	Silverman, Julius (Aston)
Edwards, Robert (Bilston)	MacColl, J. E.	Silverman, Sydney (Nelson)
Edwards, W. J. (Stepney)	McGhee, H. G.	Simmons, C. J. (Brierley Hill)
Evans, Edward (Lowestoft)	McKay, John (Wallsend)	Skeffington, A. M.
Evans, Stanley (Wednesbury)	McLeavy, Frank	Slater, Mrs. H. (Stoke, N.)
Fernyhough, E.	MacMillan, M. K. (Western Isles)	Slater, J. (Sedgefield)
Fletcher, Eric	MacPherson, Malcolm (Stirling)	Smith, Ellis (Stoke, S.)
Forman, J. C.	Mahon, S.	Snow, J. W.
Fraser, Thomas (Hamilton)	Mallalieu, E. L. (Brigg)	Sorensen, R. W.
Gaitskell, Rt. Hon. H. T. N.	Mallalieu, J. P. W. (Huddersfield, E.)	Sparks, J. A.
Gibson, C. W.	Mann, Mrs. Jean	Steele, T.
Gooch, E. G.	Mason, Roy	Stewart, Michael (Fulham)
Gordon Walker, Rt. Hon. P. C.	Mayhew, C, P.	Stones, W. (Consett)
Greenwood, Anthony	Mellish, R. J.	Strachey, Rt. Hon. J.
Grenfell, Rt. Hon. D. R.	Messer, Sir F.	Strauss, Rt. Hon. George (Vauxhall)
Grey, C. F.	Mikardo, Ian	Stross, Dr. Barnett (Stoke-on-Trent, C.)
Griffiths, David (Rother Valley)	Mitchison, G. R.	Summerskill, Rt. Hon. E.
Griffiths, Rt. Hon. James (Llanelly)	Monslow, W.	Swingler, S. T.
Griffiths, William (Exchange)	Moody, A. S.	Sylvester, G. O.
Grimond, J.	Morris, Percy (Swansea, W.)	Taylor, Bernard (Mansfield)
Hale, Leslie	Morrison, Rt. Hn. Herbert (Lewis'm, S.)	Taylor, John (West Lothian)
Hamilton, W. W.	Mort, D. L.	Thomas, George (Cardiff)
Hannan, W.	Moss, R.	Thomas, Iorwerth (Rhondda, W.)
Harrison, J. (Nottingham, N.)	Moyle, A.	Thomson, George (Dundee, E.)
Hastings, S.	Mulley, F. W.	Thornton, E.
Healey, Denis	Neal, Harold (Bolsover)	Timmons, J.
Henderson, Rt. Hn. A. (Rwly Regis)	Noel-Baker, Francis (Swindon)	Tomney, F.
Herbison, Miss M.	O'Brien, T.	Turner-Samuels, M.
Hewitson, Capt. M.	Oliver, G. H.	Ungoed-Thomas, Sir Lynn
Hobson, C. R.	Oram, A. E.	Usborne, H. C.
Holman, P.	Orbach, M.	Viant, S. P.
Holmes, Horace	Oswald, T.	Wade, D. W.
Houghton, Douglas	Owen, W. J.
Howell, Charles (Perry Barr)	Padley, W. E.	Warbey, W. N.
Howell, Denis (All Saints)	Paget, R. T.	Watkins, T. E.
Hoy, J. H.	Paling, Will T. (Dewsbury)	Weitzman, D.
Hubbard, T. F.	Palmer, A. M. F.	Wells, Percy (Faversham)
Hughes, Cledwyn (Anglesey)	Panned, Charles (Leeds, W.)	Wells, William (Walsall, N.)
Hughes, Emrys (S. Ayrshire)	Pargiter, G. A.	West, D. G.
Hughes, Hector (Aberdeen, N.)	Parker, J.	Wheeldon, W. E.
Hunter, A. E.	Parkin, B. T.	White, Mrs. Eirene (E. Flint)
Hynd, H. (Accrington)	Paton, J.	White, Henry (Derbyshire, N. E.)
Hynd, J. B. (Attercliffe)	Peart, T. F.	Wigg, George
Irvine, A. J. (Edge Hill)		Wilkins, W. A.
Irving, S. (Dartford)	Plummer, Sir Leslie	Willey, Frederick
Isaacs, Rt. Hon. G. A.	Price, J. T. (Westhoughton)	Williams, David (Neath)
Janner, B.	Price, Philips (Gloucestershire, W.)	Williams, Rev. Llywelyn (Ab'tillery)
Jay, Rt. Hon. D. P. T.	Probert, A. R.	Williams, Rt. Hon. T. (Don Valley)
Jeger, Mrs. Lena (Holbn & St. Pancs, S.)	Proctor, W. T.	Williams, W. R. (Openshaw)
Jones, Rt. Hon. A. Creech (Wakefield)	Pryde, D. J.	Williams, W. T. (Barons Court)
Jones, David (The Hartlepools)	Pursey, Cmdr. H,	Willis, Eustace (Edinburgh, E.)
Jones, Elwyn (W. Ham, S.)	Randall, H. E.	Wilson, Rt. Hon. Harold (Huyton)
Jones, Jack (Rotherham)	Rankin, John	Winterbottom, Richard
Jones, J. Idwal (Wrexham)	Reeves, J.	Woodburn, Rt. Hon. A.
Jones, T. W. (Merioneth)	Reid, William	Yates, V. (Ladywood)
Kenyon, C.	Rhodes, H.	Younger, Rt. Hon. K.
Key, Rt. Hon. C. W.	Robens, Rt. Hon. A.	Zilliacus, K.
King, Dr. H. M.	Roberts, Albert (Normanton)
Lawson, G. M.	Roberts, Goronwy (Caernarvon)	TELLERS FOR THE NOES:
		Mr. Popplewell and Mr. Pearson.
Bill accordingly read the Third time and passed.

Question put and agreed to.