Commons Sitting of 8 November 1955

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

PETITION (STAFF NURSE HOWELLS)
Mr. William Yates: I beg to ask leave to present a public petition. It concerns Staff Nurse Howells, of 11 James's Way, New Donnington, Shropshire. The petition is signed by 187 constituents of The Wrekin division of Shropshire.
It runneth:
"To the honourable Commons of the United Kingdom and Great Britain and Northern Ireland in Parliament assembled. The humble petition of we, the undersigned, showeth that we beg for Staff Nurse Howells, of 11 James's Way, New Donnington, Wellington, Shropshire, to be reinstated in the nursing profession.
Wherefore your petitioners pray, and we do so because we have each experienced as patients, the quality of her splendid nursing ability, her care for the patients, and the correctness of her conduct. These admirable qualities, so necessary and desirable in a nurse, endeared her to all her patients without exception.
This encourages us to express our firm opinion that there can have been nothing wrong in her conduct at any time to warrant her dismissal from Wellington Cottage Hospital.
We are further of the opinion that all the circumstances concerned with her dismissal should form the subject of an inquiry by the Minister of Health, and for such an inquiry we, your petitioners, as in duty bound, will ever pray."
To lie upon the Table.

ORAL ANSWERS TO QUESTIONS
  SCOTLAND

    Fishing Vessels (Coal-to-Oil Conversion)
    Mr. Hector Hughesasked the Secretary of State for Scotland what steps he is taking to facilitate the conversion of the fishing fleets of the North of Scotland from coal-burning to oil-burning ships.
    The Secretary of State for Scotland (Mr. James Stuart): The White Fish Authority already has power to make loans for this purpose. It has recently proposed that grants should also be available. This proposal would require legislation, and the Government are at present considering it.
    Mr. Hughes: While we realise the power of the White Fish Authority, does not the Secretary of State appreciate that the matter has an important bearing upon national problems of food and fuel and power, on the potentialities of the fishing fleet, and on the rights and expectations of consumers all over the country? Will he take all those matters into account in order to introduce the legislation to which he has referred so as to solve the problem?
    Mr. Stuart: It was only last month that the Authority submitted proposals to the Government, and I should like time to consider them.

    Hospital Facilities, West Fife
    Mr. Hamiltonasked the Secretary of State for Scotland (1) if he is aware of the deficiency of hospital beds for geriatric, general medicine, medical and surgical paediatric, eye, ear, nose and throat, and orthopaedic cases in the West Fife area; and what steps are contemplated in the immediate future to overcome such deficiencies;
    (2) whether, in view of the deficiency of hospital provision in many departments in West Fife, he will institute an inquiry or statistical examination of the entire field, with a view to the formulation of a long-term plan.
    Mr. J. Stuart: After a detailed study of the present and future needs of the area, undertaken jointly with the local hospital authorities, and having regard to the facilities available at Bridge of Earn

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    and other hospitals within reach, the regional hospital board does not propose any major works beyond those already in hand. It is considered that completion of these works will enable a reasonably adequate service to be provided, subject perhaps to some adjustment in the use of existing facilities.
    Mr. Hamilton: Is the right hon. Gentleman aware that continual reference to Bridge of Earn and Edinburgh hospitals is not good enough, and that it involves people in all kinds of expense which would not need to be incurred if facilities were provided in West Fife? Is he aware that the shortage of beds is estimated to be about 200 and that most of them, apart from geriatric beds, could be provided by an extension of the Dunfermline and West Fife hospital? Will he reconsider the matter in view of the importance of the area to the national economy?
    Mr. Stuart: The hospital proposals for Dunfermline and West Fife are under consideration and will be dealt with. I must remind the hon. Member that, while I realise the importance of the whole problem, it is an area that we are dealing with. The Bridge of Earn hospital, for example, plays a very important part in serving the area, for in 1952 more than one-third of 6,500 patients discharged from Bridge of Earn hospital came from West Fife.
    Mr. Hamilton: In connection with Question No. 4, relating to a statistical examination, will the right hon. Gentleman examine the staffing shortages? There is a feeling that at the periphery of the regions there is a shortage compared with the position at the centre. Will the right hon. Gentleman examine the distribution of staff as between centre and periphery?
    Mr. Stuart: I will willingly ask the regional board to examine that point.

    Geriatric Units
    Mr. Hamiltonasked the Secretary of State for Scotland what steps he intends to take to extend the provision of geriatric units throughout the hospital service in Scotland.
    Mr. J. Stuart: This is a problem to which regional hospital boards are giving the closest attention. Special geriatric units have been developed in some areas,
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    and elsewhere additional specialist facilities have been provided. Work is in progress or about to start very shortly on a number of schemes for improvement of existing facilities.
    Mr. Hamilton: Does the Minister not agree that it is desirable to have old people enabled to go about in their own homes, if that is at all possible? In view of the success of geriatric units in doing precisely that job, especially the one in Dundee, will he take further steps to point out the desirability of extending the provision of these units?
    Mr. Stuart: I agree. In addition to the hon. Member's suggestion, the regional board is discussing with the board of management the possibility of using some unoccupied beds at the West Fife Infectious Diseases Hospital.
    Colonel Gomme-Duncan: Is my right hon. Friend aware that in the city and county of Perth ample and excellent accommodation for geriatric cases already exists?

    Car Park, Edinburgh
    Mr. Woodburnasked the Secretary of State for Scotland (1) whether his attention has been called to the disquiet existing in Scotland regarding the decision of Edinburgh Corporation to build a car park in Princes Street Gardens and regarding the taking of the decision without sufficient investigation and consideration of all the possibilities of dealing with parking congestion, including those likely to be more effective and economical; and what action he will take to ensure full expression of public opinion;
    (2) whether his attention has been called to the decision of Edinburgh Corporation to build a car park in Princes Street Gardens; and whether, in view of the pressure now being applied on local authorities to keep down capital expenditure, he will recommend the Edinburgh Council to delay applying for a Provisional Order and to investigate other suggestions which may be more efficient, economical and less injurious to the amentities of Princes Street.
    Mr. J. Stuart: I am aware of the Corporation's proposals and of the controversy they have aroused. The project could not be undertaken without the Corporation's obtaining further statutory

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    powers; and the private legislation procedure provides full opportunity for the lodging and consideration of objections.
    Mr. Woodburn: Is the right hon. Gentleman not aware that when it reaches that stage it becomes a question very largely of rejecting or approving the project? Is he aware that everybody realises that there is a problem here with regard to car parking in Edinburgh but that the question of utilising Princes Street is a matter of almost international interest? Is he aware that the Lord Provost and many other people have expressed a desire that this matter should be considered with a little more caution before the final proposals are made? Would the right hon. Gentleman use his influence with the Corporation to consider other possibilities, such as the widening of Princes Street, and many other things that have been suggested, or the possibility of giving people, now that their interest has been aroused, an opportunity of making suggestions?
    Mr. Stuart: I am quite sure that many suggestions will be made to the Corporation. All that we are proposing at present is that the Provisional Order procedure should be adopted and, of course, there will be a full opportunity for objections to be considered at a public inquiry before Parliamentary Commissioners.

    Maternity Hospital, Bellshill
    Mr. Timmonsasked the Secretary of State for Scotland what progress has been made with the new maternity hospital at Bellshill.
    Mr. J. Stuart: Site works are in progress for the nurses' home, which forms the first part of the project as a whole. Meanwhile the planning of the new hospital block is being advanced as rapidly as possible, and initial sketch plans are due at the end of this month.
    Mr. Timmons: Is the Minister aware that over two and a half years have passed since the first intimation was made to me that authority was given to the Western Regional Board to go ahead with this hospital? Is he aware that when I passed the place last week-end I could see no sign of any progress whatever? Will the right hon. Gentleman do something to try to expedite the work on a new hospital which is so badly needed?
    Mr. Stuart: I am informed that the work of excavation at the site is making satisfactory progress and that after its completion the building contractors will be ready to start.

    Electricity Boards (Expenditure)
    Mr. Nabarroasked the Secretary of State for Scotland whether he will now make a statement in regard to the revised capital expenditure programme of the Scottish electrical boards and the elimination of inessential projects to conform with the revised financial and economic policy of Her Majesty's Government.
    Mr. J. Stuart: I have nothing at present to add to the answer given to my hon. Friend on 1st November.
    Mr. Nabarro: Is my right hon. Friend aware that last week it was a 14 weeks' delay and this week it is a 15 weeks' delay? May we have an assurance from my right hon. Friend that serious regard is being had by these Scottish boards to the statement made by the Chancellor of the Exchequer on 25th July last?
    Mr. Stuart: I assure my hon. Friend that the statement is receiving very serious consideration. For that reason, perhaps, it has taken a little longer to reach a conclusion because, to use an old term, we are exploring every avenue.
    Mr. Nabarroasked the Secretary of State for Scotland what sum of money per annum is represented by the 33⅓ per cent. reduction in promotional advertising expenditure by the South of Scotland and North of Scotland Hydro-Electricity Boards; when such reduction is to become effective; what is the annual amount of the remaining promotional advertising expenditure that will be permitted by the Secretary of State in respect of promotional advertising for, respectively, the South of Scotland and the North of Scotland Hydro-Electricity Boards; and the total per annum so remaining.
    Mr. J. Stuart: The expenditure by the South of Scotland Electricity Board and the North of Scotland Hydro-Electric Board on promotional advertising will be reduced by £11,000 and £3,900 per annum, respectively. In relation to Press advertising the reductions will take place immediately, and in relation to other

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    forms of advertising as contracts expire. The expenditure remaining will be £23,000 in the south and £4,100 in the north.
    Mr. Nabarro: But why should a State monopoly find it necessary to waste the consumers' money in promotional advertising? Could not these funds be better devoted to the primary purposes of the Boards, namely, the generation, the distribution and the sale of electricity?
    Mr. Stuart: I should have thought that my hon. Friend, who is a business man, would realise that advertising is supposed to produce beneficial effects for industry.

    School Building Programme
    Mr. Carmichaelasked the Secretary of State for Scotland if he will now advise local authorities that they can go ahead with their school building programme; and if he will state the amount of capital which has been authorised to each local authority for this work.
    Mr. J. Stuart: In the debate on 1st November my hon. Friend the Joint Under-Secretary of State made it quite clear that, subject to the usual process of approval of individual projects, education authorities are expected to go ahead with all school building projects which are regarded as essential. It is not the practice to give each education authority a ration of capital within which they must work and, as stated in the debate, provision is being made for a total educational building programme of at least £11 million in 1956–57 compared with £6 million in 1954–55.
    Mr. Carmichael: Why did the right hon. Gentleman send the letter from the Chancellor of the Exchequer and himself calling on local authorities to restrict their expenditure to below that of 1954–55? Is his answer today a contradiction of that letter?
    Mr. Stuart: The circular to which the hon. Member refers laid it down that, where it was impossible for an authority to reduce the expenditure below the 1954–55 level, that was understood.

    Economic Development and Schools, Isle of Lewis
    Mr. Malcolm MacMillanasked the Secretary of State for Scotland what representations he has received from the
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    Pairc Development Association in the Isle of Lewis regarding local depopulation and the need to promote local economic development and improve basic services; and if he will make a statement.
    Mr. J. Stuart: My right hon. Friend the Minister of Health forwarded to me some time ago a letter he had received from the Association; and I am asking the Highlands Panel, which the Association has also approached, to consider the position and give me its advice.
    Mr. MacMillan: Is the right hon. Gentleman aware that this local problem is symptomatic of the problem of all the Highlands and Islands, that schools are dwindling to one-teacher schools, that piers and harbours are falling into disuse, that population is drifting away, and that this is particularly serious in this part of the Isle of Lewis? Would he ask the Highlands Panel to give Lewis the highest priority?
    Mr. Stuart: I am informed that the Panel is giving it priority and that the Panel will consider the matter at a meeting on 5th December.
    Mr. John MacLeod: Will the Secretary of State look into the policy of the Herring Industry Board, which is closing ports because of the gluts of herring? Should the Board not look for outlets in places such as this where herrings can be processed, instead of boats being told that they cannot leave the ports because of the mismanagement of the Herring Industry Board?
    Mr. Stuart: That is rather a different question, but it is a point which will no doubt be considered.
    Mr. Malcolm MacMillanasked the Secretary of State for Scotland if he has considered the report of the Director of Education of Ross and Cromarty regarding the unsatisfactory conditions of many schools and school lavatories and playgrounds in the Isle of Lewis; and if he will make a statement.
    Mr. J. Stuart: I have not seen this report, which I understand was made to the education authority Proposals made by the education authority for improving conditions at 37 schools in Lewis were approved in principle some time ago, and tenders for work at the first five schools are now under consideration.
    Mr. MacMillan: If the right hon. Gentleman has seen this report, may I recommend it to him as a belated confession of the Director of Education who has been there since 1937, who has now seen the light—or should I say darkness—about Lewis schools? While the new schools are excellent, and no one would quarrel with the authority on their account, old schools around them are being allowed to rot while the children and teachers continue to live and work in the worst possible conditions of any schools in Scotland. Will he put some drive and effort into doing something about the older schools?
    Mr. Stuart: I am aware of this position. I did not receive the report referred to because it was not addressed to me, but I would be very glad to look at it if the hon. Gentleman chooses to give me one. As I said, a start is being made on the first five schools.
    Mr. MacMillan: But does not the Minister receive regular reports from Her Majesty's Inspectors of Schools, and is this not his direct responsibility?
    Mr. Stuart: I receive those reports, but I did not receive the report to which the hon. Gentleman refers.

    Electricity Supplies, Western Isles
    Mr. Malcolm MacMillanasked the Secretary of State for Scotland the present position and future programme in respect of electricity supply by the North of Scotland Hydro-Electric Board in the Islands of Harris, North and South Uist, Barra, Eriskay and the smaller Outer Hebridean islands.
    Mr. J. Stuart: The Board informs me that work in progress will result in the connection of 90 per cent. of the potential consumers in Harris and 86 per cent. in Benbecula, South Uist and Eriskay. In the former case, 175 out of 750 potential consumers and, in the latter, 243 out of 700 have already been connected. The Board is considering tenders for distribution schemes in Barra (including Vatersay) and North Uist including Grimsay and Berneray) but has reached no decision.
    Mr. MacMillan: Thank you.

    Cattle Ranching Experiment, Fort William
    Mr. Woodburnasked the Secretary of State for Scotland whether his attention has been called to the success, economically and otherwise, of Mr. Hobbs' experiment in cattle ranching at Fort William; and what steps are being taken to ensure continuance and development in adjoining lands of these improved methods.
    Mr. J. Stuart: I am aware that Mr. Hobbs' work has resulted in a considerable increase in production, and he himself has publicly stated that he is now obtaining a good financial return. Grants under the Hill Farming and Livestock Rearing Acts are available to owners and occupiers who wish to carry out improvement schemes on similar land.
    Mr. Woodburn: Is the right hon. Gentleman aware that Mr. Hobbs himself is a little disturbed as to the possibility of this successful experiment being allowed to lapse? I understand he is of opinion that it should be the duty of the Department to see that what has been achieved here is not lost, and that there is similar ground in the possession of the Department in the vicinity which could be similarly developed. In this way the successful work of Mr. Hobbs would develop and would become more prevalent in the Highlands, instead of fading away when his work comes to an end.
    Mr. Stuart: I can assure the right hon. Gentleman that I am in full agreement that similar work should be carried out on as much of the other land as possible. There is the question of the suitability of the land to consider, because winter feed is the great problem which confronts us in this development. Assistance is being given to others under the Hill Farming and Livestock Rearing Acts, and I should be glad to see it extended.
    Mr. Woodburn: Is the right hon. Gentleman aware that this depends on whether initiative comes from other people? Mr. Hobbs has not found many imitators but there is land owned by the Department next door to Mr. Hobbs which, in his opinion, is even more suitable for such development than the land which he recovered from the wild? Will the right hon. Gentleman ask his Department to consider whether this experiment

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    should not be stabilised by a Departmental public development alongside?
    Mr. Stuart: I will certainly consider other suitable land, but the Department is operating in various parts of Scotland, as the right hon. Gentleman knows.
    Colonel Gomme-Duncan: Is my right hon. Friend aware that, excellent as the work of Mr. Hobbs is, it is by no means the only experiment of this kind in Scotland, and that Lord Lovat in Inverness-shire, Sir William McNair Snadden, Sir James Roberts, and Mr. Stewart in Argyllshire and Perthshire have done exactly the same type of work with equal success?

    Victoria Infirmary, Glasgow
    Mr. Rankinasked the Secretary of State for Scotland if he is aware of the need for expanding existing accommodation at the Victoria Infirmary, Glasgow, in order to provide for the growing demands on the out-patients' departments and to relieve the congested conditions in which the research work of the hospital is now carried out; and what steps he proposes to take to implement the necessary structural extension which was accepted as essential in 1936.
    Mr. J. Stuart: This is a matter in the first instance for the regional hospital board, which has had an outline scheme for new building at the Victoria Infirmary before it for some time. This would involve expenditure of over £600,000, and it is not possible to say when work on this scale could be undertaken. The regional board is, however, considering whether necessary improvements could be carried out in stages.
    Mr. Rankin: That is the trouble with the management committee, that it is in difficulty in knowing what the regional board will do about this matter. Is the Secretary of State aware that the population of Glasgow on the south side of the river has increased greatly during the last 25 years and that the accommodation at this hospital has remained stationary? Can he not now urge the regional board to reveal the schemes that it has in mind?
    Mr. Stuart: Yes, I think that is the correct answer. I admit what the hon. Gentleman has said about the outpatients' department and the laboratories
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    being badly congested, and redesigning for phasing the scheme is the right solution.

    Algal Chemistry (Research)
    Mr. Willisasked the Secretary of State for Scotland where it is proposed to continue the fundamental studies in seaweed research; and whether any decision has yet been reached as to the establishment of a centre from which information on the results of such research can be made available.
    Mr. J. Stuart: It is proposed that fundamental research work in algal chemistry should continue to be done at universities and technical institutions. Suitable arrangements will be made for making available information on the results.

    Inveresk Gate (Use)
    Mr. Willisasked the Secretary of State for Scotland whether any decision has yet been reached concerning the future use of Inveresk Gate.
    Mr. J. Stuart: No decision has been reached as to the future of these premises.
    Mr. Willis: Is the right hon. Gentleman aware that there is concern about the manner in which this has been dealt with and that the equipment in this institute was being advertised for sale before the staff knew that the institute was to be closed? Is he satisfied that full consideration has been given to the possible alternative uses of this centre for further research work?
    Mr. Stuart: We are at present giving full consideration to uses of this nature.

    Rocket Range, South Uist
    Mr. Emrys Hughesasked the Secretary of State for Scotland what representation he has received from the Crofters Commission concerning the proposed rocket range at South Uist.
    Mr. J. Stuart: None, Sir.
    Mr. Hughes: Could the Secretary of State say whether he has taken any initiative in this matter? Why is he taking the initiative in cutting down all kinds of useful expenditure in the North of Scotland and at the same time encouraging this useless luxury?
    Mr. Stuart: This is the first time I have heard a projected missile range referred to as a luxury. It is not the kind of luxury which most hon. Members wish to enjoy. They regard it more as a necessity.

    Lung Cancer
    Mr. Hubbardasked the Secretary of State for Scotland the latest available figures on the deaths from lung cancer in Scotland.
    Mr. J. Stuart: There were 1,812 deaths from lung cancer in Scotland in 1954, and 1,311 in the first three-quarters of 1955.

    Coronary Thrombosis
    Mr. Hubbardasked the Secretary of State for Scotland the latest figures available of the incidence of deaths from coronary thrombosis in Scotland; and the incidence for the corresponding period of 1954.
    Mr. J. Stuart: During the first three-quarters of 1955 there were 6,470 deaths from coronary thrombosis in Scotland. For the same period of 1954, the number was 6,320.
    Mr. Hubbard: In view of the alarming figures of this killer disease, will the Secretary of State now take steps to get a voluntary notification agreement among local authorities in Scotland? Nobody knows the incidence of coronary thrombosis in Scotland, and as two schemes are already in operation in Fifeshire and Kilmarnock. will the right hon. Gentleman make an approach to local authorities for a scheme of voluntary notification?
    Mr. Stuart: My advice is that merely to compile statistics throughout the country would not necessarily be very helpful. We have these samples from Fife and Kilmarnock, which are what is wanted. I will, of course, consider, if medical opinion considers it is desirable, whether that should be carried further. but the question of the death rate is, I suppose, or may well be, attributable in some degree to the longer expectation of life at the present time.

    Chest Complaints, Fife
    Mr. Hubbardasked the Secretary of State for Scotland the number of cases of chest complaints of miners disclosed
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    by the recent mass radiography campaign in Fife.
    Mr. J. Stuart: This information is not yet available, but I will send it to the hon. Member as soon as possible.

    Special Constables (Duties)
    Miss Herbisonasked the Secretary of State for Scotland what action he proposes to take on the representations against the illegal employment of special constables made to him by the Scottish Police Federation.
    Mr. J. Stuart: Except in certain areas subject to local Acts, special constables may be employed on police duties in an emergency or for the suppression or prevention of tumult or riot. It is for the chief constable to decide on what occasions, within these limits, their employment is justified.
    Miss Herbison: Since the Scottish Police Federation feels very strongly on this matter and has made representations on a number of occasions to the Secretary of State, does he not feel that the time has now come when these duties should be made quite clear and that consultation should be held with the Police Federation?
    Mr. Stuart: I think that what the hon. Lady has in mind should be achieved, because the Police (Scotland) Bill is at present going through another place and should clarify the law. As all will agree, it is, of course, necessary to train these special constables. They must have some time of duty.

    Industrial Chest Units
    Miss Herbisonasked the Secretary of State for Scotland how many hospitals have industrial chest units; and if he will encourage regional hospital boards whose areas cover a coalfield to establish an industrial chest unit where this has not been done.
    Mr. J. Stuart: The only specific unit of this kind is that at Bangour Hospital, but facilities for diagnosis and treatment are provided by the chest units generally. Any question of special provision on a wider scale is a matter for the regional hospital boards, and the assessment of priorities must be left to them in the light of medical opinion and their knowledge of local needs and circumstances.
    Miss Herbison: Is the Secretary of State aware that about three years ago he replied to me saying that the unit at Bangour was in the experimental stage? Is he also aware that the National Union of Mineworkers has been asking for the same thing as I have asked for in this Question and in previous debates? Does he not think that it might help recruitment to the mines if young men were assured that everything possible was being done to mitigate this great disease from which miners suffer?
    Mr. Stuart: I agree that we must do all that we can in that direction, but specialised units are not the only method favoured by medical opinion to which I must pay some attention, but, in conjunction with the regional hospital board, I will certainly consider whether any further action should be taken.
    Mr. Hubbard: Is the Secretary of State aware that the incidence of chest diseases in Scotland, and in Fife in particular, is now higher than in any other coalfield in the country, that the matter is really urgent, apart from the health of the men, as far as coal production is concerned, but that nothing very much is apparently being done to combat this dread disease?
    Mr. Stuart: I am not contradicting the fact that it is a very serious problem. We certainly do our best to try to handle it.

    Northern Hydro-Electric Board
    Mr. Nabarroasked the Secretary of State for Scotland how much electricity was supplied from the area of the South of Scotland Board to the area of the North of Scotland Board during the first ten months of 1955; how much coal was consumed at the South of Scotland Board's power station in generating the electricity so transferred to the area of the Northern Board; and what steps he is taking to prevent a recurrence of coal-fired stations being required to support hydro-electricity establishments.
    Mr. J. Stuart: In the exceptional circumstances of the present year, approximately 33 million units were supplied to the North of Scotland Hydro-Electric Board in the first ten months of 1955, representing approximately 19,000 tons of coal. As regards the last part of
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    the Question, the completion of further hydro-electric schemes should reduce any future demands made on coal stations.

    Roads, Crofter Counties
    Mr. John MacLeodasked the Secretary for Scotland what representations have been made to him regarding the width of roads in the seven crofter counties in Scotland.
    Mr. J. Stuart: The Highlands Advisory Panel has supported representations made by Inverness County Council to my right hon. Friend the Minister of Transport and Civil Aviation that new and reconstructed trunk roads in the Highlands should have a double-width carriageway.
    Mr. MacLeod: In view of my right hon. Friend's future responsibility for roads in Scotland and particularly in the Highland counties, I hope he is putting up a good fight against the mad policy of the Minister of Transport in building narrow roads with passing places in regions where traffic is increasing year by year and where more people are coming up to the Highlands. It is a dangerous policy, it is uneconomic, and my right hon. Friend should stop it forthwith.
    Mr. Stuart: I am in constant communication with my right hon. Friend the Minister of Transport on these points, but the law prevents my actually taking any active responsibility until April Fools Day next.

  HOUSING, SCOTLAND

    Unfit Premises
    Mr. Timmonsasked the Secretary of State for Scotland (1) whether he will introduce legislation to prevent the sale of dilapidated houses in tenement and slum properties;
    (2) whether he is aware that young married couples in Scotland, on the local authorities' housing lists, are buying houses below the statutory standard for human occupation; and whether he will take powers to issue a general closing order as regards all such premises.
    Mr. J. Stuart: The Government have given their reasons on several occasions why they are not prepared to control either the sale or the selling price of houses. I have no reason to suppose

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    that the powers which local authorities already possess for dealing with unfit houses are inadequate and I am sure local authorities will readily give advice to any prospective purchaser.
    Mr. Timmons: Is the Minister aware that only four weeks ago, through my intervention, I saved a young couple and four kiddies from going out into the street? Is he aware that a number of malpractices are going on right through the West of Scotland, playing on the gullibility of young couples in their desperate need for a house? Is he aware that I could enumerate scores of cases from my own constituency in which these malpractices are carried on? Will not the right hon. Gentleman reconsider the whole matter and try to assist local authorities, which at the moment do not seem to have the power which he has suggested?
    Mr. Stuart: On 25th October, in reply to the hon. Member for Fife, West (Mr. Hamilton), I said that I had asked local authorities to give publicity to slum clearance proposals approved under the Act. I am satisfied from inquiries that I have made that local authorities readily give advice to prospective purchasers who are in any doubt.
    Mr. Steele: Is the Minister aware that if he looks at the file he will discover that I introduced a Bill for the purpose of preventing this type of sale of tenement buildings? I am certain that the Bill would meet the needs of Scotland at the moment. Is the Minister aware that I can give him an assurance that my hon. and right hon. Friends would make all facilities available to ensure that the Bill had a speedy passage through the House?
    Mr. Stuart: I remember the Bill well. I would not repeat at this stage the arguments which were used in giving our reasons for not proceeding with it, but I think that those hold today.

    Rent and Repairs Act
    Mr. G. M. Thomsonasked the Secretary of State for Scotland if he is now in a position to make a statement on the working of the Housing (Rent and Repairs) (Scotland) Act in the city of Dundee.
    Mr. J. Stuart: The Corporation's proposals under Section 1 of the Act show
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    that 23,700 houses in the city are unfit. Of this number it is considered that 8,700 houses can be rendered fit by the carrying out of work either by the owners or the Corporation. I have approved the Corporation's proposal to demolish and replace 2,270 houses during the next three years.
    At 30th June, 1955, the Corporation had granted 30 applications for certificates of disrepair and refused six, while four applications were under consideration or had been withdrawn. Four certificates were revoked after the landlords had done the necessary work. According to the current valuation roll, repairs increases are payable under Part II of the Act in respect of 452 houses in the city.
    Mr. Thomson: In view of the figures given by the right hon. Gentleman, showing that the major part of this operation is to be done by the Corporation and that only a small number of houses have been improved by the private landlords, would he not now admit that there is no means of maintaining older rented property in proper condition by private landlords? Would he not now scrap his idea of the abolition of the Rent Restrictions Acts and adopt the policy of the municipal ownership of rented property?
    Mr. Stuart: I cannot agree that we think that municipal ownership is the solution to the problem. I hope that the Act will be made more use of in the coming months.
    Mr. G. M. Thomsonasked the Secretary of State for Scotland if he will initiate a Departmental investigation of the working of the Housing (Rent and Repairs) (Scotland) Act, 1954, in respect of housing associations, with a view to ascertaining whether amending legislation is necessary.
    Mr. J. Stuart: Certain representations were made to my hon. Friend, the Joint Under-Secretary, at the end of September. These are being investigated and I will communicate with the hon. Member as soon as possible.
    Mr. Thomson: If I were to send to the Secretary of State further information that has come to hand on this very anxious problem in Dundee, would he give it consideration before it is answered?
    Mr. Stuart: Yes, certainly, Sir. I would be very glad to receive it.

    Rents and Loan Charges
    Mr. Rossasked the Secretary of State for Scotland the average rent of four-apartment council houses built in Scotland in 1950 and 1954, respectively.
    Mr. J. Stuart: I regret that information about the rents of houses built in the years in question is not available. The information given in the published rent returns relates to the average rent charged for all post-war four-apartment houses. This was £31 12s. 10d. in November, 1954.
    Mr. Rossasked the Secretary of State for Scotland the estimated annual cost of building and maintaining a house, the capital cost of which, £1,550, is borrowed at current Public Works Loans Board rate of interest.
    Mr. J. Stuart: The loan charges on this capital cost together with the cost of maintenance and management would amount to about £93 a year for sixty years.
    Mr. Ross: From the figures that we have been given by the Secretary of State, does he not appreciate that in limiting house building for general needs in future years—when we do make the decision for Scotland—the building of houses of such a rent, quite apart from rates, is the best way of abolishing the housing queue and at the same time building up a much greater need for housing in the future and creating slums?
    Mr. Stuart: I answered the Question on the Paper. Of course, we are pro-ceding along the lines that we think will be effective in dealing with overspill, slum clearance and the housing problem in general. I do not know whether I could enlarge upon that at this moment.

  MINISTRY OF WORKS

    Employees and Wages
    Mr. H. Hyndasked the Minister of Works what increases in wages will be given to employees of his Department to help them in meeting increased rents and Purchase Tax.
    The Minister of Works (Mr. Nigel Birch): None, Sir.
    Mr. Hynd: Does the Minister not recognise that these increased charges will be a burden on the workers and will lead
    1644
    to wage demands? Would it not be a welcome innovation for the Government as a model employer for once to initiate a wage increase?
    Mr. Birch: It has not generally been held that increases or decreases in taxation which apply to everybody are sufficient reasons for changes in remuneration.
    Mr. Lewisasked the Minister of Works the total number of employees in his Department, at a stated date, in each of the years 1951 to 1955, respectively; and the total annual wage and salary bill for these employees, for each year.
    Mr. Birch: As the reply contains a table of figures, I will, with permission, circulate it in the OFFICIAL REPORT.
    Following is the table:

    1st October in Year

    Non-Industrial Staff

    Annual Salaries

    Industrial Staff

    Annual Wages

    £

    £

    1951

    …

    15,958

    9,310,000

    20,475

    7,026,000

    1952

    …

    14,938

    9,575,000

    19,063

    7,458,000

    1953

    …

    14,207

    9,685,000

    18,060

    7,360,000

    1954

    …

    13,659

    9,756,000

    17,428

    7,331,000

    1955

    …

    13,050

    9,917,000

    15,439

    7,013,000

    Montevideo Embassy (Portrait)
    Mr. Hydeasked the Minister of Works why the portrait, after Sir Thomas Lawrence, presented by the late Marquess of Londonderry of his ancestor, Lord Castlereagh, Foreign Minister from 1812 to 1822, has been sent to Her Majesty's Embassy in Montevideo.
    Mr. Birch: This portrait was sent to Montevideo in 1953 at the request of the then Ambassador.
    Mr. Hyde: is my right hon. Friend aware that the Ambassador seems to have made a mistake and was confusing this portrait with the portrait of Castlereagh's successor in office, George Canning, who boasted that he had called the New World into existence to redress the balance of the Old? Would not Vienna, with which Castlereagh's name is associated by reason of the Congress, be a more suitable place for this portrait?
    Mr. Birch: I understand that the portrait has been very well received in Montevideo. The great Lord Castlereagh has been dead for some time.
    Mr. Anthony Greenwood: In view of the fact that Lord Castlereagh had to spend £60,000 to get into Parliament and procured the union of England and Ireland by methods which were far from scrupulous and lived to be by far the most unpopular Cabinet Minister in history, does not the Minister appreciate that many of us have no very strong objection to his posthumous banishment to Montevideo?
    Mr. Birch: I cannot be held to agree with the hon. Member's view of Lord Castlereagh.

    Office Building, London
    Mr. Hunterasked the Minister of Works the approximate total value of office building under construction in London at the present time.
    Mr. Birch: It is estimated that about £20 million is being spent on new office building in London this year.
    Mr. Hunter: Can the Minister inform me whether the amount of office building is causing a shortage of materials and labour on housing estates in London and Middlesex?
    Mr. Birch: The only shortage of building materials is of reinforcing steel, which does not affect housing very much. No doubt the demand for labour is competitive to a certain extent.

    Trafalgar Square (Starlings)
    Mr. Hurdasked the Minister of Works if he is aware of the filth which starlings roosting around Trafalgar Square are depositing on the monuments and on passers-by; and what further efforts are to be made to scare these birds away from this area.
    Mr. Birch: No method which is both humane and effective has yet been devised. Research is continuing.
    Mr. Hurd: As this nuisance seems to get worse day by day, will the Minister consider offering a prize to ingenious people, as that might result in the production of some device?
    Mr. Birch: We have under consideration a device—an ultrasonic vibrator—which we hope will be effective.
    Mr. Dugdale: Is the right hon. Gentleman aware that the Corporation of
    1646
    Birmingham has an instrument which is designed to terrify starlings and which emits a sound great enough to terrify any Member of Parliament but which has no effect whatever on any starling in Birmingham?

    Government Buildings (Smoke Control)
    Mr. Willeyasked the Minister of Works what steps he has taken to avoid or lessen the emission of grit, dust, and smoke from Government buildings.
    Mr. Birch: Smokeless equipment is installed in new buildings and is used for replacements in old buildings, and training is given to stokers.
    Mr. Wiley: I am obliged to the right hon. Gentleman for his reply. Is he satisfied that his Department is doing enough and is setting a good example for other buildings?
    Mr. Birch: We are getting on reasonably fast.
    Mr. Anthony Greenwood: How many open fires are still in use in the old buildings?
    Mr. Birch: I cannot give that figure without notice, but they are being eliminated pretty rapidly.

    Uranium Supplies
    Mr. Warbeyasked the Minister of Works what quantities of uranium have been allocated by the Combined Development Agency to the United Kingdom Atomic Energy Authority and the United States Atomic Energy Commission, respectively, during each of the three years to 30th June, 1955.
    Mr. Birch: As I am sure the hon. Member will appreciate, it would not be in the public interest to disclose the amounts of those allocations.
    Mr. Warbey: While appreciating that difficulty, could not the Minister tell us what the proportions are? That would not be making any disclosure, and it would give us some idea whether we are getting our fair share of the available supplies of uranium through an arrangement which, after all, makes this country dependent on the good will of a commercial competitor.
    Mr. Birch: I do not altogether agree with the hon. Gentleman's view of what is a disclosure. All I can say is that the agreement is working reasonably well, and we are satisfied with it.
    Mr. Warbey: Are we getting our fair share?
    Mr. Birch: Yes.
    Mr. Warbeyasked the Minister of Works what assistance the Government are giving to the Atomic Energy Authority in the procurement of supplies of uranium independently of the combined Development Agency.
    Mr. Birch: It is not at present possible to say to what extent uranium procurement will take place independently of the Combined Development Agency, but I can assure the hon. Member that Her Majesty's Government will give assistance wherever it is practicable and desirable.
    Mr. Warbey: Can the Minister say why the Atomic Energy Authority, as revealed in its Annual Report, is not directly financing prospecting for uranium in British Colonial Territories? Is it because the Government are keeping money for this purpose from it, or is there another reason?
    Mr. Birch: If the hon. Member will read the Report with attention, he will find that a great deal is being done to encourage the search for uranium in the Colonies.
    Mr. Warbey: Why cannot something be done to help the Authority to finance the prospecting?

  RESEARCH

    Fishery Research Ship "Sir William Hardy"
    Mr. Hector Hughesasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, the cause of the delay in the Fishery Research Ship "Sir William Hardy" concerning the research and other work for which she was built; and when she will commence that work.
    The Parliamentary Secretary to the Ministry of Works (Mr. J. R. Bevins): The delay arose because, as a result of the introduction of diesel electric propulsion, it was found necessary to improve the ventilation of the engine room. The trawler should be ready within a few weeks.
    Mr. Hughes: Can the Parliamentary Secretary say how it is proposed to make good the loss to the country caused by the non-use of much capital spent on this ship and by the long neglect of the research for which it was built?
    Mr. Bevins: This is a highly technical subject, and responsibility for what happened has not yet been clearly established.

    Nuclear Radiation
    Captain Pilkingtonasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, what steps the Government are taking to discover the genetic effects of nuclear radiation in regard to future generations; and whether he will summarise what is so far known on this subject.
    44. Dr. D. Johnsonasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, when he expects to publish the White Paper concerning the medical effects of nuclear radiation, including the genetic effects.
    Mr. Masonasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, what investigations are now being sponsored by the Medical Research Council regarding the possible long-term effects of nuclear radiation on human beings.
    Mr. Bevins: The Medical Research Council is conducting a number of investigations on the possible genetic and other long-term effects of exposure to nuclear radiation. As the House will know, a committee specially appointed by the Council at the request of the Government is giving the highest priority to the preparation of a report which will include a review of existing knowledge on the subject. It is unlikely to be completed before the spring.
    Captain Pilkington: Since some scientists apparently believe that this nuclear radiation may have a disastrous effect on future generations, would it not be a good idea to suggest the cessation of further experiments until a little more is known?
    Mr. Bevins: I do not think that that is a supplementary question which ought to be addressed to me.
    Dr. Johnson: Will my hon. Friend include the genetic effects of X-rays within the scope of this?
    Mr. Bevins: That is being included in the investigations.

    Dental Research
    Captain Pilkingtonasked the Parliamentary Secretary to the Ministry of Works, as representing the Lord President of the Council, whether he is satisfied with the present amount of dental research; and what steps he is taking to increase it.
    Mr. Bevins: Dental research is being carried on at a number of centres in this country, under the sponsorship of the Medical Research Council and otherwise. An important limiting factor in the further promotion of dental research is the dearth of suitably qualified and experienced workers. But the Council is aware of the need for more research in this field, and is actively seeking opportunities to extend its progamme.
    Captain Pilkington: Can my hon. Friend say how our knowledge of this research compares with that of other countries, notably America?
    Mr. Bevins: I hardly think that that arises out of the Question, but I can assure my hon. and gallant Friend that this matter is very much in the mind of my noble Friend. The limiting factor is not so much a shortage of money as a shortage of skilled workers.

  ANTARCTICA
  Mr. Usborneasked the Prime Minister whether he will propose to President Eisenhower and Marshal Bulganin that steps should be taken to declare Antarctica world territory under the sovereignty of the United Nations.
  The Prime Minister (Sir Anthony Eden): No, Sir. Her Majesty's Government viewed with sympathy the United States proposals in 1948 for an eight-Power condominium, but these proposals enjoyed very little support. I doubt whether any fresh proposal to entrust Antarctica to the United Nations would have any better prospect of success.
  Mr. Usborne: While thanking the Prime Minister for that extremely frigid reply, may I ask whether he is aware that in fact the proposal I am now making is not that it should be a condominium of eight Powers, which I admit was proposed in 1948, but that the sovereignty of Antarctica should be vested in the United Nations? That is a different proposal. Does he not think it is worth while?
  The Prime Minister: It is a different proposal, but I think it is even more difficult, because the sovereignty of large areas of Antarctica, as the hon. Gentleman no doubt knows, is vested in a number of friendly Powers, including members of the Commonwealth and countries like Norway. It is not vested in the United States and Soviet Russia who are the two countries mentioned in this proposal. I do not think that the prospect would be awfully good.

  UNITED NATIONS (FUNCTIONS)
  Mr. Pitmanasked the Prime Minister whether he will approach President Eisenhower and Marshal Bulganin to make a joint proposal to the United Nations that a new wing of the United Nations should be formed which shall have responsibility and power and be separate from the present wing which has only advisory functions and influence, and such new wing be given responsibility in respect of limited functions, such as oil pollution, fishing and submarine cables in a limited area such as Antarctica and the oceans not now claimed or desired by any nation.
  The Prime Minister: No, Sir; while I understand the motive that lies behind my hon. Friend's Question, I am sure that oil pollution, fishing, and submarine cables are best dealt with, as at present, by international agreement.
  Mr. Pitman: Is the Prime Minister aware that the decision of Her Majesty's Government to support a revision of the Charter met with widespread approval, and will he, in instructing the delegation for that conference, ask them to give to the United Nations some effective means of government and not limit them in the future always to report and advise and nothing else?
  The Prime Minister: My hon. Friend will know how immensely difficult are these questions connected with the high seas, if only because countries have widely varying views about what territorial waters should be. That is one of the reasons why it makes this not easy to handle.

  QUESTIONS TO MINISTERS
  Mr. Lewis: May I raise a point of order with you, Mr. Speaker. for your help and, I hope, your guidance? A Question which is on the Order Paper in my name today—Question No. 47 —was down yesterday on the Notice Paper with another Question of mine asking the Prime Minister whether he would send an invitation to the Soviet Parliament to visit this country. I visited the Table Office and asked for the Question which appears on the Order Paper today to be withdrawn. I now find that there has been a mistake and that the other Question which I wanted to ask has been withdrawn. May I have your permission not to call this Question—it is not my fault that there has been a mistake—but to ask the Prime Minister whether he can answer the other Question of which he has had very many days' notice?
  Mr. Speaker: I understand, in the short time available to me to consider this matter, that there has been some mistake, and I am perfectly willing for the hon. Member not to ask the Question which is on the Order Paper. As regards the Question which was wrongly withdrawn, if that is the position, and if the Prime Minister would be willing to make a statement about it after Questions, I should be a consenting party to that.
  Mr. Lewis: I thank you, Mr. Speaker.

  TITLES (USE)
  Mr. Emrys Hughesasked the Prime Minister if he will introduce legislation to abolish the use of titles.
  The Prime Minister: No, Sir.
  Mr. Hughes: Whilst thanking the Prime Minister for that reply, may I ask him if he realises that an unanswerable case for abolishing titles has recently been stated by a well-known Conservative newspaper, on the ground that titles perpetuate snobbery and class distinction? Is the right hon. Gentleman aware that this is about the only country in the world that now continues this system of titles?
  The Prime Minister: As the hon. Member—if I may use that title without offence —may be aware, there are a number of different views and tastes on this matter.
  Sir T. Moore: May I take it from my right hon. Friend's reply that such abolition would not preclude us from welcoming Marshal Bulganin or Hero of the Soviet Union Khruschev?
  Captain Pilkington: Would my right hon. Friend indicate to the hon. Member for South Ayrshire (Mr. Emrys Hughes) that while there is life there is hope?

  ADMINISTRATIVE TRIBUNALS (COMMITTEE OF INQUIRY)
  Mr. D. Priceasked the Prime Minister whether he will broaden section (b) of the terms of reference of the Committee of Inquiry into the practices and procedures of administrative tribunals so that the Committee may be empowered to consider, in the case of the compulsory purchase of land, the whole principle of appeal from the Minister to the ordinary courts of law.
  Mr. Marloweasked the Prime Minister whether he is satisfied that the terms of reference of the Committee which has been appointed to consider the practice and procedure of administrative tribunals are sufficiently wide to allow consideration by the Committee of the question of appeals from administrative tribunals to the ordinary courts of law.
  The Prime Minister: The terms of reference are, in my opinion, wide enough to include the question of appeals to the

  1653
  ordinary courts of law both from administrative tribunals and from Ministers exercising statutory functions in connection with the compulsory purchase of land.
  Mr. Price: Is my right hon. Friend aware that his statement will give great satisfaction to people who have been the victims of compulsory land purchase and who feel that the present system whereby the Executive makes an order and the Executive tries the appeal is not entirely in accordance with British justice?
  The Prime Minister
  Mr. Wade: Is the Prime Minister able to say whether there will be public hearings by this Committee, as the subject of administrative tribunals has aroused considerable public interest?
  The Prime Minister: I think that would be a matter for the Committee itself to decide. Perhaps the hon. Gentleman will put down a Question.

  PARLIAMENTARY DEBATES (BROADCAST DISCUSSIONS)
  Mr. Donnellyasked the Prime Minister if he will amend the directive to the broadcasting authorities by excluding persons who are not Members of either House from the effect of the ban on discussing subjects to be debated within 14 days in Parliament.
  The Prime Minister: The rule as followed now for several years protects the principle that when debates are arranged in Parliament they should not be immediately anticipated by broadcast discussions, whether hon. Members take part or not. I would not therefore propose that the rule should be modified to apply only to Members of the two Houses.
  Mr. Donnelly: Is the right hon. Gentleman saying that in his opinion this House has a right to prevent people who have nothing to do with this House from deciding whether or not they shall talk about things on the radio? Is he upholding that particular principle?
  The Prime Minister: I do not really look at it in that way. We could argue about it but, as the hon. Gentleman
  1654
  knows, this was an arrangement originally voluntarily arrived at. I think it a reasonable arrangement in the interests of Parliament and everybody concerned, and I see no present cause to vary it.
  Mr. Dugdale: Will the Prime Minister state whether there is any restriction on discussion taking place in the Press on matters which are likely to come before Parliament within fourteen days? If there is no such restriction, why should there be a difference between the B.B.C. and the Press in this matter?
  The Prime Minister: There is no restriction, and the reasons for the differential have frequently been stated and argued out by my predecessor and others.
  Mr. Wade: Is the Prime Minister aware that there is here an issue of some constitutional importance? Is it right that political parties in Parliament should attempt to dictate to individuals who are not Members of Parliament what they should or should not discuss? Furthermore, is it right that such a principle should become established before it has been debated or voted on by the elected representatives of the people?
  The Prime Minister: I do not think that it is a principle being established; it is a practice which has been followed being steadily pursued, and on the whole I think it works in the interest of Parliament. I would guess that the country as a whole understands that the interest of Parliament in this matter is of some significance.
  Mr. J. J. Astor: Is the Prime Minister aware that the present rule puts the editors of newspapers in an unwarranted privileged position?
  The Prime Minister: I expect that they will survive it all right.
  Mr. T. Williams: Is the Prime Minister aware that some of the members of these four-men panels are incapable of discussing the activities of an ordinary parish council?
  The Prime Minister: It would not be right for me to express an opinion while asking others not to do so.

  PARTY POLITICAL CONFERENCES (CIVIL SERVANTS)
  Mr. Lewisasked the Prime Minister if he is aware of the growing practice of Ministers taking their civil servants to party political conferences at Exchequer expense; and whether he will issue a general directive that civil servants, cars and other facilities provided to Ministers, at the expense of the State, should not be used in support or furtherance of any political party, organisation, or conference.
  The Prime Minister: I have made inquiries and am satisfied that this is not, as suggested, a growing practice. I certainly would not wish it to become so.
  Mr. Lewis: May I take it from his reply that the Prime Minister, while not issuing a general directive, has in mind that it is a practice not to be encouraged; and that when it is drawn to his attention he will advise Ministers not to do it?
  The Prime Minister: The general position, as I think the House knows, is that Ministers with police protection may use their official cars for private journeys, in which case they pay a mileage charge. Other Ministers have no cars personally allotted to them and cannot draw on cars for private journeys.
  Mr. H. Morrison: This has nothing to do with cars, has it? [HON. MEMBERS: "Yes."] We are dealing with Question No. 52, are we not? [HON. MEMBERS: "Yes"] But Question No. 52 asks the Prime Minister—
  "if he is aware of the growing practice of Ministers taking their civil servants to party political conferences."
  Hon. Members: Read on.
  Mr. Morrison: It goes on, "at Exchequer expense"—Yes, I follow that. But is it not the case that the Minister of Education took his public relations officer to a party political conference at Bournemouth? Is not this a new thing? Will not the right hon. Gentleman come clear about it: that it ought not to have been done, and that he will stop it in the future, whether it be the case of the Minister of Education or otherwise?
  The Prime Minister: I think that the Minister of Education explained the circumstances of this particular case. I am
  1656
  sure that he is aware, as we all are, of the need to maintain the existing practice, that civil servants do not go to party political conferences except on very rare occasions when they go to help their Ministers with particular Departmental work.
  Mr. Morrison: We really are entitled to have from the Prime Minister a categorical decision about this. It is surely wrong that civil servants, whether public relations officers or otherwise, should accompany their Ministers to party political conferences. Surely, it is the case that Ministers at party political conferences must stand upon their own feet and that it is not right that public funds should be used for the purpose of assisting Ministers to defend themselves. I beg the Prime Minister, as a matter of good constitutional propriety and of public morals, to be categorical about it and to assure us that he will not allow this to happen. I am very serious about it. I had a lot to do with this in the Labour Government, when, as far as I know, it never happened.
  The Prime Minister: I thought that I was absolutely categorical about it. I think it wrong and undesirable that Ministers should take public officials to conferences to help them in the work of the conferences. What I am not going to say is wrong—and I hope that the right hon. Gentleman is not going to ask me—is that either a Prime Minister, because I have done it myself, or the Foreign Secretary should take an official with him to do his other ordinary work. I think that is perfectly proper, and it has been done. That is the only distinction I draw. Certainly no public official should be made use of at all for the purpose of a party political conference.
  Mr. Morrison: I can follow the point of an official being available to assist a Minister in handling papers and official business not connected with the conference at all, but it is admitted in this case that the public relations officer assisted the Minister in what he was going to do at a party political conference. I do not think that anything would be lost by the Prime Minister saying that that was wrong and that he will see that it does not happen again. I beg of him, in the interest of good administration, to say so.
  The Prime Minister: I think that I have made my position perfectly plain and understandable to everybody, and I have nothing to add to what I have said.

  QUESTIONS TO THE PRIME MINISTER
  Mr. Beswick: On a point of order. We have had another example today of the impossibility of the Prime Minister being able to answer all the Questions addressed to him. We have also had another illustration of the inconvenience caused to Members by the request from the Prime Minister's Office to transfer Questions from one day to two other days a week. The difficulty of answering all the Questions on one day follows from the bunching up of Questions on two days. In the circumstances, will the Prime Minister be good enough to answer Question No. 53 so that we may know on what days the right hon. Gentleman is prepared to answer Questions addressed to him?
  The Prime Minister: I think that the hon. Gentleman is being a little ungenerous. Of course it is open to hon. Members—and that was my answer—to put down Questions to me or to any Minister on any sitting day except Friday. There is no doubt about that. However, in reply to the right hon. and learned Member for Rowley Regis and Tipton (Mr. Henderson) on 23rd June last, I said that I hoped it would be convenient to the House if I answered Questions on Tuesdays and Thursdays. These are certainly the days most convenient to me. That is only a suggestion that I have made, and it does not, of course, withdraw from hon. Members the right to ask Questions on any day of the week; but I hope, then, that they would not be offended if on some occasions I asked one of my colleagues to reply to them.
  Mr. Beswick: Further to that point of order. It may be open to hon. Members to put down Questions on any day of the week, but what we are really interested in, Mr. Speaker, is the day on which they will be answered.
  Mr. Speaker: Order. I do not think that this is a point of order.
  Mr. H. Morrison: I submit to you, Mr. Speaker, as a matter of indulgence, that it does affect the rights of the House. I
  1658
  accept the Prime Minister's views that it is competent for hon. Members to put down Questions on any day of the week other than Friday, but I suggest to the right hon. Gentleman that it is cutting things rather fine if he takes the view that he ought not to be expected to be here to answer Questions on more than two days a week. I should have thought that for him to be present on three days a week was not unreasonable, unless pressing public business keeps him elsewhere.
  The Prime Minister: I always try to treat the House with courtesy. I am a little astonished at what the right hon. Gentleman has said, because I understand that I have been following a precedent which has been in operation for quite a considerable period. However, I will certainly do all I can to meet the wishes of the House in this matter. I simply said that these two days were easier for me, and that is true. Naturally, I will try to meet the wishes of the House if it asks for more.
  Mr. Speaker: I cannot allow this discussion to go on further. I think that if there is any question of this sort as to what procedure should be adopted, and if the Opposition have one view and the Government another, it is properly a subject which should be discussed through the usual channels outside. It is certainly out of order at the moment because Question time is over. What the hon. Member is really doing, under the guise of a point of order, is asking for an answer to a Question which was not reached. It would be quite irregular if I permitted that to happen.
  Mr. Beswick: As this question was out of order on a point of order, may I take it, Mr. Speaker, that my Question has not been answered?
  Mr. Speaker: The hon. Member may take what he likes out of that situation. Now I think that we ought to see if we can get an answer to the missing Question of the hon. Member for West Ham, North (Mr. Lewis).
  Dame Irene Ward: On a point of order. As Question No. 53 was asked on a point of order when it was not a point of order, could we have a non-point of order on this side of the House and have my Question No. 54 answered?
  Mr. Speaker: That just illustrates the danger into which the practice of the hon. Member for Uxbridge (Mr. Beswick) would lead us. I think that the Question which was mistakenly withdrawn read as follows:
  "To ask the Prime Minister, whether he will now invite a Parliamentary delegation from the Union of Soviet Socialist Republics to visit this country, as guests of Her Majesty's Government."

  U.S.S.R. PARLIAMENTARY DELEGATION (INVITATION)
  Mr. Lewisasked the Prime Minister whether he will now invite a Parliamentary delegation from the Union of Soviet Socialist Republics to visit this country as guests of Her Majesty's Government.
  The Prime Minister: I understand that you, Mr. Speaker, and my noble Friend the Lord Chancellor have addressed invitations to the two Chairmen of the Supreme Soviet for a visit by a Soviet delegation to this country in July next year, as the guests of Parliament.
  Mr. Lewis: Is the Prime Minister aware that the invitation will be warmly applauded by everyone in this country, and may we also hope that for once we may have some decent weather so that the delegation can see this country in all its glory?
  Mr. H. Morrison: May I join with my hon. Friend in expressing our pleasure that this invitation should be made? I only rise to ask whether the Prime Minister will try to make special arrangements whereby our visitors can come to the Gallery of the House of Commons and witness the functioning of our Parliamentary institutions.
  The Prime Minister: That is very much in mind, and it is actually on the programme which we are putting forward.

FINANCE BILL
Order for Second Reading read.
3.40 p.m.
The Financial Secretary to the Treasury (Mr. Henry Brooke): I beg to move, That the Bill be now read a Second time.
Just now, as a country, we are overloading our resources. Almost everybody is agreed that that is our trouble. We are trying to get a quart into a pint pot, which is a thing to stop doing very quickly, lest the precious contents run to waste. As a nation, this autumn we have been buying too much, ordering too much, and spending too much. As our resources in men and materials are limited, the final effect of insisting upon carrying on like this would simply be to drive up prices against ourselves and endanger the value of the £. It must stop, and the Budget's object is to help to stop it. That may mean postponing some things which are good, and which we should like to have. Christmas trees are good things to have at Christmas, but if everybody rushes to buy Christmas trees on Christmas Eve it does not produce any more trees; it simply rockets up their price.
As Members of Parliament, therefore, we have to see how we can induce people to stop and think before buying and ordering things. We cannot get out of our difficulties otherwise. I hope that people will also stop to think before claiming that a 1 per cent. rise in prices justifies a 7 per cent. or 8 per cent. rise in wages. If not, the price of those Christmas trees and, indeed, many other things, might go through the roof before Christmas of next year.
We all owe a duty to people who have no means of escape from being hurt by rising prices—those people living upon fixed incomes. Many of them feel, very understandingly, that not enough attention has been paid to their problems in the years which have gone. If this Budget substantially helps to deal with inflation and the price rise they and everybody else will be thankful for it.
The Bill contains the tax measures for restraint upon spending. In his Budget speech my right hon. Friend described how he intended to make Government

1661
Departments, local authorities, nationalised industries arid private companies stop to think before spending money upon new developments; stop to think, that is, about the urgency of the new developments they have in mind. The proposals ill the Finance Bill are the counterpart of all that in the tax field.
Tax legislation has to be absolutely precise. I suppose that that is why Finance Bills tend to look extraordinarily complicated to a good many people, like myself, who are not lawyers. The traditional duty of the Financial Secretary upon these occasions, when he moves the Second Reading of the Finance Bill—as he normally does—is to try to explain the effects of the Bill in language which he himself can understand. If he succeeds in that there is every hope that the rest of the House will understand. If he does not, there is clearly no hope at all.
I propose to deal first with the Inland Revenue duties in Clause 2 and onwards, and then come back to the Purchase Tax provisions in Clause I. Clause 2 enacts the increase in Profits Tax upon distributed profits from 22½ per cent. to 27½ per cent. and makes the new rate effective from 1st November. The Clause itself is the simplest and, I think, the shortest of the four operative Clauses, but, linked with it, is the Second Schedule, which looks formidably incomprehensible. However, let me reassure the House upon that. The Second Schedule simply follows the same lines as the provisions inserted in previous Acts when the rates of distributed Profits Tax have been changed. The accountants and solicitors who have to deal with these matters will find nothing involved about it.
The broad effect is this: let us suppose that a company has the calendar year as the accounting period, and that in 1955 it makes a profit of £120,000, of which it distributes £60,000. Then, for the chargeable accounting period of 10 months, to the end of October, the profits will be taken as £100,000 and the distribution as £50,000, taxable at the old rate of 22½ per cent. For the two months of November and December the profits will be taken as £20,000 and the distribution as £10,000, taxable at the new rate of 27½ per cent.
In his Budget speech the Chancellor made clear his reasons for increasing this tax, and I will not elaborate them. One
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or two hon. Members have strongly suggested that the tax will make no immediate difference. I believe they argue that from the fact that the yield in this financial year will be negligible, but though the Profits Tax does not come in as revenue immediately, it begins to bite instantly. From now on, the board of directors of every company which is deciding what dividend to declare will have to allow for it. In this way it begins to exercise its influence, in line with the needs of the economy, more swiftly even than does Purchase Tax. Systems of dividend-freeze by Acts of Parliament are inequitable and I believe that they would be unworkable, but this new Profits Tax will put sharp teeth into my right hon. Friend's advocacy of dividend restraint—and that is precisely what it is intended to do.
We are not prejudging the Royal Commission's recommendation of a flat rate of tax for companies. The Bill is a supplementary Finance Bill, to deal with an exceptional situation. We could not start to rewrite the whole of company taxation in a twinkling. We have to take the Profits Tax instrument as we find it and sharpen its cutting edge. Twenty-seven and a half per cent. is a very high rate of tax upon distributed profits, when joined with Income Tax at 42½ per cent., and Profits Tax does not now rank as a deduction in computing profits for Income Tax purposes as it once did. My right hon. Friend is not blind to the fact that high rates of distributed Profits Tax may operate unevenly upon companies, according to whether they have a high or a low ratio of preference to ordinary capital but, I repeat, this is the practical use of the instrument that is ready to our hand.
The recommendations of the Royal Commission are much more far-reaching, and will need a great deal more study, especially in their potential effects upon different types of company, before my right hon. Friend can possibly reach a final decision upon them.
Mr. Harold Lever: Before the right hon. Gentleman passes from this point will he, for the benefit of the handful of Members of the House who are not economists, explain how the increase in the Distributed Profits Tax, or dividend

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restraint, will help in any way to cure the inflationary situation?
Mr. Brooke: It prevents the creation of greater incomes.
Clause 3 is important to our balance of payments. We need all the dollars we can earn by doing insurance business overseas. Our invisible exports can be of tremendous importance and value to us just now. This is one of the great potentialities, because, in the field of insurance, Britain has a proud reputation which is second to none throughout the world. Insurance is done partly by companies and partly by individuals. Lloyd's underwriters act as individuals. They are prohibited under the Assurance Companies Acts from carrying on business otherwise than as individuals. Indeed, at Lloyd's it is the essence of the matter that the whole personal fortune of each underwriter is at risk. There is no limited liability.
Here comes the tax snag. Companies are liable to Income Tax and Profits Tax, but the rate of Profits Tax on profits put to reserve is quite low, 2½ per cent. Individuals are liable to Income Tax and Surtax, and, unlike the Profits Tax, Surtax allows of no relief for profits put to reserve. Obviously, underwriters are bound to put a substantial part of their profits to reserve. The nature of insurance demands that they should. They must accumulate reserves against the possibility another year of catastrophic losses, as may always occur. The problem here is how to do tax justice between individual underwriters on the one hand and insurance companies on the other.
The law at present allows underwriters to pay over certain sums free of Surtax, after payment of Income Tax and Profits Tax, into special reserve funds set up for the purpose of their business. The present legal limits are 35 per cent. of the net profits or £5,000 per annum, less Income Tax, whichever of those two is the smaller. Unfortunately, the United States has suffered tragically from hurricanes in the last year or two. These have thrown heavy liabilities on the London insurance market. My right hon Friend became aware that Lloyd's underwriters were realising that they would be forced to restrict their commitments in America unless they could find some means of increasing their covering reserves.
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Something needed to be done because, in the national interest, we want to see London writing more business overseas and not less. In the long run the business is profitable and brings in dollars, and losses in the short run are only frightening if reserves are unequal to meet them. This is why we propose to raise the limit of 35 per cent. to 50 per cent. and the limit of £5,000 to £7,000. Any additional sums put to reserve under the Bill free of Surtax will become liable to Surtax if they have not been drawn upon when the reserve fund is wound up on the death of the underwriter. That is provided for in subsection (2). If it is wound up during the underwriter's lifetime because he chooses to go out of business, any money paid to him out of the fund will be liable to Surtax under the existing law.
Because of its urgency for maintaining, and I hope expanding, dollar earnings, this Clause cannot wait until next year's Budget. The cost to the revenue is £500,000 a year, but that will diminish as the unpaid Surtax becomes payable later on. Its dollar earning effect is well worth the temporary loss of revenue.
Mr. J. T. Price: Before the Financial Secretary leaves that point, may I ask, since he has just explained that the Clause is brought forward to meet an emergency in which the underwriters have to meet a catastrophic risk although, in the long run, the insurance in America will be profitable, as everybody knows, whether this matter will be reviewed after the emergency, or whether this is to be a permanent feature of our fiscal policy for underwriters?
Mr. Brooke: The position is kept under review. We have kept it under review from the beginning. I do not know whether hon. Gentlemen opposite realise that this system was started by the Labour Government. This is the second time on which proposals have been brought forward to alter the position. We must clearly recognise there is great need, and I hope that the Clause will commend itself as a practical improvement of our existing system.
Clause 4 is designed to exterminate the small but ingenious tribe of dividend strippers. These are people who have discovered a device for extracting from companies their cash reserves, without creating any liability to Surtax and with

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remarkable Income Tax advantages to themselves. I can best reveal the secrets —if they are secrets—of this process by taking an imaginary example. We will imagine a concern which carries on a trade of dealing in securities, and proceeds to buy up for £100,000 the shares of another company which has large, undistributed cash reserves.
Having got control of that other company it then proceeds to pay out those reserves by declaring an enormous dividend. Suppose, in our imaginary example, it causes the company to pay out £92,000 in dividend and then sells the shares for £8,000. On the face of things, it has merely broken even, because £92,000 plus £8,000 equals the £100,000 which it originally paid for the shares. But wait a moment. The concern which indulged in this transaction carries on the trade of dealing in securities, and when it sells shares for less than they cost it can treat the difference as a trading loss available for Income Tax relief and it need not bring into account any dividend received between the purchase and the sale.
In this case, therefore, having bought for £100,000 and sold for £8,000, it shows a so-called "loss" of £92,000 and, therefore, qualifies for tax relief in respect of that loss. It is thereby enabled to claim 8s. 6d. in the £ on £92,000, and pockets £39,100 entirely at the expense of the Revenue. This trick is at present perfectly lawful and it has just begun to be exploited on a really big scale. If we waited until the next Finance Bill the loss of revenue in the interval would exceed six figures. I am not prepared to stand by and see the Revenue milked like that.
Mr. H. Rhodes: This brave talk is all very well, but the Comptroller and Auditor General pointed this out before the April Budget, and nothing was done.
Mr. Brooke: I am very glad that the hon. Member will support us in doing it now.
In principle, the remedy is simple enough. It is to make sure that it is impossible to claim the cost of getting the dividend as a trading loss available for tax-relief purposes. That is what Clause 4 does, in eflect. The detail of it, I grant, is a little more complicated. We have drafted this Clause so as not to interfere at all with perfectly straightforward and
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genuine transactions. It would apply only where the dealing concerned has acquired more than one-tenth of the ordinary shares of a company, and where a dividend is paid after acquisition out of pre-acquisition profits. The Bill will catch and defeat every dividend-stripping operation where the shares are acquired after 26th October, 1955—Budget day. From that day dividend stripping will become unprofitable, and the dividend stripper will be out of business—will be out of that business, anyway.
Mr. Harold Wilson: The right hon. Gentleman is giving a very lucid account of this racket—and it is a racket even though, up to now, it has been legal—but would he explain why it is that the Government have approached the drafting of this Clause in this way? The Clause occupies about three pages of the Bill and the three pages of the Third Schedule. He will recall that the parallel operation, if I may so call it, of bond washing was dealt with much more briefly in the 1937 Finance Bill, because then the tax was placed on the vendor and not on the purchaser of the shares. Would the Financial Secretary explain why, in this case, the Government have decided to make the tax fall on the purchaser of the shares, when it might have been more simple—and certainly more effective—to put the tax on the vendor? Is the Government's reason for not doing that a feeling that it would be the thin end of the wedge for a capital gains tax?
Mr. Brooke: No, Sir. The only reason is that we want to make sure that it is absolutely effective in our object of killing dividend stripping. Whether this is precisely the right, or the best way of doing it, might certainly be discussed in Committee, but our purpose in so drafting it is to ensure that the Statute will he effective.
I turn to Clause 1—Purchase Tax. When the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) was Chancellor this tax was levied at three rates—33¼ per cent., 66⅔ per cent. and 100 per cent. In 1953, under the Conservative Government, those rates were brought down to 25, 50 and 75 per cent. There are, in fact, very few goods now chargeable at the highest of the three rates, apart from the more elaborate greetings cards and cosmetics. There is very little else. Nevertheless, the goods in

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the two higher tax classes now produce more than half the total yield from Purchase Tax, and will continue to do lo under this new Clause. When the right hon. Gentleman the Member for Leeds, South was Chancellor the two top rates produced less than half of the total Purchase Tax yield, so that the tax is less regressive now than it was under his management.
Mr. Hugh Gaitskell: Can the Financial Secretary give the exact figures?
Mr. Brooke: Certainly. In the time of the right hon. Gentleman the two top rates produced about 45 per cent. of the yield. When this Bill comes into operation they will be producing about 55 per cent.
Mr. Roy Jenkins: The right hon. Gentleman is getting rather close to answering a question which I asked in the Budget debate, to which the Chancellor referred but did not directly answer. What are the absolute figures for the amount of the total increase in Purchase Tax which are to come from the three different categories?
Mr. Brooke: I had intended to answer that a little later, but I will gladly oblige the hon. Member by giving the answer now, because I remember that he and several other hon. and right hon. Members asked for a break-up of the extra £75 million of Purchase Tax revenue as between the different rates. I have brought the figures today, because I want the House to have the fullest information on all this while it is debating these complicated matters. I am sure that the right hon. Gentleman will realise that the figures cannot be absolutely precise, and that I am giving them as broad estimates.
The 30 per cent. tax on household goods is estimated to produce £15 million in a full year, as I told the Committee the other day. The effect of abolishing the D scheme—including, of course, the extra tax from furs—may be an increase of £8 million. Over the textile field, though we tried to keep the revenue at the same figure under the new rates as under the old, that would have required the rather absurd rate of about 4⅔ per cent. on clothing. Therefore, we rounded it up to the simple 5 per cent. This means that £52 million of the additional
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yield comes from the raising of the three main rates to 30 per cent., 60 per cent. and 90 per cent.
As I mentioned a minute or two ago, there are very few categories of goods now chargeable at the highest rate, but because the increase in tax there will be no less than 15 per cent. it may bite rather hard. The result is that we estimate that only an extra £2 million will come from the goods chargeable at the highest rate. The greater part of the £52 million will be from the middle category. We estimate that £30 million will come from goods in that category, which will be at 60 per cent. That, of course, is where the cars and the television sets are. The remaining £20 million will come from the 30 per cent. class. I hope that I have made the break-up clear. The House will realise that the more expensive an article is, the more revenue it brings within each class. Baby cars and Bentleys each pay tax at 60 per cent., but the amount of tax on each is distinctly different.
Mr. J. T. Price: The Financial Secretary has just estimated £30 million as the amount which will be produced by motor cars in the middle range. [HON. MEMBERS: "No."] That is out of the £75 million additional tax which was appended when the proposals were put forward in the Budget. I want to ask—and I do not think that the matter has ever been raised before—how the country's revenue is to profit to any material degree from these changes in motor taxation, when there is, first, a 20 per cent. initial allowance on cars sold in the market place, and also 10 per cent. depreciation? Surely the new taxation will be given back when Income Tax claims are made.
Mr. Brooke: I am sorry if the hon. Member misunderstood. I did not say that £30 million came from motor cars, but that the £30 million will come from motor cars and all the other goods chargeable at 60 per cent. The question of initial allowances, and so on, can quite properly be raised in our debates, but I cannot help thinking that, at present. I shall be helping the House best by expounding what is in the Bill rather than wandering over what is not in the Bill.
I quite recognise that the Financial Secretary's speech when moving a Second Reading of the Finance Bill is liable to

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be a dry and dull one. [HON. MEMBERS: "No."] Yes. But I feel that if, perhaps, I can make the subject lucid I shall be conferring some benefit on hon. Members on both sides in our subsequent debates.
Mr. Gaitskell: I am obliged to the right hon. Gentleman, as I am sure we all are, for his lucid explanation and his answers to these questions. There is one point which is not quite clear. He said, I think, that the gain resulting from the abolition of the D scheme and the introduction of the 5 per cent. and 10 per cent. rates was £5 million. Could he say how much of that is due to furs and how much to other articles?
Mr. Brooke: About £1,250,000 is due to furs.
Mr. H. Lever: Before the right hon. Gentleman passes from this point, may I ask him—
Mr. Speaker: Order. I would call attention to the fact that this is a Second Reading debate and that speeches should be, as far as possible, free from interruption. There is no objection to eliciting a figure here and there, but this is not a Committee stage.
Mr. Brooke: Clause 1, to which I now come back, is designed to do four main things. It raises each of the Purchase Tax rates by one-fifth—to 30 per cent., 60 per cent. and 90 per cent. respectively. Secondly, it abolishes the D scheme, which previously applied to clothing, woollen textiles, furs and furniture. Thirdly, it brings into tax at 30 per cent, a range of household goods from plain cups and saucers to expensive dinner services, from saucepans and jelly moulds to biscuit barrels and electric toasters, albeit a range of goods—and a very varied range—which was previously exempt. Fourthly, the Clause removes what I think is an obvious anomaly in the existing law, in that at present goods may have tax imposed on them at any existing rate, including the highest rate of all, by an affirmative Order, but not at any new rate. Any new rate requires a Finance Act.
For instance, under existing law my right hon. Friend could subject some exempt article to Purchase Tax at the very highest rate by Treasury Order, subject to an affirmative Resolution of this House. But though he could tax it at 90 per cent. in that way, if he felt that
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the correct rate of tax would be something quite small—say 7½ per cent.—he could not do that by Order, because nothing else is in the tax at that rate. To impose 7½ per cent. would require an Act of Parliament. That, I suggest, is rather absurd and the Clause removes that restriction. But, of course, we are retaining, and should wish to retain absolutely, the provision that nothing can be taxed at a rate higher than the existing highest rate except by going through the whole procedure of legislation.
The Budget changes in the tax are all directed to helping the country out of its economic difficulties. A general rise in the main rates of Purchase Tax is, after all, the obvious way of checking spending. My right hon. Friend hopes that a rise of one-fifth will do the trick; and it will still leave the rates lower, I may point out, than when the Conservatives came into office.
It is, of course, the expensive goods which will feel the increase most and that is as it should be. People are wondering whether this extra tax will really stop the public buying. We shall see, but surely the answer is that it will stop some of the public from buying things that they do not really need, and that if they do buy, some of the money they spend will be drawn off as tax revenue into the Exchequer and purchasing power will be cut back to that extent. There will be less to spend on other things. [An HON. MEMBER: "It is too simple."] As the hon. Member says, it is too simple, but it is absolutely true and it is absolutely what the situation requires.
In so far as there is less spent, or less to spend, there will be more goods released from the home market and available for export, and more incentive to make a fresh drive to sell them for export. That, too, is exactly what is needed if we are to get our balance of payments really strong. The House will have noticed the respect we have already won abroad in this last fortnight, signalised by the £ having gone above parity with the dollar. We have to keep the £ strong by our own efforts, and that is where the Government are giving the lead. My right hon. Friend would not be lifting these three main rates if he were thinking of lowering them again quickly, and I would not advise anyone to pin hopes on their early reduction.
The Purchase Tax on quality goods with individual craftsmanship in them

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needs to be watched especially carefully, and I have had representations in the last eighteen months from hon. Members on both sides of the House concerning this field. Goods of this sort can do so much for Britain's reputation in overseas markets, but if high Purchase Tax prices them out of the home market, then the craft may die and there may be no basis on which to maintain exports.
This is a very real danger, and well justified representations have been made in the past from both sides of the House that heavy Purchase Tax was strangling two of these craft industries, silverware and cut glass. My right hon. Friend rightly decided that, for export reasons, they could not bear a still higher rate than the 50 per cent. which they were paying, and that a concession must be made in their favour. So this, too, was in line with the main purpose of the Budget to strengthen exports and stabilise the £.
The opportunity has been taken to do something of which I am sure both sides of the House will approve, and that is to free from tax plate and ornaments made of silver for use in churches. The effect of the tax had been criticised in the past, and now we are remedying it.
The D scheme is to go entirely, and I have not seen anyone closely acquainted with it who is shedding a single tear on that account. Price changes had progressively made the original D levels out of date, so that some had become too low and many more of them had become too high. One could not be constantly altering them, and yet they gave rise to all sorts of legitimate complaints.
What really moved my right hon. Friend to his decision—and it was a bold decision—to abolish the D scheme completely was the handicap it placed on export trade. We must live so largely by exporting high quality goods, the best goods we can produce, and yet the D scheme contained a tax incentive to make less high quality goods below the D level for sale in the home market. With the D scheme gone, there will be no tax distortion of the range of production any more. The old rates of tax above the D level were 25 per cent. and 50 per cent. The new rates, apart from furs, will be 5 per cent. on most things and 10 per cent. on the rest. The 5 per cent. rate is so low that on the cheapest goods
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it will hardly be felt at all. It is Is. in the £ on the wholesale price.
May I mention, in passing, that one effect will be to bring down the tax on crash helmets, which has so often been mentioned in the House, from 25 per cent. to 10 per cent. The 5 per cent. and 10 per cent. rates here proposed are, of course, the lowest rates of Purchase Tax there have ever been. The clothing and the furniture trades, as a matter of fact, are being looked at enviously by a great many other trades which are charged Purchase Tax at 30 per cent. or more. Of course, no one enjoys paying any tax at all, but I hope that the general feeling will be—and there are signs that this feeling is already prevailing—that, although every method of remedying the faults of the D scheme could be criticised on some grounds or other, the Government's choice was the best and straightest solution—to scrap the scheme and secure the revenue instead by a low flat rate of tax.
On furs, as I explained in the Budget debate, there was a D level of £12. It would have been quite out of keeping to reduce the present tax on fur coats. If the tax had gone up from 50 to 60 per cent., and the D level had been abolished at the same time, then the fur trade, alone in the whole Purchase Tax field, would have been hit twice. It would have suffered two blows. The Government's intention here, to abolish the D level but to keep the rate on furs at 50 per cent., thus will mean that furs will pay more tax.
Mr. Geoffrey Hirst: Before my right hon. Friend leaves that interesting subject, may I ask him a question? While I very much appreciate the abolition of the D scheme, because I have asked for it many times, what I am worried about is the continuation of a tax difference between wool cloth and non-wool cloth, which the textile industry thinks is very unfair. I have not yet seen any reasonable argument why that difference should stand, because the two cloths are in competition with each other.
Mr. Sydney Silverman: Before the right hon. Gentleman answers that question, may I ask him a similar one? Would the right hon. Gentleman care to explain to the House specifically how the proposals made in Clause 1 of the Finance Bill are intended

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to react upon or to improve the present emergency in the cotton textile trade?
Mr. Brooke: I hope that the abolition of the D scheme will help the textile trades generally, but I shall make my speech rather long if I go into great detail. I would, however, willingly answer my hon. Friend the Member for Shipley (Mr. Hirst) perhaps at a later stage.
All I would say here now is that we are taking a valuable step—I dare not say to bring Lancashire and Yorkshire into equality, because neither side would think it was not equal to the other—but to remove any such difference as he has criticised in that we are lifting the tax off the woollen household textiles, such as blankets and rugs, in the same way as we lifted the tax off cotton household textiles, such as tablecloths and towels, in my right hon. Friend's earlier Budget.
At the time when I was interrupted, I had been speaking about furs. I have left to the end of my speech my right hon. Friend's proposal to bring within the field of tax at 30 per cent. household goods which were previously exempt. In the first days after the Budget, this aroused more interest and controversy than anything else in the whole Budget. The Chancellor reached his decision because it is necessary to restrain home demand, not over a limited field, but over a broad field. It is largely a matter of chance what has been within the claws of Purchase Tax and what has been hitherto outside them, and it hardly seemed right now to be guided wholly by that chance —to tax more heavily what was taxed already, and yet to do nothing at all as regards articles, some of them much less essential articles, which happen to be outside the Purchase Tax.
The logical thing was to include within this tax at the third rate, that is to say, the 30 per cent. rate, all the goods which were of the same general character as those within that rate already. The Chancellor felt that some part of the measures to save us all from the perils of inflation and soaring prices should be shared by every home. People ought to stop to think before buying many of these things, just as much as before buying things which had been bearing Purchase Tax already.
Mrs. E. M. Braddock: Can the right hon. Gentleman tell the House how much the Treasury will have to pay the Treasury in order to cover the additional amount which the hospital services will have to find on Purchase Tax? In the case of the particular hospital management committee in which I am interested, it will cost £2,500 additional this year, and how the Treasury are to find this money by putting a hand in one pocket, taking the money out and putting it in another, I do not know. Has the right hon. Gentleman any figures to show us how the hospital services will meet this additional cost?
Mr. Brooke: The hon. Lady would not expect me to answer a question like that without notice, but what she has said is really no argument against my right hon. Friend's proposals.
It is, of course, quite fantastic to represent it as a tax on the poor which the rich escape. The extra cost will average 4d. a week for the ordinary household—the price of a couple of cigarettes or a couple of evening papers. But, of course, it will come out a great deal more for those people who want to buy expensive electric toasters or costly dinner services, both of which, up to now, have been bearing no tax at all.
Furthermore, many of these goods that have been exempt are made of metal, and metal is scarce and needs to be used sparingly if the factories which require metal for making up into exports are not to go short. There was also the need to clear up the mess left by the last Labour Government. [HON. MEMBERS: "Oh."] I am sure that that Government was actuated by the best of motives. They wanted to free domestic essentials, but to leave luxury goods subject to tax, but they had such extraordinary ideas of what were luxuries. I gave a few examples the other night, and I will mention many more, because they show how we are setting about getting some sense into this tax.
The Labour Government made teapots exempt, but taxed teapot spouts. They freed the dish with the meat on it. but taxed the cover which is put over the meat in the larder. They freed the lids for preserving jars, but not the sealing clips for holding them down. They freed flower bowls, but taxed flower vases. They freed coal scuttles, but taxed pokers,

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tongs and shovels. They freed pastry boards, but taxed pastry cutters. They freed those clockwork time-pingers that cost 16s. or so, but taxed the cheap and simple hour-glass egg-timer.
They made nonsense of the tax. The dividing line which they drew between liable and non-liable is quite indefensible. It gives rise to the very worst of the Purchase Tax anomalies.
Mr. Douglas Glover: Surely it was sensible to tax egg-timers when right hon. Gentlemen opposite were in office, because there were no eggs.
Mr. Brooke: I know that the right hon. Member for Leeds, South says that his party's policy was as far as possible to limit Purchase Tax to luxury goods. Apparently to him and his right hon. Friends, wine glasses are a necessity of life but tooth paste a luxury. Unless we are to put up with these extraordinary Socialist distinctions for ever, I see no way of putting the tax on to a reasonable and logical basis, except as proposed in the Budget. We looked at the whole subject very thoroughly before the Budget was introduced. We have looked at it again since, for my right hon. Friend insists on examining himself every suggestion about these matters which is made to him.
I have been reading the newspapers and have seen plenty of ideas there for tinkering about with the "pots and pans tax" as some people have called it. There is much appositeness these days in the old nursery rhyme,
"If if's and and's
Were pots and pans
There'd be no need for tinkers."
One suggestion mooted was that a distinction should be drawn between metal and non-metal goods. These are the sort of matters which can be examined in Committee, but I must say that I myself do not see how Parliament could, for instance, treat metal tea-pots differently from earthenware tea-pots, metal pie-dishes differently from glass pie-dishes, metal trays differently from wooden trays, or metal jugs differently from plastic jugs, and so on down the list. It would look dreadfully unfair to tax the metal article while leaving the identical article, in plastics, glass, or earthenware, free of tax. All these matters can be examined in Committee, but I doubt whether anyone
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on either side could defend creating anomalies like that.
As the House knows he always does, my right hon. Friend has given most careful attention to everything which has been said or put to him up to now. His fixed resolve is to stop inflation and to stop the £ from losing its value at home or abroad. For all the reasons I have given, he stands by his Budget proposals, and I commend this Bill, which embodies them, to the House.
4.33 p.m.
Mr. Douglas Houghton: One would have gathered from the earlier part of the right hon. Gentleman's speech that the Bill was intended to stop people buying too many Christmas trees. But as he unfolded his case we saw that this is the Bill of the Budget; and as we opposed the Budget, so we shall oppose the Bill. That does not mean to say that we are opposed to all that is in the Bill, but whatever approval we feel of some parts of it is outweighed by the offence of Clause 1.
Before I come to the proposals in the Bill, I should like to make a comment and a protest about what I understand to be the restrictions which will be placed upon the scope of the discussions during the Committee stage. As I understand, because there is no general amendment of the law Resolution we shall be confined, in Committee, to discussion of Amendments to what the Bill proposes to do, and nothing more. This follows exactly the situation which we went through at the time of the April Budget. We therefore have here the unusual experience of two Finance Bills in one year and both restricted in discussion during the Committee stage because there is no general amendment of the law Resolution which permits it.
I think that that is to be regretted. At the time of the Finance Bill in April, the Chancellor was giving more away than he should have done and was in a hurry to get to the hustings. He did not want a long debate on the Finance Bill at that time. That Parliament was coming to an end and the Election was in prospect. We all understood, if we did not accept or acquiese in, what he was proposing to do. Now we are going through the same experience for the second time, and it looks as if the right hon. Gentleman were anxious to bring to an early close the

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inquest on the Government's miscalculations. I am bound to register our protest against what is likely to be the position during the Committee stage.
I propose to follow the right hon. Gentleman's example in dealing first with Clauses 2, 3 and 4 and coming later to Clause 1. First, I will deal with the Profits Tax proposal in Clause 2. As the right hon. Gentleman explained, the Bill proposes to increase the tax on distributed profits from 22½ per cent. to 27½ per cent. The Chancellor has set aside, at least for the time being, the Majority Report of the Radcliffe Commission, which was in favour of abolishing the differential in Profits Tax rates between distributed and unclistributed profits.
As the Chancellor reminded the House when he introduced the Budget, there was a minority Report which strongly opposed the majority recommendation for the abolition of the differential rates of Profits Tax except as part of a wider reform of taxation, including a capital gains tax. The Chancellor said he is not yet ready to make up his mind on permanent alterations and he framed his Profits Tax proposals within the existing framework of the tax; and we on these benches support him in doing that.
In the course of his speech the right hon. Gentleman said that 27½ per cent. Profits Tax on distributed profits, on top of 42½ per cent. Income Tax, was a very heavy load for distributed profits to bear. It is, but surely a very large proportion of those profits has been earned out of the consumer and out of the worker, and there is no reason a very large proportion of them should not come back to the State, to the public at large, for social purposes. That is the whole foundation of what is frequently called the Welfare State. We should put this heavy tax on distributed profits in the context of general social welfare, including defence, which right hon and hon. Gentlemen opposite so warmly support—I am not quarrelling with that—but for which they so often show a disinclination to pay when the bill is presented.
In the current issue of a publication called The Banker there appears an article entitled, "Two Steps Forward and Two Back." In it the Chancellor is criticised for what it calls "retrograde expediency in taxation," and the Profits Tax is one of the taxes mentioned. This article is rather scathing about a tax
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increase which yields nothing this year and only £10 million next year and which will not become fully effective until 1956–57.
"Its real purpose,"
The Banker says,
"in which it has already demonstrably failed, was to look to the psychological effect and to use it as a bargaining counter with the trade unions."
If that was its real purpose I do not decry this tax increase for that reason. Nor is the psychological effect of this proposal to be dismissed so summarily, as it is far too early yet to say that it has "demonstrably failed."
The psychological effects of Government and Parliamentary action on electoral power with a universal franchise are sufficiently understood and respected. The psychological effects on the electorate and their relations to political measures and the general mood of political and social affairs is understood, but in my opinion the psychological effects on trade union power in conditions of full employment are not so fully understood. That is very important, as I shall endeavour to show later.
The increase in the Profits Tax on distributed profits, has, we believe, some intrinsic merits of its own. The Financial Secretary referred to one of them. This is a warning that all is not well. This is something which directors of companies need now to consider in deciding on their future dividend policy. It is a warning, even though it is a confession of the failure of the earlier policy of the Government. In our view this increase might well have been more without damage to the interests of companies and to the strong psychological effect on trade union and public thought. The marking up of industrial shares immediately after the Budget statement showed that many expected it to be more. Indeed, The Accountant for 5th November says:
"Nothing could be more eloquent of the mildness of the change than the estimate of its yield"
and goes on to say
"The effect on purchasing power is likely to be equally, or even more slight."
Hon. Members opposite may disagree with me, but I want for a moment to look at the question of dividends and share prices more realistically. Are dividends too high? Are high dividends inflationary? Last year, ordinary share

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dividends increased by £89 million compared with an increase of £440 million in wages, but, taking into account also the tax-free capital gains resulting from the rising dividends, the share values rose by an average of about 40 per cent. last year. It is obvious that higher dividends made a significant contribution to inflationary pressure last year.
It is true, however, that since 1946 wages have risen by £2,900 million and dividends by only £280 million. Yet the influence of rising unearned incomes on the outlook of the workers and upon wage claims cannot be denied. As one noble Lord put it in a debate in another place the other day, whether there is an economic justification for wage increases arising from higher dividend distributions and a rise in the capital value of shares, the fact is that it has a marked impact on trade union thinking and whether we like it or not we have to live in the world that is and not in the world as we would like it to be.
Mr. John Arbuthnot: Before the hon. Member leaves that point, will he agree that, compared with 1938, ordinary dividends are 157 per cent. up, whereas wages are up by 266 per cent.?
Mr. Houghton: That may well be so, but such an intervention reveals the complete misunderstanding of hon. Members opposite of what hits the trade unionist and gets his back up. There is all the difference in the world between getting unearned income and unearned increment and getting increases in wages, whether the wages are high or low, or whether they are for desk workers or workers in heavy industries. Those making a contribution to the national wealth are entitled to a first call. We do not deny that those who invest their savings and legacies, and even their inherited wealth, in industry should get a reasonable reward on their investment for their denial of their capacity to increase their consuming power, but these things have to be put in their right proportion. If hon. Members opposite are seeking to establish parity between the percentage increase in dividends and the percentage increase in wages they show a lamentable misunderstanding of the position. In 1938, while bondholders were still getting their money, mine workers were still doing a full week's shift for 35s. a week. If
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there was to be any equity in a progressive social and industrial system, quite clearly the pre-war level of wages had to be increased by a very much bigger percentage than would be justified in the distribution of dividends and interest.
I now turn to Clause 3—(Lloyd's and other underwriters). As the right hon. Gentleman reminded us, it was a Labour Chancellor, in the Finance Act of 1949, who first introduced this concession, the reasons for which the Financial Secretary has fully explained. This afternoon he gave reasons for the new proposal with which we must fully sympathise. We all recall with great distress and sympathy the tragic experiences that many American citizens recently went through during the hurricane. If the insurance market in London has suffered serious losses because of that, we can only sympathetically consider any extension of the concession given earlier to enable insurers to discharge their business obligations without undue anxiety and to enable them to maintain their place in the world insurance market. In Committee, we shall certainly consider that Clause with understanding and sympathy.
To Clause 4 we give warm approval. As the right hon. Gentleman has explained, this attempts to stop a form of tax avoidance known as "dividend stripping" and known in the City of London, I understand, as "the Indian rope trick," which description I like more because it acknowledges that it is a trick. In passing, I may say that I was not too pleased with the calm, and indeed genial, way in which the right hon. Gentleman explained to the House this infamous piece of jiggery-pokery. This is yet another of the long and regular series of complicated additions to our tax legislation necessary to check the ingenious activities of unscrupulous taxpayers, aided and abetted by astute lawyers and accountants.
This is a dishonourable trade. I wonder how businessmen and professional men can ascend the pulpit, as they so often do, to lecture the working man on his duty when they indulge in this transparent piece of tax dodging. It is no good pleading that this is the product of high taxation, for it has been going on since 1842 and successive Finance and Income Tax Acts have been swollen to cope with it. I believe that this is a reflection on the public morality of all

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concerned. I should like to hear some hon. and right hon. Members opposite, whose voices are heard with attention outside, condemn these practices.
Viscount Hinchingbrooke: There would be no need to indulge in them were it not for the fact that taxation generally is fantastically high.
Mr. Houghton: If the noble Lord would take the trouble to read the reports of earlier Commissions of various kinds over the last hundred years he would find that there were some people who could not resist cheating the Inland Revenue when Income Tax was as low as 9d. in the £. This has such a fascination for the ingenuity of some minds that they cannot stop doing it. I know what the Radcliffe Committee said about the idea of a general prohibition of all methods of tax avoidance of the kind written into the Excess Profits Duty legislation during the war.
I know the difficulty and objections. I believe that to go on year after year spending hours of Parliamentary time dealing with these tax dodgers is a sickening experience. When I read of a poor wretch who has been sent to prison because he has claimed tax relief for a wife he has not got, I think of all those who, cleverer than he, have no loftier motive, but adopt subtler means. Those, too, stand condemned.
I now come to Clause 1—(Purchase tax). The Bill proposes, as the right hon. Gentleman explained, to increase the three rates of Purchase Tax by one-fifth, to widen its range to include kitchenware, and to replace the D scheme on textiles and furniture by a tax of 5 per cent. or 10 per cent. on the full wholesale prices. The Chancellor hopes to get £15 million this year and £75 million in a full year out of it. These are proposals which the Trades Union Congress condemned as inequitable. I want to know whether any hon. Gentleman opposite will say that they are wrong. The Banker says of this also that it is a retrograde tax expedient. There are other opinions, independent they may be, but certainly not unduly biassed in favour of the policy of my right hon. and hon. Friends on this side of the House.
I take Time and Tide. It says:
"But was this rise in Purchase Tax a wise move? It has already hastened a new round of wage claims, which was the last thing the Chancellor wanted at this stage. Deliberately
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to put up the cost of living and then call for wage restraint shows, on the face of it, an astounding naivety. The higher tax on dividdends will weigh light in the trade unionists' minds against the supposed savage attack on their living standards."
The Time and Tide heading was
"Mr. Butler Takes a Chance."
The Spectator had this heading:
"Mr. Butler's Blunder."
It said:
"It was probably impossible to say anything in defence of the Purchase Tax proposals. They have been a serious blunder. What is the point of £15 million extra revenue between now and April if it is got at the expense of inflaming the unions' demands for higher wages? As it is, the annual wage bill has increased by well over £200 million so far this year, and claims now pending may add as much as a further £200 million. Against these figures the extra £75 million from Purchase Tax in a full year seems small indeed."
I see that Truth, under the heading
"The Budget in Retrospect."
has a critical comment to make. The same ominous note is struck there. It says:
"The only question which remains is not, as some have asked, whether the Chancellor has done enough but whether he has adopted the right means. It is perfectly obvious that so long as the demand for labour remains at its present high level any attempt to cut consumption by higher taxes or lower subsidies will immediately produce demands for higher wages and that, unless these are substantially conceded, there will be an outbreak of industrial unrest."
The city editor of this periodical is right about that. He says that the way to set about stopping inflation is to produce a fall in the demand for labour. One can see where his mind is leading. We cannot really be satisfied that that is not where the Chancellor's mind is leading. Indeed, I believe that what perhaps the Chancellor has not realised is that the ordinary man is much more sensitive to a rise in retail prices than he is to other forms of taxation. These Purchase Tax proposals are equivalent to an increase of 4d. in the standard rate of Income Tax, but, as we know, these two taxes operate in entirely opposite ways. All indirect taxation is the same; those who have less pay most in relation to their income.
I see that the right hon. Gentleman takes some credit for the fact that the Purchase Tax is now less regressive than it was when the present Government took office. Surely the right hon. Gentleman realises that this tax was a legacy of the war, when drastic measures, not always

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equitable, had to be taken to curb purchasing power, and to divert consumer goods and resources to the war effort. That is something which this Government should have tried to get rid of, not to restore, increase and enlarge in scope.
When the Chancellor, last April, heard complaints that his Budget was not giving relief then to the poorer people he asked cynically, "How can I give tax relief to people who do not pay taxes?" These same folk now have got another dusty answer because they are to pay the bulk of the Purchase Tax. There is no doubt about it—the Chancellor may smile—but this kitchen tax is deeply resented. The Chancellor said that some direct restraint on consumption was required, and that the new proposals would simplify the tax and remove anomalies. He wants to stop people buying metal teapots. If he taxes metal teapots more that would be unfair to people who want to buy earthenware teapots, so he taxes earthenware teapots as well. The logical conclusion of the Chancellor's policy is, "You must not use a teapot at all and if you use a dustbin, I shall tax that as well." He also said that the effect of these proposals on the cost of living would be less than 1 per cent.
A noble Lord, speaking in another place recently, understood the psychology of the Purchase Tax much better than the right hon. Gentleman. He deplored the proposals because high Purchase Tax is an irritant rather than a deterrent. I agree with him. He believed that it creates animosity because it makes people feel that the Government are their enemy and not their protector. How much greater is the indignation when higher living costs are imposed by the Government who, at Election time, on fiery flaming posters, said that they would attack the cost of living.
Dealing with the comforting assurance that the cost-of-living-index will rise less than one point, I would say categorically that this House can no longer look at the cost of living of the average household today in the simple terms of the index. Let us have that plainly understood. In addition, we have higher rents to come yet. The desire of the working folk for a wider experience and a fuller life has now taken us beyond the price of meat and potatoes, important as they are. This
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means that the amenities of leisure and means of enjoyment are surely part of the modest ambition of the average working-class household. I am frequently moved by the modest demands which the average working-class household makes upon the resources and wealth of this country. If they were to rise up with Napoleonic economic ambitions, they could destroy our economy in a matter of weeks. Their toleration is, I think, something to be wondered at.
Hon. Members opposite should always understand that the average housewife today is looking for those things which the housewives of the better-off have had for years—labour-saving machinery, modern kitchen equipment, brighter fabrics and better furnishings, and a nicer place to live in. What is all this about doubling our standard of living within the next twenty-five years if these things are not part of it? Can we blame ordinary folk for wanting to get a little closer to it, to see what it is like?
Now I pass to the D scheme. This is a Machiavellian proposal. The Chancellor proposes to reduce the tax on the finer quality goods to help the exporter and put the tax on the lower quality stuff which we can no longer export and which is even in severe competition with cheap imports at home. That is what the proposal amounts to. What he should have done is what we have been asking him to do for a long time, and that is to make a clean sweep altogether of the tax on textiles.
Anomalies will always exist as long as we have this tax. Dustbins will now carry 30 per cent. tax—people do not buy them for the fun of the thing—while ceremonial staffs and maces of solid gold go free. While on the subject of anomalies, the right hon. Gentleman is now distinguishing between dustbins, buckets and pails, which are taken out of the exempt class, and sanitary pans, chambers, urinals and commode pans, which are left in.
I cannot find anything about dustbin lids in the present proposals. Can it be that, while dustbins are now charged 30 per cent., dustbin lids still go free? Further examples are that a common glass powder bowl will be subject to 90 pei cent. tax and a solid gold snuff box 60 per cent. If the Chancellor wins a trophy for running away from his Election promises, the tax on it will be only 30 per cent.

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There is more to come. If a trader or manufacturer buys taxed goods which qualify as plant for investment allowance for Income Tax purposes, he will actually make money out of the increase in Purchase Tax. He will get back 120 per cent. in tax relief on the additional Purchase Tax that he pays. Therefore, he will make money out of the Purchase Tax and beat the Chancellor at his own game. I hope that the Chancellor will make some drastic changes in his Purchase Tax proposals in Committee.
I now turn to the large and ominous question mark overhanging the Bill: will it achieve its purpose? [HON. MEMBERS: "No."] I know that it is part of the wider economic strategy. It is extremely difficult to discuss the Bill in isolation and distinct from other measures which are part of the Chancellor's general strategy. However, for the moment we have to look at the Bill standing by itself.
The question whether the Bill, which is intended to be disinflationary, in fact becomes inflationary will depend largely on what the trade unions do and what the stock market thinks the trade unions will do. The marking up of equity shares since the Budget may be read as a sign that the Stock Exchange has decided that the Bill and its accompanying measures will not halt inflation. I sincerely hope they are wrong.
Mr. Cyril Osborne: Equity shares have been marked down.
Mr. Houghton: The hon. Gentleman will no doubt have an opportunity to make his own speech. I want to develop the theme on which I have now started.
There are already disturbing signs among the trade unions. Here I wish to say that no political party is fit to govern Britain these days if it does not know how the working class live and think. The only authentic voice to which the Chancellor can turn on his side of the House is that of the hon. Member for Totnes (Mr. Mawby). The working class are more class-conscious than the Chancellor realises. We have not started that; it started long before we were born. The charge that I heard against the Government over the week-end was. "They are now attacking our class." In my opinion, there is nothing to be ashamed of in being conscious of one's long-standing inferior position in the estimation of right
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hon. and hon. Gentlemen opposite. The Conservative Party still has a tremendous amount to learn about that; and the Bill proves it.
All I will say about the recent interview between the Prime Minister, the Chancellor of the Exchequer and the T.U.C. is that I thank the right hon. Gentlemen for the commendable speed with which they acted on the suggestion that I made. My only anxiety about the matter, which, I think, was full justification for the suggestion, was that the Chancellor's misjudgment of the situation should not lead to grave consequences. It was supremely important, in my view, that the Government should feel the impact of responsible trade union opinion while there was still time to retrace at least some of their steps. I hope that the meeting did good. We shall know later on whether or not it did.
In my brief intervention in the Budget debate I said that wage claims based upon tax increases alone were not justified. I repeat that now; but it is by no means as simple as that. All sorts of factors go to make up a wage claim, and it is difficult to disentangle them. They are so often an expression of the thought, mind and intention of large bodies of people, many of them thinking differently but trying to express themselves in terms of coherent trade union policy. Some unions may step up claims which they have already made. Others may pursue their claims—as I see one has said it will —with greater vigour because of the Budget. On the other hand, another says that, notwithstanding the Budget, it will not make a wage claim yet because it has other things with which it has to deal first.
The Budget and the Bill come just at the time when wage claims are being submitted, and what the Chancellor has done is bound to have an effect upon them. He must surely have known that. All sorts of candid friends have been telling him that it would be so. It seems to me that that was plain from the moment he sat down. Nothing that I say will stop the claims, and nothing that my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) said started them or will enlarge them. Trade union policy will be decided by trade unionists. However, I have no doubt—it is my profound hope that it will be so—that the

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steady hand of experience and responsibility will be seen in the activities of the trade unions during the coming months.
The misfortune of the Bill and of the Budget, of which it is the legislative expression, is that the Chancellor has had his thoughts too sharply concentrated upon the foreigner and not enough upon the people at home, on whose co-operation and good will he relies equally. I cannot say what the outcome of it all will be. It is no part of our wish that the Government's economic policy should lead the country into chaos, disruption and unemployment, but the Government have surely put their hands to measures which may be difficult for them to control and which may lead to those undesirable consequences.
The problem which confronts us, expressed in simple terms, would appear to be within our capacity. A 5 per cent. increase in our overseas earnings accompanied by a 5 per cent. reduction in imports would do it, and that does not seem to be beyond our capacity.
This is perhaps the moment when the country might be paying more attention to provision for its own old age by the extension of vocational superannuation schemes rather than by making heavier demands on consumer resources. Certainly, I believe that this was a splendid opportunity for the Government to consider all the implications of the Millard Tucker Report, to make superannuation schemes more attractive and more flexible and enable much of what might otherwise be spending power to be diverted into investment for supplementary pensions in retirement. Here is something to which the trade union movement itself might now be giving much closer attention, and I notice that the Amalgamated Engineering Union is already raising the matter with its employers.
My judgment upon the situation is that the Chancellor is not too bad as a fair-weather Chancellor, but when he comes into conditions of difficulty and adversity his judgment of the reactions of the people is at fault. I ask whether the Chancellor has no reserves of moral strength to call upon to meet this challenge in a bolder and more imaginative way; or is this Bill really designed as one of the first and lighter weapons of
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deflation—to lower brim-full employment, to reduce the demand for labour, to weaken the trade unions and to teach the workers their economics the hard way? The Bill may be dangerous because it may set in motion forces beyond the control of the House. It is, in fact, dangerous because it has created a widespread sense of injustice. The House should decline to give it a Second Reading.
5.12 p.m.
Mr. Geoffrey Stevens: On another occasion I should like very much to follow the hon. Member for Sowerby (Mr. Houghton) in discussing tax avoidance and evasion. I believe he admitted that, in some degree at least, the avoidance and evasion which takes place in all income groups, and not merely amongst the "dividend strippers" to whom he referred, is due to the feeling which I have had for a long time and which I rather sense he feels too—the feeling that there has been too high taxation for too long in peace-time. That is the cause of 90 per cent. of the evasion, but I do not think that this is the occasion for discussing that kind of topic, enjoyable as it might be.
The hon. Member for Sowerby recalled that Purchase Tax was introduced in war-time to divert goods and resources to the war effort, whereas it seems to me that the increases in Purchase Tax which are covered by the Bill are aimed at diverting goods and resources to further the export effort. I should have thought that that was the main object, if not the whole object, of these increases in Purchase Tax.
I do not think that the hon. Member for Sowerby likes Purchase Tax. I certainly do not. It is one of the worst taxes, though not quite the worst, ever devised. It is difficult to administer, not merely from the point of view of the Revenue, but from the point of view of the wholesaler and retailer as well. It is full of anomalies. The hon. Member for Sowerby quoted some most interesting and amusing examples, as did my hon. Friend the Financial Secretary to the Treasury. The longer and more detailed are the Purchase Tax Schedules the more anomalies one comes across.
One point in connection with Purchase Tax, which was not mentioned in the

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Budget debate and has not been mentioned in today's debate so far, is the unpleasant position of the retailer should any Chancellor—either the present Chancellor or, in fifteen or twenty years' time, another successor Conservative Chancellor—decide to make a reduction in the Purchase Tax. Obviously, the higher the rate of Purchase Tax the greater the loss to every retailer in the country should the Purchase Tax be reduced.
The Purchase Tax is a shocking tax. I hope that we shall be able to get rid of it as soon as possible. However, in the special circumstances in which we find ourselves, I accept the increases which have been provided for, from 25 per cent. to 30 per cent., from 50 to 60 per cent., and from 75 per cent. to 90 per cent. [HON. MEMBERS: "Why?"] Because I think that they provide the quickest possible way of creaming off the surplus purchasing power which is available at present. There is no argument between the two sides of the House that there is a surplus spending power at present. There is inflationary pressure, and this Purchase Tax increase was the most ready and the most obvious method of dealing with the inflationary situation.
I find it very difficult indeed, however, to accept the very steep rise from nil to 30 per cent. Purchase Tax on kitchen equipment. The feeling against this very sharp increase is very widespread. It exists on both sides of the House and I am quite certain that it exists throughout the country. Various suggestions have been made with a view to toning down the very hard effect of this great increase. It has been suggested to me that certain things—items other than metal—should be removed from the Schedule and that those items should not suffer the increase at all, but it seems to me that the more elaborate the groups and the more the groups try to make distinctions the more anomalies one finds. When is a domestic brush an industrial brush? There are all sorts of difficulties and anomalies of that kind if one tries to eliminate certain items of household equipment from the groups.
I wonder whether one way to answer the problem—if it can be answered by the Chancellor at present—would be to consider a lower increase than from nil to 30 per cent., and whether a figure of 15 per cent. would not be accepted throughout the country as a fair one, having
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regard to the special circumstances of the country's finances at present. I throw out that suggestion to my right hon. Friend. I hope that he will give it serious consideration.
I should like to draw attention to one small but very important point which may have escaped attention. It is that in Section 23 of the second Finance Act, 1940, people in certain trades who had only a small business, with retail sales amounting to not more than £500, were exempted from Purchase Tax altogether. Having regard to the very great changes that have taken place in the last fifteen years in wages, costs of raw material and that kind of thing, I wonder whether the time has not come once again, particularly having regard to the high rates of Purchase Tax, to raise that limit, and perhaps double it to £1,000. One of the reasons for introducing that small-man concession was to help one-man businesses and to help in the training of craftsmen in small craft industries.
Mr. H. Wilson: While it may well be that the time has come to do that—and the hon. Member has adduced very strong reason for thinking so—is he aware that under the extremely restrictive Budget Resolution which has been forced on the House it would be quite impossible for him or anyone else to move such an appropriate Amendment in Committee this year?
Mr. Stevens: I must admit that I am not aware of that. I cannot comment on it. It is a technicality on which I hope the right hon. Gentleman is wrong. I think that the point may and should be considered.
However, in the special circumstances I accept these increases in Purchase Tax other than the increase from nil to 30 per cent. to which I have referred. I believe that the country as a whole should accept them. I believe that industry should accept the extra 5 per cent. on the Profits Tax on distributed profits, though I should like to discuss at some other time with the hon. Member for Sowerby the differential between Profits Tax on distributed profits and that on undistributed profits. I think that that very wide differential—and the Finance Bill widens it still further—far from helping the worker, in the long run acts to his detriment.

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On the question of wage demands, I side myself four-square with the right hon. Member for Leeds, South (Mr. Gaitskell) when he said shortly after introducing his Budget in April, 1951—when he made tax increases far beyond anything that is provided in this Bill—that there should be wage restraint. I entirely support what my right hon. Friend the Chancellor said in his intervention in the debate a week ago, that it is a pernicious doctrine that if taxes are increased on account of the needs of the nation those increases in taxes must at once be matched by wage demands. That would be the end of all things, certainly the end of any possible hope of doubling our standard of living in the next twenty-five years.
The figures of national income and expenditure given in the Blue Book for 1955 show that in recent years, and indeed in 1955 as well, wage earners, and to a lesser extent salary earners, have been more than able to keep pace with the increase in the cost of living. Therefore, I believe that those categories can bear this increase in Purchase Tax.
However I should like to say something about a body of persons to whom the Financial Secretary referred in his speech this afternoon. I refer to those who live on fixed incomes—on pensions, on retired pay, on what the hon. Member for Sowerby called unearned income, that is, dividends from savings from years of labour. It is true that an old person can live without smoking, without drinking, without going to the pictures, without buying expensive washing machines. No old person, however, can live without cooking in a saucepan. No old person can live without keeping his or her room clean with a brush. It seems to me that the case of those small income groups reinforces my plea to the Chancellor to look again at this steep increase of Purchase Tax from 0 per cent. to 30 per cent., and I hope that he will do so.
I have objections to some parts of this Finance Bill but the overriding consideration in my mind, as I think it should be in the minds of all of us, is the necessity to stabilise the £. It is because I believe that this Bill will help to that end that I shall support the Finance Bill in the Lobby tonight.
5.22 p.m.
Mr. H. Rhodes: This Finance Bill reminds me of a friend of mine who has a bad cough when he goes to bed at night. His wife complains because it wakes her, but she dare not tell him that the best thing to do is to stop smoking because they have had so many quarrels about it that it disturbs the harmony of the family. So his wife never mentions smoking but says, "Don't you think you had better go and get a bottle?" So he spends his shilling at the chemist's shop and gets his bottle of physic. The Government help him to pay for it and so they are all happy—he is still able to continue smoking, he gets his bottle of physic and pays for it, and so the position continues as it has been.
What I want to hear from the Government today is what they are doing towards putting some energy, some vibrancy, some guts into our ability to produce more cheaply. That is what I want to know, because many speeches I have heard so far on this topic, either in the debate last week or today, bear no relation whatever to the facts. In this respect we are living in an unreal atmosphere.
How can the introduction of Clause I of the Bill help us to produce more cheaply? How can we produce more cheaply if we cannot produce economically? If we cannot produce economically prices will go up on that count alone. If we also tax goods more, that will mean another rise. So we can have a rise on several grounds, first by the imposition of the Purchase Tax, then the reduction in business because of the credit squeeze, and after that come along the wages claims which make prices higher still.
What have the Government in mind about that? We are entitled to know. National husbandry can be compared with the experience of a child brought up in a family which has a hard task to make do. When I was a child certain principles were inculcated. One was that we had to live within our income and, whatever the size of it, we had to try to save and to put a bit by with the object of being able to expend a little later on either education or for whatever purpose was of benefit to the individual members of the family. Those principles should be applied to the national position as we consider the economic consequences of

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the Finance Bill. I want to know where in the Bill there are any provisions which will carry out the principles of good husbandry carried out by any wise family.
Since the Budget was introduced we have read a lot of comments by the economists. I have never known an economist yet, in commenting on any Budget or Finance Bill, really to commit himself. Economists always qualify what they say. A lot of them will agree that production is good and that it must increase by 3 per cent. annually if we are to increase our standard of living. A lot of them agree that 20 per cent. is a good figure for national or private investment. There is disagreement as to what the remedy should be, but on one topic there is unanimity. It is that unless we can get the co-operation of the citizens who comprise this nation, this Bill or any other Bill is so much waste paper. We want to know how the Government are setting about achieving that co-operation.
Now I want to deal briefly with Purchase Tax because, apart from the tidying up of one or two anomalies in the iniquity of dividend taking, there is nothing else in the Bill. The provisions in this Finance Bill for Purchase Tax are a logical consequence of previous action. It is, in fact, a sales tax. The Treasury has been struggling for many years to convert all taxes on consumer goods into sales taxes, and has taken the precaution of writing into the Bill the ability to increase to the maximum amount at will. That needs to be watched by the House.
Let us take the history of the tax. First, war-time revenue and punitive measures; more war effort, and the rest of it. After the war, there was the Utility scheme. Under the Utility scheme, another Government Department had the say as to whether the tax should go up or down. That did not suit the Treasury, who said, "We will get rid of this as soon as we can." So the Treasury set up the Douglas Committee and put into operation the D scheme.
It is all very well for the Financial Secretary to come to the House and tell us what a bad thing the D scheme was. We told him hundreds of times that it was a very bad scheme.
Mr. H. Wilson: And he would not listen.
Mr. Rhodes: As my hon. Friend said, the Financial Secretary would not listen. We went through the night debating it. I hope that as time goes on, the Government will realise that we do not talk about these things needlessly and that there is point in what we say. Perhaps at some future time the Government will take a little notice. It is most important if they want to catch up on events and save time.
The D scheme was removed. We knew all about the margins, just where the tax came into effect, how it affected the higher-price stuff and how people screamed about the necessity of supplying the home market and all the rest. But over-ruling and overriding all that was the Treasury determination to make certain that taxation was under its control, that it could raise the tax at will and that it was as near as possible to a sales tax. That is exactly what it has now come to be.
I should like to know from the Government what sort of advice they took on this tax. The Government should take advice from the proper quarters if they do not themselves have the knowledge and experience upon which to draw. Take the imposition of the 5 per cent. on cotton dresses, apparel and the rest. Is there nobody in the Board of Trade or in the Treasury who has a clear picture of what is happening in the textile trade today and of what effect the price of the raw materials can have?
The principal objection addressed against the D scheme from the Box a fortnight ago was the difference and disparity in price, affecting the revenue yield. Was it not said that if prices came down, the yield from the D scheme would be either nothing at all or comparatively little? That has, therefore, been in the Government's mind. In the case of staple rayon, there is a stable commodity and a stable price. Wool is now reasonably stable for a season, but cotton is not.
The Government's stupid action in setting up the Liverpool Cotton Exchange as they did has made it impossible, because of action in America, or the lack of action, to insure the commodity. The overwhelming amount of cotton for disposal by America which has been in the market during the last nine months has made it practically impossible for manufacturers in Lancashire to cover their risk

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with insurance. In fact the position is quite absurd now that the prices quoted on the futures market are 6d. discount per lb. at the present juncture.
If the price of the raw material is so unsure and uncertain, for goodness' sake give the industry a chance. After all, it will take months to work out a picture as to the incidence of the tax on either wool, cotton or rayon, and we cannot afford another disturbing factor.
Mr. Osborne: Surely the carry-over of the American crop would still have been as large whether the Liverpool Exchange had been reopened or not. The uncertainties of American policy which control the price of that large carry-over would still be present. Therefore, the uncertainty in the cotton trade would still have existed as greatly whether the Liverpool Exchange was opened or not.
Mr. Rhodes: Of course. I never said that it would not. What I said was that it was a stupid thing to reopen the Liverpool Cotton Market in the way in which the Government did at such a juncture. It has been unprofitable to everybody. There is no question that the immense crop has overshadowed the market. It must be got rid of, and the sooner the better. But that is beside the point. I use that only as an illustration.
Whilst the cotton prices are in a state of flux, whilst there is uncertainty as to what the prices will be as soon as the auctions begin in January, what on earth have the Government been doing in imposing this tax of 5 per cent. until the results of the selling of the cotton in America becomes clear? The Government know full well, and the Minister should know too. It is a disgrace that they should have put on this tax before there was a chance of seeing what the circumstances would be.
While the Chancellor of the Exchequer was tapping the Dispatch Box a fortnight ago, an auctioneer was tapping his box and selling off a mill which employed three to four hundred people in my constituency. Do the Government still believe in production? Do they still believe that it is a necessary and important factor? Lancashire is having extreme difficulty in producing as much as it can. I know the theory about going for export and all that, but this is how it affects Lancashire. If this tax is imposed as a
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punitive measure on an industry which already has difficulty with its sales, it becomes still more punitive. What are the Government's intentions? What do they expect Lancashire to do? Do they expect Lancashire to produce more with credits cut down and the subsequent inability to plan ahead? That is what people in Lancashire today are asking. They are bewildered by the Government's actions.
Apart from the examples I have given, the Government will find great difficulty in operating their proposals. The inflationary power of this country can perhaps for a while take this 5 per cent. in its stride, and the Government will have to adopt more positive measures if they mean business in exports. The suggestion which my right hon. Friend the Member for Huyton (Mr. H. Wilson) made about the stimulus that could be given to the export drive by reintroducing building licences, etc., was valuable. More direction is needed, and the country should be taken more into the Government's confidence and told why these measures are necessary.
We have had the experience of easing up and having more spending power in April and then in October being told to cut down—that we have to produce less for ourselves and suffer the imposition of price increases through Purchase Tax. There is no indication about how the job will be done, or what incentives for exports there will be. This is poverty politics and I hope that my side of the House will reject the Bill.
5.41 p.m.
Mr. John Peyton: I want to keep my remarks as short as possible, because I am aware that a great many other hon. Gentlemen wish to speak; so that I hope that the hon. Member for Ashton-under-Lyne (Mr. Rhodes) will forgive me if I do not follow the points which he discussed. He is an expert on the textile industry, to which he devoted a large part of his speech. I shall later refer to two remarks made by the hon. Member for Sowerby (Mr. Houghton). During his speech there were many points with which I found it very easy to agree, but there were two very unworthy remarks.
The first was where he dared to suggest that hon. Gentlemen opposite were un-

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certain about whether it was perhaps the intention of my right hon. Friend the Chancellor to inflict unemployment on the workers of this country. I do ask—and I hope that this will be accepted as something upon which we can all agree—whether, in the interests of the House of Commons and in the interests of the nation, we cannot scotch this terrible suggestion that is constantly being put about: that one party or other is willing or wishes to have unemployment.
If anybody ever suggests to me that a measure of unemployment is a good thing, I always express the firm and fervent hope that if such a thing should ever happen, the person expressing that wish will himself be unemployed and will then appreciate what he is saying.
Mr. Houghton: I think that the hon. Member for Yeovil (Mr. Peyton) will agree that the combination of the measures now proposed by the Government have for their purpose the lessening of the demand for labour, to reduce brim-full employment. The point which I thought I made was that that might lead to consequences out of the Government's control and might be the end of this policy of using the blunt weapons of credit control, indirect taxation, withdrawal of subsidies, increases in rents and the general lowering of demand for labour.
Mr. Peyton: The general meaning, which I had clear in my mind, was that the hon. Member for Sowerby was suggesting that my right hon. Friend the Chancellor was willing to countenance a measure of unemployment. That I indignantly repudiate on behalf of my hon. Friends on this side of the House.
My right hon. Friend has been called by hon. Gentlemen opposite a fair weather Chancellor, which is for them an extraordinary thing to say, because when the right hon. Member for Bishop Auckland (Mr. Dalton) was at the Treasury, the weather was set fair, but only for a time, and so it was when the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) was at the Treasury. But when my right hon. Friend the Chancellor came to the Treasury the weather was indeed stormy and part of the reason for that storm was the fact that the man of words, but not of action, the right hon. Member for Leeds, South, had hesitated
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and been quite unwilling to take effective action in time.
The Bill has two great merits. The first is that it buries the D scheme, which goes entirely unlamented. The second, and it is of considerable merit, is that it is a very short Bill. I am sorry that during the Committee stage there may not be a full opportunity of discussing in detail the operation of two of the ugly sisters of the Bill, the credit squeeze and hire-purchase restrictions. I hope that the Economic Secretary will consider and continue to consider the credit squeeze. Is he really satisfied that the credit squeeze is not in fact now having a most injurious effect upon the small manufacturer who is wishing, willing and anxious to export? How can he finance an export programme at the moment with a credit squeeze of increasing severity operating?
The second subject on which I wish to comment is hire-purchase restriction. I am by no means satisfied that the Treasury case against hire purchase has been fully made. It has been said—and hon. Gentlemen in all parts of the House are very well aware of the argument—that hire purchase drains off goods which are needed for export. On the other hand, we are experiencing an increasing standard of living. One effective way of increasing it and of committing people to an increase of the national standard and of their own individual standards is to allow them to buy in this way. Is my hon. Friend satisfied that it is practicable effectively to enforce the hire-purchase restrictions now in force? I very much doubt it.
I believe that as time goes on there will appear more and more ways, very undesirable ways, of getting round these restrictions, and I hope that the Treasury and my right hon. Friend the Chancellor will not adopt on this question too rigid an attitude which will in any way inhibit them from reconsidering the position.
The Economic Secretary to the Treasury (Sir Edward Boyle): If my hon. Friend the Member for Yeovil (Mr. Peyton) will study certain statistics, which I will gladly send to him, he will see no reason to think that hire-purchase restrictions are being widely evaded.
Mr. Peyton: I am very much obliged to my hon. Friend.

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I should like to express one general opinion, namely, that I share the disappointment which was expressed on the other side of the House that we are still putting off a general review of our present system of taxation. It may be that hon. Gentlemen opposite will not agree with me, but I am saying that, from the point of view of industry and from the point of view of the country as a whole, taxation is now at a penal level. I am not for the moment concerned with individuals. I am concerned with industry, which earns our daily bread and in which men and women have their employment.
It is of desperate importance that we should cease to regard taxation as being something about which on either side of the House we have different views, with this side opposing high taxation, while it is advocated on the other. That is not a very constructive or useful attitude towards one of the most difficult problems we have to face. At the moment we have an immensely complex tax machine, and I think it is high time that it was reviewed. We have the seeds of such a review in the Millard Tucker Report and I hope very much that before long the Treasury will bestir itself into a state of such unprecedented activity that the recommendations of the Millard Tucker Report may find expression in the form of a Bill before the House.
I have promised that I shall not detain the House for long, but I wish to advance one further special plea in regard to Purchase Tax in those industries which are confronted with an unprecedented flood of cheap imports. I respect the pertinacity with which the cotton case has been pressed on the Government by those hon. Gentlemen representing cotton constituencies, and whose duty it is to do so. I represent a constituency in which a large number of gloves are made, particularly good-quality gloves. The figures of imports—I will weary the House with but three figures—are, in the first nine months of 1953, 283,000 dozen; in the first nine months of 1954, 733,000 dozen and in 1955, 1,383,000 dozen—a figure well in excess of the annual output of the home industry.
I am quite willing to pay tribute to the Chancellor for removing the evil of the D scheme. Not only did the D scheme exempt those cheap imports from taxation, which was grossly unfair, but in
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addition it frequently made the operation and implementation of the uplift scheme excessively vicious. Now, on the new basis of a 5 per cent. flat rate throughout, quite obviously there is no incentive for the ambitious Excise man to bring quite such pressure to bear to raise the price and get it into the tax bracket.
I beg the Government and my right hon. Friend the Chancellor of the Exchequer, before the Committee stage of the Bill, to consider whether the time is not now ripe to remove this damaging Purchase Tax from industries which are facing very severe competition from the flood of imported cheap goods; and to remind themselves at the same time that in many cases this flood of cheap goods is a wholly new factor in the existence of those industries.
5.54 p.m.
Mr. J. Grimond: I regard this Bill as signifying the twilight of the post-war politician—economists. The view of the ordinary people—and it is with them that we are concerned today, as was said by the hon. Member for Sowerby (Mr. Houghton)—is that they can detect no crisis, or, if they can, they can detect no relevance to a crisis in the proposals of the Chancellor. We are now faced with that position at the end of four or five years of Conservative Government and what is the total of their proposals? It is, first, to increase the Purchase Tax which the party opposite has always, and rightly condemned. Not only is it increased now, but there was a clear indication from the Dispatch Box today that this tax is to be more or less permanent; that it will be extremely difficult to take off and that the Government are to make it much easier to increase it from time to time. Secondly, it is to increase the distributed Profits Tax, which the majority of the Government and their advisers know to be bad. They know full well that they should be making profits harder to make—not increasing the tax on distribution. Lastly, there is the statement from the Chancellor of the Exchequer that no large economies in Government spending are possible.
I suggest that all we are doing is to continue a state of affairs which has existed since the war and are trying to rectify it by the same methods which were brought in in a hurry during the war years and which have never been properly reviewed.
Sir E. Boyle: I hope that the hon. Member is not forgetting the important Measures in the field of housing and local government which we are not discussing today but which, by common consent, were considered the most important of the major announcements after Parliament reassembled.
Mr. Grimond: I am far from forgetting them, but if the excuse for this Finance Bill, in which there is nothing defensible, is that there are other jolly good Bills on the stocks, I do not think that that is very convincing.
Mr. J. T. Price: On a point of order, Mr. Deputy-Speaker. Since the Economic Secretary to the Treasury has just introduced the question of housing subsidies, which are not in this Bill, will it be in order for hon. Members on this side of the House to discuss housing subsidies as part of the Bill?
Mr. Deputy-Speaker (Sir Charles MacAndrew): Yes, I should think so, so far as they relate to the finances of the country.
Mr. Grimond: I wish to assure the House that I do not intend to discuss them at any great length.
The only thing which emerges from the discussion is that these proposals, such as they are, are unlikely to achieve the purpose which the Chancellor has in mind. But the only alternatives put forward on behalf of the Labour Party are an increase in import restrictions and a return to building licences, which are not fundamental tenets of Socialism but which also originated with the war. This the desert in which we are left.
The first thing which this House has to do is to get the facts of the situation over to the people of the country, because a great many statements made by the Government and other influential pundits are quite contradictory and in certain respects, I think, are very misleading. One glances at the position of sterling. We have the Governor of the Bank of England saying, on 4th October, that apart from temporary fluctuations, sterling is undervalued. Is that the view of the Government? What is the significance of the transactions which we hear are going on in Zurich and Holland and other places? How much importance should ordinary people attach to these?
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Then I suggest that if the Government wish to impress the people that we are straining our resources too far they must show some concrete examples of economy themselves. I know that the field for economy is limited, but I continually meet people who say, "Look at this or that example of Government extravagance." People find it difficult to believe that the situation is so desperate when this sort of thing goes on.
As the hon. Member for Sowerby pointed out, the psychological effect of what the Government do is very considerable. I give only one example of what seemed to me a ludicrous failure in public relations following a statement by the Minister of Labour and National Service. I read in the newspapers that he told the trade unions that in his view, if big profits could be earned, they should not be earned, but that prices should be reduced. In the same week we read that the British Petroleum Company, in which the Government have a controlling interest, doubled its interim dividend. In point of fact, petrol, rightly or wrongly, is sold at an agreed price throughout the country, and no effort is made to bring down the price. I know quite well that there are reasons for that. I know that there are national difficulties in the petroleum world. But why do the Government do that sort of thing? Why do they not get out of the petrol business?
I was told—no doubt it is untrue—that when the present Chancellor of the Exchequer took over his office he restored the picture of Mr. Gladstone, whose eye had been rather too fierce for the right hon. Member for Bishop Auckland (Mr. Dalton). I hope that when he did so he may also have restored a few of the texts from Mr. Gladstone's writings, such as that it is the sign of
"…a chicken hearted Chancellor of the Exchequer when he shrinks from upholding economy in detail…"
I think that the way the Government do things has an effect on ordinary people even though, in the aggregate, those things may not be so very important.
The Government have to get across to the people what is the fundamental fact of the situation. That is as one hon. Member has said, that we are trying to spend more than we have; we are living beyond our income. Then the Government have to prove that their proposals for dealing with this matter are related

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to the problem. What do the Government tell us is wrong? It is particularly that we are not saving enough to justify the rate of investment. Very well, are they making production more efficient? Are there any proposals in the Finance Bill about that? As the hon. Member for Ashton-under-Lyne (Mr. Rhodes) said, there are not. Are we encouraging more saving, and is there anything in the Finance Bill to do that? No. One thing that the Government are certainly doing is to send the local authorities—
Mr. Arbuthnot: The Finance Bill is encouraging, more saving by increasing the amount of National Savings Certificates allowed to be held.
Mr. Grimond: If that is thought to be significant in relation to the national economy, then I agree. But it really is not very much.
What the Government are doing today is to send the local authorities into the market for the purpose of making the interest rate and the general squeeze more effective. The curious thing is that they have told us that there are to be practically no cuts in public expenditure. Three hundred thousand houses are still to be built next year, and we all remember what the Prime Minister said at the end of the censure debate: the roads programme stands, railway modernisation stands, and education stands. Is school building to be cut? No. Does the Ministry of Education Circular No. 283 stand? Yes. The new hospital programme stands. Finally, when the Opposition suggested that the only things which were to be cut were the nationalised industries the Prime Minister said that that was utterly false. The nuclear power project is to go on, and so on.
What is the point then of driving local authorities and other public bodies into the market? I always understood that the object of the operation was to cut out certain marginal schemes altogether and to reduce the total of investment in housing and other so-called unproductive investment. But, surely, if it is true that there are to be extremely small cuts in public investment, all that will happen is that the local authorities and the national industries will be asked to pay more for their money. They are to make the same calls on our physical reserves.
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If there are to be cuts then they will fall on private house building and on productive private industry. Is that really what the Government want? It certainly seems to be quite out of keeping with what they have been telling us during the last four or five years. Furthermore, is it deflationary? I am not at all clear that if there are not to be cuts, the general principle of making local authorities and other public bodies pay more for their money will necessarily achieve the object of the Chancellor, that of stopping inflation.
What else is in the Finance Bill? There are the increases in Purchase Tax. I do not really think that the Chancellor can be under the impression that these increases will be of very great assistance in tackling what he calls the prime need, that of increasing savings in order to cover extra investment. It may be that some of the goods affected will go into the export market, though I think that that is a much over-rated argument. It may be that by putting up the price we shall mop up a certain amount of purchasing power, though I find it difficult to believe that by increasing taxation we shall do much to stop inflation.
The Government have been asked what companies are expected to do about the Profits Tax. We do not want them to invest at the moment. Very well, then all that they can do is to increase their liquid resources. What do they do with those liquid resources? I am told that a good many of them are going into the hire-purchase business now that people have been stopped from getting the money from the banks.
What the Chancellor might well have done in this Budget was to indicate to the world that he intended to have a change in the methods of taxation and would devise certain long-term measures to put the economy of the country right and to check inflation. It seems to me that during the last ten years we have been striking at certain results of inflation without going to the cause. High equity prices, the increase in hire purchase, the failure of savings, the difficulty of recruitment to the various professions and the undermining of the Welfare State are due to inflation.
It cannot be emphasised too often that the object in stopping inflation is not a technical economic one. By continually depressing money, one hits at the

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poorest in the country. It is not the rich who lose by inflation. The rich in places like France, for instance, have done very well. It is the poor and the pensioners, and those who are not organised, who lose. It is for their sake that we have to strike at a too great rate in the devaluation of our money.
The root cause of it must be a continual tendency for too much credit and money to get into the system and no Chancellor of the Exchequer has been able to explain how or why that happens. Goodness knows, I am not very much in favour of further inquiries, but it seems to be a case for having another Macmillan Committee to inquire into the central and joint stock banks and the whole financial and credit arrangements today. Let us see what we can do to check the sources of inflation. Things are very different from what they were twenty or thirty years ago.
Today we have a certain amount of inflation built into the economy because of the high rate of Government expenditure. We have this recurrent trouble in trying to force exports into the dollar market. How far is that justified and possible in today's world? We have the growth in importance of the sterling area today. Flow far should that affect our economic position? As I say, I think there is a case for a detailed inquiry on the lines of the Macmillan Committee into the whole set-up of credit and currency today.
I suggest, too, that the Chancellor must really tackle the question of making profits harder to get. I am by no means a whole-hog Free Trader, but I fail to see why, if the Profits Tax is raised to 27½ per cent. and the Stock Exchange rises on top of it, we should go on protecting certain industries in the home market. I should like too to see the President of the Board of Trade driven on by the Chancellor to attack monopolies. I am quite certain that we ought to make profits more difficult to get.
As I have said before, I believe that we must give up the idea that the only cure for inflation is to put up taxation. I do not know how far, even with a large Budget surplus, it may be possible to reduce taxation, but I believe that it would be possible to use it in a way which is more likely to meet what the Chancellor tells us he wants to do. We
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ought to differentiate more strongly between earned and unearned income. We should examine the possibilities of reducing the taxation on savings and of increasing it on expenditure.
I do not believe that we shall get stability or get away from recurrent crises until the wealth of the country is spread more widely. It is much too concentrated today. There is no reason why the Chancellor should not take certain practical steps in the matter. I am not advocating particular profit-sharing or co-ownership schemes, but the Scottish Trust Company method could do a great deal by spreading the risk and ownership. We shall not get the workers to appreciate that their future is in their own hands, and that it is to their advantage to stop inflation, until we can show them that the industrial profits that are earned are spread among the people, until they feel that they really have a stake in the country and that it belongs to them.
6.9 p.m.
Mr. Donald Chapman: I wish to refer to some points made by my hon. Friend the Member for Sowerby (Mr. Houghton) to which great exception was taken by the hon. Member for Yeovil (Mr. Peyton), who is no longer here. My hon. Friend said that the Chancellor is a fair weather Chancellor. I cannot agree that that is an incorrect statement, and it follows, too, from what the hon. Member for Orkney and Shetland (Mr. Grimond) has just been talking about.
I am sure that this Budget marks the end of a particular era of Chancellors of the Exchequer. It is, of course, very largely because the present holder of that office has been through a period—over the last three or four years, at any rate—of giving tax reliefs, what he calls incentive Budgets. Now he is back to a very difficult situation—and a totally different one, in which that fair weather has gone. Unfortunately, the proposals he puts before us will make the situation even worse.
The great problem which faces us is the inflationary situation which exists at home. It is very questionable whether the Chancellor has had his eyes sufficiently at home and has not been too busy following the overseas fortunes of sterling, because it is quite clear—I think it is agreed by hon. Members on both sides

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of the House—that this Budget will considerably increase inflation at home. The Chancellor must have been very badly advised to introduce a Budget which, for the price of £8 million in Purchase Tax on textiles and £15 million on mops and buckets, will start a wages cascade which will sweep the lot of us away in a short time.
Has he considered this year's figure for wage claims and industrial disputes, which are indications of the way in which inflation is gripping us? In the relative stability of the post-war years, under the Labour Government, between 4 million and 7 million people were affected annually by advances in weekly wage rates. In the first nine months of this year 11 million people were affected, so that we can expect that about 14 million or 15 million people will be affected in the course of the whole year. During the time of the Labour Government, industrial disputes averaged between 1,400 and 1,700 per year. There have been 1,800 in the first nine months of this year, and that figure will again be far exceeded when we have the full year's figures.
The real problem facing the Chancellor was concerned with the question how we could cut down the pressure upon resources at home and direct goods which were being consumed at home to the export market, without provoking wage demands by acting unjustly by unnecessarily increasing the cost of living, or imposing cuts and sacrifices which were not in the general social interest. That problem has been increasing for the past three or four years, since the Conservative Party took office, and the Government cannot face it because they have lost the good will of the trade unions.
Mr. Osborne: No.
Mr. Chapman: I am sure that they have. The figures I have given show that, despite all the pleas for moderation, the trade unions have said, "No, we do not trust the kind of economy which you are trying to create, and we propose to join in the free-for-all which you seem to be willing to create for everybody except the trade unions."
The Chancellor has come to end of a period of largesse and incentive, and is experiencing his first difficult period, when he has to meet trade unions upon sticky ground and say, "I have no more
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to give away. In fact, I have to impose cuts." In these circumstances, he is carrying on a policy which cannot in any sense enable the trade union movement to co-operate with him. The Chancellor, we are told, has set his face completely against direct controls of any kind, and considers that he must use only financial controls in order to bring about a diminution in internal consumption, and especially in internal investment.
What does this mean? The trade union movement is not interested only in the 1 per cent. by which Purchase Tax will increase the cost of living; it is also interested in the fact that the Government are saying, "We have abandoned controls over most of the economy and, therefore, all we can do is to cut the remnant which we still control." And so we find that the socially useful expenditure of local authorities, including their building programmes, are to have a physical cut. The level of expenditure will be reduced to the 1954–55 figure in 1956–57.
On the other hand, the financial burden of the Bank Rate is supposed to do the equivalent to private expenditure; but, of course, it does not. In an inflationary economy it is the "spiv" industries—the socially useless industries—which are making high profits, and they are not deterred by a high Bank Rate. The net result is that socially useful things are being physically cut and less socially useful things are being penalised by a 1 per cent. increase in the Bank Rate which will not affect them at all.
The other day I travelled into the middle of Birmingham from my constituency. Ringing in my ears was the protest of the Chancellor that expenditure upon socially useless building was down to a minimum. The Chancellor has not got any figures to prove that. He has abandoned so many controls that he does not know what building really is going on. He is telling local authorities to cut down their social and building expenditure, but on my way into Birmingham I found that four public houses were being extensively renovated and altered; one cinema was being completely gutted and rebuilt inside, and many offices and banks were being done up from bottom to top. That was on one arterial road into Birmingham, on one ten minutes' bus ride.
This reliance upon the Bank Rate to control private expenditure is entirely

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misplaced. It is a totally blunt weapon. We are left to face the fact that the Government are cutting expenditure upon all the things which hon. Members on this side of the House believe to be useful, while allowing the useless to go cut-free. In such circumstances, how can the Chancellor of the Exchequer expect the trade union movement to play ball with him? The trade unions believe that he is creating a free-for-all economy, of which private enterprise is taking advantage, while the trade unions are the one section of the community which is being told not to profit from the situation.
I now turn to the question of imports and exports. We are told that we must not have any physical controls and physical directions. The Chancellor has said this so often that he has put himself into the position of not being able to use any physical controls at all, although that is what is required at the moment. For example, there is a desperate need for the direction of the greater part of our increased motor-car production into the export market. The Chancellor has so committed himself, time and time again, to the statement that Tory freedom works, and that he cannot impose physical controls or directions of any kind, that the motor-car industry can go on taking the easy path of selling in the home market.
I read a very amusing letter in this week's New Statesman and Nation from Mrs. E. Arnot Robertson, who is not generally known to busy herself with economics. She said:
"Once again, a Chancellor is nagging me to cut down my expenditure on home-produced consumer goods which might be used for exports, in order to pay for necessary imports."
She went on to ask how necessary were some of the imports which they were supposed to bring in. She gives, admittedly, a slightly farcical list of goods which she found on the import list of this country. "How can anyone tell me," she asks, "that any of these things is necessary." She says, finally:
"The list has 142 pages. Let the Chancellor read it again before he asks me for further sacrifices."
The lesson of Mrs. Arnot Robertson's observations is that in present-day circumstances all sorts of luxury and socially useless things are coming into this country and are affecting our dollar
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balance and our balance of payments generally. Yet we are told that none of them is to be controlled physically. The Chancellor has committed himself against that course of action. Consider, then, the trade unions' position: are they supposed to be accepting this kind of thing and not to be taking advantage of the general free-for-all which is indicated?
Lastly, let us look at the total on the financial side. My estimate is that, by the time the increases of rents are charged under the Bill which is at present before the House, together with other cuts in consumer expenditure, the cuts on the ordinary people, as the result of the Budget and all the measures surrounding it, will be between £150 million and £200 million, while the Profits Tax will be a mere cut of £40 million on the rich. In this year, 1955, the Chancellor of the Exchequer is trying to sell a parcel like that to the trade union movement and expecting it to take no action about further wage increases.
The Budget will teach the Chancellor a very great lesson. He will learn that the years are gone in which the great trade union movement which, as he himself said the other day, now amounts to more than half the country in terms of political power in our community, can be asked to acquiesce in policies of that kind. Those policies turn the clock back. They ask the unions not to profit by a free-for-all economy—while socially useful things are cut and socially useless things are left free to carry on as before.
This may be the present Chancellor's final Budget. He has got himself into too many difficulties, as my hon. Friend the Member for Stechford (Mr. Roy Jenkins) said not long ago. We need a new sort of direction in all these matters. My hon. Friend the Member for Orkney and Shetland (Mr. Grimond) said that we had now to start seeing how, with trade union power able to demand wage increases, we could prevent inflation without increasing the cost of living and driving wage increases up further. That is the great problem now.
The Chancellor has been blown in the wind here, there and everywhere on this issue and he has now ended up with a Budget which is a gift to all the extremists in the trade union movement who press for great wage demands. The Chancellor is not able to retrace his steps and

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change his policy. He has said too much too often to be able to do what is needed today.
I read on the tape this afternoon before I came into the Chamber that another million workers, in the Amalgamated Union of Building Trade Workers, are stepping up their wage increase demands from 4d. to 6d. an hour. The net result of the granting of such increases would be that the cost of the average council house will go up by £60. That has been preceded by wage demands from the National Union of Railwaymen, and the new wage demand foreshadowed by the mine workers. The shipbuilding engineering unions have also made it clear that their demands will be more extreme as a result of the Budget.
We must write this Budget off as a failure in the supreme sense of controlling the wage spiral at home. We must find a new Chancellor of the Exchequer—I hope a new Government, but certainly a new Chancellor—who will say, "We admit the existence of these problems and we are trying to find policies which are anti-inflationary and in which we can have co-operation. We are trying to find an economic climate in which the workers will be willing to accept restraint because we shall also provide real restraint upon the vested and profit interests generally." We shall not get out of the mess caused by the Budget until we have such a new Chancellor and this new direction to our policy.
6.26 p.m.
Mr. John Howard: It is a great privilege for me to take part in this debate. Usually, in my profession as an accountant, I am concerned with the Finance Bill more from the aesthetic point of view. It is a pleasure to be here in the House of Commons to learn how we pass the Finance Bill through its various stages. I am sorry that the hon. Member for Sowerby (Mr. Houghton) has left us. I listened with great attention to what he said about the Bill and the difficulties arising from it. He speaks with great wealth of experience from his service in the Inland Revenue, and his comments on the taxation side of the Bill have added a great deal to the debate.
I was rather concerned to find that the hon. Member endeavoured to contend that a rise in share prices had magnified
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the claims which the trade unions are putting forward. He gave a figure of 40 per cent. increase in share prices, but he did not explain that the rises are increases on paper. Had there been any general movement to exploit those prices by selling investments we should have seen immediately a drop in Stock Exchange prices, and the 40 per cent. rise would cease to exist at all. A 40 per cent. rise in prices has not been injected into the purchasing power of stockholders, who also make demands on the goods available in this country.
Let me follow the hon. Member further and consider dividend restraint, and in particular the measures which are being introduced to encourage boards of directors to restrict their dividends. We have increased Profits Tax to 27½ per cent. Ever since I have been a Member of this House, although that is quite a short period, increases in company dividends have been of great concern to trade unions and to hon. Members opposite. I therefore hope that we shall receive a great deal of assistance from hon. Members opposite in making it clear that substantial measures have been taken to discourage increases in dividends.
I admit that dividends have been rising over the past two years, but only after a long period of restraint. During that period of restraint many people with comparatively small incomes, who had tried to secure their future by investing in Stock Exchange securities, suffered a quite disproportionate reduction in their standard of living by reason of that dividend restraint which had operated immediately after the war.
I do not know whether the present increase in Profits Tax will reduce the level of dividends, but it will be most useful in dissuading boards of directors from increasing the present level of dividends. I would like to look at the situation in figures, if I may, just for a moment. This is the problem which would face the chairman and board of directors of a company when deciding whether to maintain or to increase the dividend payable for a particular year. If they are paying a net dividend—that is, dividend after deduction of tax—of £11 10s.—and I have taken that figure, since 8s. 6d. is easily calculated on £20—that company must find, and pass to the Treasury, a further £5 as taxation on that dividend. In other words, for every £ distributed in dividend

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the company must pay 8s. 8d. to the Treasury. Those figures are some indication of the practical deterrent which this new level of profits taxation has placed upon companies, and it is a consideration which will certainly be borne in mind in board rooms.
Mr. Arbuthnot: If a dividend is to be paid only 30 per cent. can be distributed, and 70 per cent. goes to the Treasury.
Mr. Howard: I agree that 70 per cent. of the total profits would go to the Treasury if the whole of the profits were distributed, but where a company distributes the same level of dividend as before, then for every £11 10s. of dividend the company must give £5 to the Treasury. Only if it distributed the whole of the profits would it have to pay 70 per cent. in taxation.
In the previous Budget debate the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) quoted from a table in the Financial Times to prove that the cover available to certain major companies for their dividends had not been affected to any major extent by the increase in Profits Tax. He chose a certain range of figures published in that newspaper. What he did not emphasise was that, because of the relatively small amount distributed in dividends as compared with earnings in that range, the cover is very much the same. Obviously, the higher the proportion of the dividend in relation to earnings, the greater the amount of Profits Tax payable. In the case mentioned, the proportion was small, and, therefore, the change in cover was also relatively small.
The Chancellor of the Exchequer has given industry a very good and hard reason for dividend restraint, and if we receive the support which we are entitled to expect from trade union leaders, who will not distort this charge—which amounts to an added 4d. per week per household—into a reason for major wage claims, we shall have achieved a measure of wage restraint which will stand us in good stead in the future. Another figure in the Financial Times, which the right hon. Gentleman the Member for Leeds, South did not quote, demonstrated the increases in output and consumption in certain items covered by Purchase Tax. These range from motor cars, through vacuum cleaners, refrigerators, and so on, down to electric kettles.
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What was common to almost every item was that, although the output had risen very sharply in the first seven months of 1955 as compared with the comparable period of 1954, the whole of the increased output, or more, had gone into the home market, and we had not benefited to any extent by increased exports. Home production had been absorbed at home and none of it had gone to pay for imports which we need. When we are looking at these durable goods which are covered by Purchase Tax, it must be seen that we cannot fail to restrict the amount of home consumption by imposing, as we have done, Purchase Tax amounting to £75 million a year.
I should like to follow one hon. Member opposite, who expressed the view that the present trend of Purchase Tax was towards a sales tax. In his opinion, that was our objective. He should remember that a sales tax is not so easy to collect as some would believe. It would be collectable from the retailer, and many small retailers just have not the organisation to record, collect and pass over the tax to the Customs and Excise people.
Mr. Victor Collins: By the Chancellor's present method of collecting either 5 per cent. or 10 per cent., the tax is, in fact, a sales tax, but collected from the manufacturer.
Mr. Howard: I shall not follow the hon. Member on that point. Collection of tax when a sale is made would be most difficult to introduce, because it would be imposing on the shopkeeper a problem which he simply is not geared to tackle.
With restriction of demand in the home market—and I am sure that this will follow and that home consumption will fall—the manufacturer must take one of two courses if he is manufacturing goods covered by Purchase Tax. He must decide either that as his home market is restricted he will defer any re-equipment schemes or any ideas of expansion, or that he will try to increase his exports. Either alternative would help to achieve my right hon. Friend's objective. I am certain that the desirable objective of expanding our exports will be particularly effective in that field of industry covered by small private companies.
From a recent review of the ramifications of small companies, I see that out of the 85 that were examined only three took

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any major part in exporting. There is a very good reason for that. Most of them are directed by one, two or three men. If they are able to sell the whole of their output in the home market it is only human nature to sell in the easiest market. They probably have their hands full anyway. They are already committed to a full day's work in selling their products in the home market. If they find that the home market dries up, then those export inquiries which have been awaiting attention will get it. I have many instances in my own practice where firms simply do not tackle the export market, because their executives have not the time to cope with present problems, and also with the new problems of credit inquiries, market research, and so on, overseas. If their home market shows signs of drying up the Budget provides them with an incentive to seek exports.
Perhaps I may turn for a moment to Lloyd's underwriters and to dividend stripping. We are giving Lloyd's underwriters an incentive to plough back reserves, so that they will not have to feed into the business money which has been drawn out and which has been subject to Surtax in the process. By the dividend-stripping legislation we are preventing a number of people withdrawing profits from limited companies and thus avoiding Surtax. I have seen this scheme in operation—let me hasten to mention that I have not operated the Indian rope trick—and I know that it has gone on a great deal over the last few years. It is becoming extremely well known, and I applaud the action of my right hon. Friend the Chancellor in introducing legislation to stop this perfectly reprehensible form of tax dodging.
Mr. J. T. Price: I am very glad to hear that coming from the other side of the House. Would the hon. Member like to express a view about the conduct of his colleagues in both the accountancy and the legal profession who have aided and abetted these dirty practices?
Mr. Howard: The hon. Member is trying to put words into my mouth which would lead me into great trouble with my professional colleagues. The hon. Member for Sowerby is not now in the Chamber, but I am sure that he will agree that the taxation law has always been operated on the basis of treating
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any transaction on the merits of the law as it exists; and where there is inequality one way or the other the taxation authorities and usually the taxpayer accept the inequalities of the law.
I was concluding by referring to Clauses 3 and 4, one of which gives a well-merited benefit to the underwriters who are enormous dollar earners, and the other of which stops a leakage which is becoming quite serious to the Treasury. I should like to add a small plea on behalf of those professional people who are Surtax payers, but who receive no benefits from this legislation and still have to plough back their profits into their business, paying Surtax on the profits so ploughed back without any hope of relief. I hope that some consideration will be given to members of the legal, accountancy and architectural professions when we have the next Budget in April.
6.42 p.m.
Mr. Coldrick: I think we all agree upon the seriousness of the situation that confronts the country, and would like to see an end brought to the recurring crises in our balance of payments situation and the consequent decline in the value of the £. But it is about the measures that should be employed to achieve this objective that we have violent disagreement, and I am among those who disagree very strongly with the methods which are now proposed by the Chancellor to cope with the economic difficulties confronting the nation.
The Chancellor is proposing virtually three things that matter. In the first place, he has indicated that he is prepared to raise the Profits Tax by about 5 per cent. The most eloquent commentary upon that, despite the dissent of the hon. Member for Louth (Mr. Osborne), is the fact that on the day following the Chancellor's announcement, the share values on the Stock Exchange rose by anything from 1s. to 8s. I know that the hon. Member for Southampton, Test (Mr. J. Howard) has been attempting to use his eloquence to persuade us that these are mere paper values and do not really matter, but it is always significant that whenever there is an increase in wages, that increase is considered to be concrete and substantial—
Mr. Osborne: The Stock Exchange ordinary prices are now lower than they were before the Budget.
Mr. Coldrick: But does it not demonstrate the futility of hon. Members opposite, who are constantly passionately asking for stability when the Government are seeking to run an economic system where share values are determined by the speeches of a Chancellor? We can never get stability so long as the economic system is run on the principles of a lottery, and consequently I am particularly proud that I belong to an organisation in which the £1 share is worth 20s., no matter what statesmen may say in this House.
The Chancellor has indicated that there is to be a savage cut in the subsidies that are paid to local authorities. It is not my intention to go into that matter, but the Economic Secretary to the Treasury has already made it abundantly clear to us that that is the weapon upon which the Chancellor relies primarily to effect a measure of deflation. All I can say is, as others have so eloquently said before, that I believe that by this direct attack upon working-class standards of living the Chancellor is creating more class bitterness and in this country than could possibly be done by a swarm of agitators preaching class war.
If we are to create an atmosphere, or a social climate as the Chancellor is so fond of saying, in which it becomes abundantly patent that the Government are prepared to assist those who are not in great difficulties but are determined to cut down at the expense of those who are actually doing the work, I do not believe that there is a chance of the Government securing co-operation. It is all very well for hon. Members opposite to argue forcibly that it is right that subsidies should go only to those people who need them, but in agriculture and in industry they proceed to grant subsidies regardless of the wealth or poverty of the recipients. There is a complete misunderstanding of the psychology of working-class people if the Government imagine that they can operate one form of treatment for the owners and another form for the workers.
My chief purpose in speaking is to deal not so much with those considerations as with Purchase Tax itself. I have heard hon. Members on both sides of the House arguing strongly that while they do not disagree fundamentally with the principle of Purchase Tax and are not prepared to oppose the Chancellor, yet, like the hon. Member for Yeovil (Mr. Peyton), because
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they have a glove-making industry or some other industry in their area they want exemption for gloves or whatever article is manufactured in their area. Others argue strongly that Purchase Tax should be removed from textiles, and so on.
The Co-operative movement represents the greatest body of consumers in the country and, therefore, I am concerned not about a particular class of person but about the whole of the community. From its inception we have been hostile to this tax, for two reasons. First, we regard the tax as being regressive and unjust in so far as it imposes the heaviest burdens upon those who are least able to bear them. Secondly, we have opposed the tax because of the endless waste of effort in seeking to apply it to the various commodities that incur the tax.
Frankly, I do not know how a large number of small shopkeepers are able to operate the tax at all, but I know from my experience in a fairly large enterprise that a great deal of time is spent by many employers in constantly ascertaining the appropriate tax on thousands of articles, writing up the amounts and then trying to decide how they should be applied. I therefore join with those who say that at least we ought to be able to work out a simpler form of taxation so that we may gain the results we want without applying this iniquitous form of taxation.
I do not know whether anyone will suggest that it was we on these benches who were responsible for the introduction of the Purchase Tax. If so, I would remind the House that it was introduced by a Tory Government. When we failed to get the tax repealed we concentrated, with others, on endeavouring to widen the range of those goods which would be exempted from the operation of the tax. We succeeded to a very great degree in getting all these kitchen and household goods, which we regard as being indispensable, freed from the application of the tax. It was left to the present Chancellor to begin to reverse the process. He started by the introduction of the D scheme, and, in this connection, I am somewhat bemused and bewildered by the arguments now being adduced by different people.
When the Chancellor introduced this tax he did so at the behest of the manufacturers, primarily because he felt that it would give them a greater opportunity

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in the export markets. As a matter of fact, the whole argument from the furniture manufacturers—and I have part of the furniture industry in my constituency—was this, and there was a good deal of cogency in it. As utility goods were exempt from the tax up to a certain figure, whereas quality goods as they were called incurred the tax throughout the whole range of prices, it obviously militated against the production of the best classes of furniture for export purposes, and that, of course, was the argument put up by the Chancellor in favour of the introduction of the D scheme.
Now, having got the D scheme—if I may keep to the example of furniture, with which I am more familiar than textiles—representations were made by the furniture manufacturers to the Treasury that the Purchase Tax should not be increased because they thought it would have the effect of tending to debase the standard and cause manufacturers to produce a lower class of goods. "Right," said the Chancellor, "there is the danger of that." But, instead of doing what the furniture trade wanted, he proceeded to clamp the tax on the cheaper goods. It is fairly obvious that if we raise the price of the cheaper goods, it will have the effect of making it impossible for an increasing number of people to buy the higher-quality goods, and, in my submission, will tend to bring about that debasement of standards which the furniture manufacturers feared.
The argument of the Chancellor, as of many hon. Members on the Government side of the House, seems to be that this is a deflationary form of taxation. It is rather significant that we have had this tax for about 14 years, but during the whole of that time we have been going through an inflationary period. It is, therefore, fairly obvious that the tax itself cannot have that very deflationary effect on the economy.
Already it has been clearly and forcibly stated that on this occasion the introduction of this extra amount in the form of Purchase Tax will tend to create an additional inflationary demand or spiral. Apart from the reasons that have already been adduced—and I will not argue them again—I submit that now that we have removed price control, prices will go up, not merely by the amount of taxation, but
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also by the amount necessary to repay the interest upon the additional capital involved.
Let me make that clear. The more we raise the Purchase Tax, the more the trader has to increase his capital in order to do the same volume of trade. Obviously, to use a simple form of illustration, if we raise the tax from 25 to 30 per cent., or from 75 to 90 per cent., it means that the trader will need £130 to do what £100 did without the tax, or, as the case may be according to the article manufactured, £190 to do what £100 did before. Is it not obvious that those who supply the capital and those who have to pay the interest on it will want to reimburse themselves by increasing prices accordingly? So we get this tendency not merely for the tax to be added on to the price, but also the additional interest necessary to cover the increased volume of capital. Thus, all this is calculated to increase prices to the consumer.
I think there is always the danger, which applies to the Treasury most markedly, that we think in terms of percentages instead of in terms of people. It is very easy for the Financial Secretary and the Chancellor to say that this will mean only ·7 of 1 per cent. I have been actively associated with the trading side of the Co-operative movement, and it used to be pointed out that the Purchase Tax would work out at approximately ½ per £ in a turnover of £700 million, but what consolation to the ordinary woman is it to think that the average will be only half or 1 per cent. if she has to pay anything from 5s. to 20s. more when she buys a particular article? It is that failure to understand the psychological reactions of the ordinary consumer which so very frequently leads Chancellors and others astray.
In 1954, when the Chancellor was in a much more expansive mood and not so much confronted with these difficulties, he said, in taunting hon. Members on this side, that there was a danger of our getting into the habit of thinking that anything pleasant was necessarily evil. I submit that he is now falling into the trap of his own logic and is beginning to think that everything unpleasant must of necessity be good. He recognises that this Budget is calculated to be unpopular and unpleasant, and therefore, thinks that it is good for the nation. I believe that he has misread the times and is doing things

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that represent a complete contradiction of everything that he is seeking to do.
The Chancellor is seeking to make the £ more valuable, and he is doing it by making it purchase less for the consumer. The ordinary person, presumably, is expected to feel happy at the thought that, when buying a suit of clothes or a dress that figures in the price list approximately in the £10 range, he or she will pay anything up to 8s. more in order to acquire it, while those purchasing suits or dresses now in the £15 range will be able to buy them 5s. or 10s. cheaper. If that is the way the Chancellor thinks he will get the co-operation of the people in order to create the wealth that is essential to provide us with a greater measure of stability, he is making a very great mistake.
In conclusion, I say that we on this side of the House are accused of being in favour of direct physical controls while hon. and right hon. Gentlemen on the opposite benches believe in what they call freedom. Their so-called economic freedom has landed us in the position with which are now faced. Do not let us run away with the impression that they do not believe in controls. I submit that they believe in controls, but that they have not the courage to operate those controls directly, because the Chancellor has made it abundantly clear that what he is relying upon now to a large extent is the use of the money mechanism, and that he will operate it through the Bank Rate.
We are transferring to the bankers the power to decide which industries shall expand and which shall contract. They, of course, cannot be attacked by the people; they are not responsible to the electorate. Although the words have been used very frequently in this House, I say that it is dishonest and deceitful on our part not to accept the responsibility for the guidance of the economic system when we have been entrusted with that task by the electorate, and to abdicate our power by transferring it to others who are in no way responsible to the community.
7.0 p.m.
Lady Tweedsmuir: A very experienced financier once said, "If you want to raise a cheer in the House of Commons, make a general panegyric about economy. If you want
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to invite sure defeat, propose a particular saving." I submit to the House that we have had very few constructive suggestions from the benches opposite during the debate. There has been much criticism generally of our measures of economy but very little, apart from one exception, about what could be put in their place.
I should like to draw the attention of the House, if I may, to a remark which was made by the hon. Member for Sowerby (Mr. Houghton), because he was elevated, so to speak, to Front Bench level in opening for the Opposition. If that is so, we must accept what he said as official Opposition policy. In the course of his speech he read from a newspaper which said that any economy suggested by the Government would, of course, lead to inflationary wage demands by the trade unions. The hon. Member for Sowerby commented, "They are right about this." Is that the theme which is running through the attitude of the Opposition Front Bench at this time—that whatever endeavour is made on this side of the House to bring about economy, it must inevitably lead to inflationary wage demands?
Mr. H. Hynd: My hon. Friend the Member for Sowerby (Mr. Houghton) is not here, but I think it is well within the recollection of the House that he went out of his way in his speech to say that he did not associate himself with that opinion.
Lady Tweedsmuir: Naturally, I wish the hon. Member for Sowerby were here so that he could reply for himself, but I felt that I must draw the attention of the House to the point. I thought that his last speech was very much less happy than his first speech on the subject. In fact he made the remark, "The paper is right about this," because I copied it down.
Personally, I find it very difficult to discuss the Finance Bill without making any reference to the other measures which the Chancellor has put forward, for of course the Finance Bill is much the smallest part of his measures to try to secure confidence in the £ overseas and to prove to our friends overseas that we intend to tackle inflation at home. I would only say in passing that I certainly support the credit restriction, the general

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economies and, above all, the general principle that we should try to return gradually to the real economic price of goods and services in this country, and then give State financial hacking to those who really need it.
Next I come to the specific proposals in the Bill, and here I am afraid I find myself in considerable agreement with the hon. Member for Bristol, North-East (Mr. Coldrick). I question whether higher taxation is the answer to our problem of inflation. I have listened with the very greatest attention to every argument which has been put forward on this point on both sides of the House, having tried, Mr. Speaker, unsuccessfully to catch your eye for at least three days.
For instance, I wonder whether an increase in Purchase Tax is the answer to our present problems. I did not vote against it in the Budget because, naturally, I do not pit my knowledge against that of the Chancellor, but I feel in my bones that maybe it is not right. While I appreciate what are the motives behind the increased taxation—we want to encourage exports, we want to reduce the call on certain metal-using industries, we want to increase general savings and we want the country to appreciate what the problem is—I wonder whether, in a nation which is taxed to the extend of 40 per cent. of its national income, higher taxation will be anything but inflationary.
It is interesting to note that a great many other countries are having the same problem of inflation, in particular Canada, New Zealand, Holland, Sweden and Western Germany. The answer there is not higher taxation. In some cases, in fact, exactly the opposite action is being taken. I do not say that I want to see the sort of arrangement that is used in Western Germany, which is the equivalent of a subsidy to the shipbuilding industry, much as it might help in my own constituency, for I think the sooner we get rid of that kind of direct financial incentive to exporters the better.
Let us, however, consider some of the results of Purchase Tax. I will not now go into all the details, because that can be much better done in Committee, but I will give one detailed example. To my surprise, I found myself hunting in company with the hon. Member for Liverpool, Exchange (Mrs. Braddock),
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who pointed out that if we have Purchase Tax on some glass and chinaware supplied to hospitals, then, on the one hand, while the Government are trying to introduce economies in the hospital service, on the other hand they are increasing its expenditure.
Those on the Government benches may, I suppose, point to countries such as America and Canada and the tax that exists there. They may say, "Those countries have a sales tax but they are positively booming." While it is true that Canada has a rapidly expanding economy, and has a direct sales tax on everything except food and children's wear, that sales tax is allied to something which is very important indeed—the fact that there is far less tax on individual earned incomes. Although in Canada prices are higher, wages are higher, too, and if a man is prepared to work, the sky is the limit. Of course, many of Canada's physical problems are different from ours, but that country has managed to a remarkable extent to relate reward to enterprise. I am opposed to Purchase Tax in principle because I feel that it is illogical in the context of what we have been trying to do in the past.
If we criticise an economy that lays an obligation upon us to try to suggest an alternative. Certain hon. Members opposite, during the Budget debate—not so much today—suggested at various times controls, that certain subsidies should be retained. In one or two cases they suggested that there should be more taxation. I submit to the House that all those measures have been tried before—and look at the result in 1951.
We on this side of the House try to use the monetary and credit system, as well as general economies, believing that by so doing we leave the choice of how money will be spent with the company or with the individual. That, I think, is the right principle. I would much prefer to see a logical sequence of further reductions in the subsidies, on this principle, so that those who can afford an economic price should pay it while those who cannot afford to do so should have the State's financial backing.
That means a change of policy, but I would much rather see it adopted and at the same time have direct higher pensions and direct higher family allowances, including family allowances for the first

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child. I should also like to see the Government adopt Lord Mackintosh's suggestion that there should be certain tax reliefs on savings.
I hope that whoever replies to the debate tonight will give us categorically the hire-purchase figures to show whether there has been an evasion of the hire-purchase restrictions. I have no facts or figures to support it, but it is widely said, as everybody knows, that there has been very considerable evasion of the hire-purchase restrictions.
I do not want to go in detail into the question of the Profits Tax, except to say that I am glad the Financial Secretary said that what is being done now will in no way preclude the consideration of the Report of the Royal Commission on the Taxation of Profits and Incomes. I feel—and I submit it with all humility to our Front Bench—that a certain confusion of thought exists. We have always thought that profits are good and should be encouraged. Hon. Members opposite have held an opposite view. That is perfectly understandable, but I must say I feel sympathy with a distinguished past Member of the House of Commons who said the other day that philosophers, both before and since Aristotle, always held that two contradictory propositions cannot both be true. It seems to me that perhaps we on this side of the House are in this case being contradictory.
These increases of tax changes are not only liable to be inflationary, but I do not see that they are an encouragement to exporters. In his speech this afternoon the Financial Secretary said that the reason silverware and glassware were to some extent being exempted was that the Purchase Tax was a direct deterrent to the export trade. I find myself very confused.
Mr. H. Brooke: If I may say so, there is a clear distinction here between the specialised products of the craft industries which may be priced out of the home market entirely and mass-produced manufactures from factories, such as cars, which show no sign whatever of being priced out of the home market but, rather, are meeting with an overwhelming demand here so that cars which could be exported are readily bought at home.
Lady Tweedsmuir: As I said earlier, I perfectly appreciate that of course the object behind the Finance Bill is to try to stop demand at home and to encourage
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exports. The burden of my argument was that we would not do it so well by making prices artificially higher at home but would do it better by ensuring that the true economic price is paid at home and that those who cannot pay the true economic price are helped by the State.
I have personal experience of the fact that Britain is not exporting all that she should. Recently I was in Canada and the West Indies; I found it very revealing to see my country from overseas for a change. Britain is having a relatively small share of the Canadian market, and in Canada and the West Indies I found one over-riding complaint—that while they would prefer to buy from Britain, in each case there were complaints of long delivery dates. To give one example—Scottish mining machinery—while the Americans quoted a delivery of six months, Britain's delivery date was two years.
We have as well the overwhelming flooding of these markets, particularly in Canada, by German investment of all kinds. All that means that Britain is experiencing a gradual loss of business, which cannot possibly be assessed by statistics, and which holds the very real danger of our exporters in future being unable to break into those markets. Therefore, I hope the Government, when considering the business of export firms, will exercise their credit squeeze with the greatest restraint.
I think it is perfectly plain in all these debates that everyone, on both sides of the House, wants to tackle inflation, but I do not believe anyone is yet really absolutely clear about how to do it. Never before in the lifetime of any of us have we experienced exactly this situation. We have full employment at home, we have the best social services in the world, we have a serious lack of natural power or energy and, comparable to our size and population, we are keeping the largest forces overseas and have the greatest defence burden of any nation in time of peace. That, of course, we must keep if we are to continue as a leading Power in the world and if we are to have any authority in the councils of the nations.
A few days ago, the Chancellor spoke of Keynes, who brilliantly devoted his life to the problems of unemployment.

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We have exactly the opposite problem to solve. Because there is no precedent in the lifetime of any of us I do not feel that Parliament as a whole yet has the answer to our problems. I submit that it is to that we must bend our minds.
7.15 p.m.
Mr. Sydney Silverman: It was said of old that adversity makes strange bed fellows and it is a remarkable illustration of the parlous condition to which four years of Tory Government have reduced the country that the noble Lady, in a speech which delighted us all—both those parts with which we agreed and those with which we did not agree—should find herself on the same side as my hon. Friend the Member for Liverpool, Exchange (Mrs. Braddock). Her discomfort, I am sure, will not be in any way diminished when I say that I find myself in the same position.
Having regard to the extremely persuasive attack that the noble Lady made upon the Chancellor's Purchase Tax proposals, I think that, on reflection, she may think that she was a little unfair to my hon. Friend the Member for Sowerby (Mr. Houghton), who opened the debate from this side of the House. If she will forgive me saying so, I do not know whether she quite realised that she was exploiting the subtlest and most sinister weapon of the smear campaign. It is this—you take an incident or a statement, or a comment, you state it perfectly, fairly, accurately and completely, but you introduce somewhere into it a little twist of untruth which falsifies the whole picture.
Lady Tweedsmuir Lady Tweedsmuir rose—
Mr. Silverman: I will give way in a moment.
I want to tell the noble Lady why I say that. She quoted, or purported to quote, something my hon. Friend said beginning with a quotation from a newspaper. Then she said that he said that the paper was perfectly right. He did say that the paper was perfectly right and the paper did say that something would cause trade unions to demand high wages. But the paper did not say, and my hon. Friend did not say—it was the noble Lady who perhaps misremembered or
1728
misheard; I am sure that she would not have invented it—that any economy that the Government made would lead to that result. That was her contribution, not that of the newspaper, nor of my hon. Friend. What the newspaper was saying was that if we attack this kind of problem in this kind of way then inevitably that would be the result and the fact that the newspaper and my hon. Friend were right was nowhere more clearly proved beyond further argument than in the speech of the noble Lady.
Lady Tweedsmuir: As the hon. Member has challenged me, I should like to record exactly what I did say. It was to the effect that the newspaper had said that if certain economies were made that would inevitably lead to wage demands and the hon. Member for Sowerby (Mr. Houghton) had said, "Yes, that is right." Indeed, I have noticed that several hon. Members have said that it would inevitably lead to increased wage demands. Personally, I do not agree, but that is what the hon. Member said.
Mr. Silverman: The noble Lady would be wise to look at the OFFICIAL REPORT tomorrow morning, because I think she will find that she did not say "certain economies" but "any economies." If she said "certain economies," meaning these particular economies, she would have been right, but she did not say that. It may have been inadvertence. If so, perhaps the noble Lady will be grateful to me for drawing her attention to a slip of the tongue.
I think that the Finance Bill has to be seen in relation to all the budgetary proposals, and not considered entirely by itself. I think, also, that the Financial Secretary, who opened the debate for the Government this afternoon, gave a perfectly fair description of what is the legitimate purpose of a Budget of this kind.
It is true that his remarks related only to his description of Profits Tax, but I am sure that he will agree that they apply equally to the whole of the Chancellor's proposals. He said, "You must not regard this as a Budget in the ordinary sense; it is an emergency Budget to deal with an emergency passage and an emergency situation." Those are not his exact words, but I am sure that he will accept them as a fair paraphrase of what he intended to say.

1729
If we judge this Budget and the Finance Bill by that test—a fair test—then surely it becomes obvious that it lamentably fails in its purpose, and is far more likely to increase the evil than to limit it. His argument did not apply to some of the things he was defending. Dividend stripping is not an emergency. It has been going on for a long time. The right hon. Gentleman knew all about it. My hon. Friend the Member for Sowerby, an expert in these matters, said that it had been going on since 1842. Are we then to say that the Government in their emergency Budget, in the autumn of 1955, have at last caught up with 1842?
Mr. H. Brooke: I do not think that the hon. Member for Sowerby (Mr. Houghton) said that dividend stripping had been going on since 1842. I think that he said that various forms of tax reform and evasion had been going on since 1842.
Mr. Silverman: I will not persist with that point, because I should be going on too long. My recollection is that he said what I have attributed to him, and if he did not, it was certainly not an emergency, because this was not a thing that came to light, or came into being, between April, 1955, and October, 1955, and no one can pretend that it did.
When he came to Purchase Tax, the hon. Gentleman defended what was being done by reciting a very amusing and a very long list of anomalies. I do not think that they were all so anomalous as he tried to pretend.
Mr. H. Hynd: There are still plenty.
Mr. Silverman: There are still plenty left, as my hon. Friend has pointed out. Some of the cases were not so anomalous. There is all the difference in the world between a gold pin and a safety pin, and between things which use metal and things which do not, and all other exceptions of that kind, however remarkable the results may be.
The point I am making is that if these things were really anomalies, and had to be removed, they did not come into existence between April and October of this year. The Government had known all about them for at least four years. They were not afraid to tell my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) about them when he was Chancellor. I have heard many of these debates before. The Government have
1730
had four years. It is not an emergency. What, then, is the emergency, and what are the proposals to meet it?
I want to refer to a particular emergency to which I think all too little reference has been made throughout these Budget debates. No one will pretend that the Lancashire cotton trade is not passing through a period of emergency, and, therefore, an emergency Budget, which was intended to deal with the emergency, must presumably have had somewhere in contemplation the emergency in the Lancashire cotton textile trade. It must, therefore, have been—or was it?—the intention of the Chancellor to do something to relieve that emergency, because, believe me, if one of the things that we have to do is to restore or increase the export trade of this country, there is no other industry in the world more ready and more able to assist, if we really intend to do something for it.
What does the Chancellor do for it? What does it need? It needs a home trade and it needs an export trade. What did he do for it concerning the home trade? For years every Lancashire Member of the House, without distinction of party, has been saying to the Government, "For heaven's sake, if you want to do some little thing"—no one thinks it will do very much—"for the cotton trade in Lancashire, relieve it of Purchase Tax." All of us were unanimous. I think that it was the one thing, almost the only thing, on which, without distinction of party, all Lancashire Members have been unanimous in debate after debate from 1951 onwards.
First, there was some resistance, then some concession, and finally the Budget of this year in which the Chancellor, the Financial Secretary, the Economic Secretary, the President of the Board of Trade—all of them in the space of four or five days of the Budget debate in April—assurred the House not merely that Purchase Tax could not be interfered with but that it would be dishonest to try.
It culminated, hardly a week later, with the Prime Minister coming to the House of Commons because there was an Election pending—hardly for any other reason—and repudiating all of them, and doing the very thing which they had all laboured to convince the House was not merely impossible but dishonest. He took it all off. But, of course, we know now that he did not mean it.

1731
The Prime Minister took it all off for the period of the Election. Some of it is back again now. There is Purchase Tax on it all now. It is true that the D scheme has gone, and no one pretends that the abolition of the D scheme will not be of some benefit to the production of quality goods in Lancashire. But if we are raising the price of ordinary common necessities in this industry, what is the good of saying that we are attacking inflation? There is nothing then to be gained out of it.
Let us look again at the Purchase Tax. What do the Government wish to do? According to the Chancellor and the Financial Secretary, they want to reduce purchasing power. Whose purchasing power ought we to begin to reduce? Should it be the purchasing power spent on luxury articles or on ordinary articles; the things that people have to live by or the things that they can do without? What is the use of a measure which makes it more difficult for ordinary people to buy ordinary domestic necessities, and which makes it much easier for them to buy luxury articles, such as luxury clothing? What the Government are really saying is that ordinary people are living too well and that what they intend to do is to reduce their power to buy ordinary things.
Going back to the quotation made by my hon. Friend, what is "an ordinary working man living only by his weekly wage" to think of a Budget, in a situation which required deflationary methods, which at one stroke, by its Income Tax proposals, increases the purchasing power of the well-to-do or the better-off section of the middle class and then, by the second of its proposals makes the ordinary people pay the bulk of it by putting Purchase Tax on to the things which are the necessities of ordinary life?
Is it possible for such a man to do any other than to say, "Well, if you increase my cost of living, my standard of living is not very high—it is certainly not too high—and you will have to pay for it by increased wages"? This will not do any good to the economy of the country and it certainly will not do any good to the textile trade.
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Now I come to the only other point I want to make. No one believes that an improvement in the capacity of the cotton textile trade to sell goods on the home market is any final or long-term answer to its difficulties. I am not one of those who think that the Lancashire cotton trade is down and out. I believe that it has, or could have, a great prosperous future ahead of it. It will never again have the virtual monopoly that it had a hundred years ago, but that does not mean that it cannot be a productive, profitable, progressive industry, doing a great deal for the economy of the country and doing a great deal to advance the standard of living of all people all over the world. Of course it can, but not in its present condition.
The cotton industry needs a thorough overhaul. It needs complete modernising. It needs re-equipment and it needs to be brought up-to-date. It is all very well to say that the owners of the mills ought to have done that long ago when times were good and when they made large profits—of course they should. The only time in my lifetime when the cotton industry has been really profitable was the five or six years of Labour Government. I am not saying that it was due to a Labour Government or Governments solely—it is a curious coincidence all the same but mill owners made very large sums of money and they could then have used large parts of them, and ought to have done, to re-equip and modernise their industry and to equip themselves for the keener competition of the modern world in the mid-twentieth century. But they did not do it, and they are not making large profits now.
What is the Government's other budgetary proposal? They have two main budgetary proposals. One is the increase of the Purchase Tax and clapping it on to a wide variety of goods which, everybody had thought, we all agreed ought to be relieved from it. The other budgetary proposal is the credit squeeze. What in the name of common sense is the Lancashire mill owner to do now? It is nothing to the purpose to tell him what he ought to have done in the past. We have all been telling him that, and it is quite true, but it does not help now.
If it is true that this industry is not considered down and out, if the Government have not thrown it over altogether,

1733
if they do see a future for it and if they do see it again contributing in the export trade and to the economic prosperity of our own land, is it not obvious that what is needed is, not a credit squeeze, but a credit expansion? How else are the mills to be re-equipped?
What do the Government say? "Yes, it must he re-equipped and re-equipment will be expensive, but it must take place and there will be no future for you unless it takes place, but you must wait until times are better, until we can afford to allow you the credit facilities which will enable you to re-equip." Is that what the Government say? If it is, we are entitled to ask them, "What in the meantime?" The manufacturer will be all right in the meantime. The profits that he salted away are not all spent; he will not starve, and if he cuts down his consumption a little, judging by what the Financial Secretary had to say, the Government will not regard that as a first-class tragedy.
But what of the worker, the man who has only the skill of his hands with which to earn his living, only the skill and labour of his hands to support his dependants, in these years while we are waiting for the Government to allow sufficient finance or credit to be available to enable re-equipment to take place? Do the Government think that all the markets abroad that we shall lose in the meantime we shall be able to recover as soon as they make up their minds that we can begin to re-equip? It does not work like that. It may be difficult to retain a market while one holds it, and in modern competitive conditions it is very difficult indeed. But if we lose it, we can re-equip a great deal and we will never, never get it back.
If we take these two things together, the outlook for the Lancashire textile industry is bleak. The Government know that it is bleak. They do not care. They have no proposal of any kind to make. They have turned down every other proposal that has ever been made to them at any time and they have no proposal at all of their own. The result, in these coming years, will be increasing unemployment in Lancashire. It may turn out that employment over the rest of the country may not fall very much and that all the unemployment that some people still long to see will be borne by the
1734
Lancashire textile trade and its associates and dependants. That is a very convenient way out.
Let us have our pool of unemployment, but let us concentrate it in Lancashire—is that the Government's intention? If it is not the Government's intention, do they agree that there is an emergency here? If they do agree, what in heaven's name are their proposals? What are they going to do about it? What do they suggest can be done about it?
Viscount Hinchingbrooke: I am sure that the House would be grateful if the hon. Member would make his views absolutely clear. Does he advocate the lifting of the credit squeeze to the Lancashire cotton industry only, or throughout the country?
Mr. Silverman: I have only two minutes left and I do not want to take longer than that, but I can, though not in any detail, indicate to the noble Lord what I am suggesting.
I agree with my hon. Friend who spoke just now. We are long past the days when Governments and this House could disinterest themselves in the economics of the' country. There are people who still hanker—I think that the hon. Member for Orkney and Shetland (Mr. Grimond), who is a Liberal, may be one of them; there are many others—for the days when it was believed, and when, indeed, it was the practice, that industries and businessmen and commerce were all left to pursue their own way, doing what they thought right, acting as they thought fit, with the belief that somehow, as an incidental byproduct, the community's interests would be safeguarded.
Nobody believes it any more. The Government do not believe it any more than do the Opposition, or we would not have had this supplementary Budget. We know that we must use our Finance Bills and our other sovereign powers to see that the community's interests come first where the community's resources are involved. The difference is whether it is done straightforwardly, so that everybody knows what is being done, or indirectly through handing over the power of control to the banks, financiers and money lenders.
My answer to the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) is that instead of having a general squeeze, we should have had an

1735
economic plan. We must take responsibility for the use of our resources. Some credit must be allowed; some things must expand and others must contract. We must take responsibility for it ourselves. What other way is there of dealing with it? We could then divert some of our capital expenditure—because there would still be capital expenditure—to where it is most needed, as it is in the textile industry, and away from other places where it is less needed.
That was what my right hon. Friends tried to do between 1945 and 1950. They did not begin in fair weather. Nobody thinks that they did. They steered the ship through a storm by taking the helm themselves and not by handing it over to the cabin boy in the poop.
7.42 p.m.
Mr. Cyril Osborne: As we have listened very patiently to the hon. Member for Nelson and Colne (Mr. S. Silverman), I hope that he will not interrupt me in the few minutes during which I wish to address the House. He asked what was the emergency, and went on to say that the Finance Bill could not be judged apart from the larger policy of the Chancellor. With that view I agree. I want, first, to try to tell the hon. Member and the House what is the emergency. Last July and August there was a threat to sterling on the Continent and in America—a threat that there would be another devaluation similar to that which we suffered when Sir Stafford Cripps was Chancellor of the Exchequer.
The real purpose of this Finance Bill and the other steps which the Chancellor is taking is exactly to put that one thing right, to do today what Sir Stafford Cripps, with all his ability, all his tenacity, all his honesty, all the power he had behind him, was unable to do in 1949. I remind hon. Members that that devaluation was the greatest tragedy that had happened to this country since the war of 1939–45. It is not appreciated on either side of the House, let alone in the country. It is this which the Chancellor must put before the ordinary people. If I can have the attention of the hon. Member for Nelson and Colne—he wants to know, and I am trying to instruct him.
Mr. S. Silverman: I have heard every word.
Mr. Osborne: In 1947–48 I went to the United States and Canada and tried to sell English textiles. I managed to get some orders. When in 1949 we were delivering some of them, we suffered devaluation. I discovered—and it is this that the House and the country must realise—that we were compelled to send three articles to obtain the same number of dollars that previously we had received for two. We had to work 50 per cent. harder to earn the dollars for raw materials and foodstuffs, and it is from a repetition of that disaster that the Chancellor is saving the nation.
For that my right hon. Friend deserves all the honour and respect which we can give him and not the vilification which he got from right hon. Gentlemen opposite, with whom I should like to have dealt had I had the time to do so. The hon. Member for Nelson and Colne must remember that the prices which we have to pay for our wool and cotton are, of course, world prices, and in raw materials, world prices are dollar prices. Those were increased by 40 per cent.—if the hon. Member for Nelson and Colne would listen he might learn something. We had to pay 40 per cent. more, because a Socialist Chancellor in 1949 failed to do what my right hon. Friend is succeeding in doing today.
So far the Budget has been judged purely from the domestic point of view. Its real test is in the foreign exchanges of the world.
Mr. Harold Davies: I am grateful to the hon. Member for Louth (Mr. Osborne) for giving way. I should like him to remember, when he is talking about the value of the £, that his own Chancellor of the Exchequer is responsible for some of that fall by his irresponsible speeches in Paris when he was dealing with the European Payments Union. The British contingent suggested that there should be a margin of between 2£75 dollars and 2£82 dollars to the £. The result was that the whole world was afraid of what was going to happen to the £ on the market.
Mr. Osborne: That may or may not be true. Supposing I grant all that, which I do not—I see that the hon. Member for Nelson and Colne is now leaving the Chamber—the problem facing the nation is that which faced Sir Stafford Cripps in 1949. Seven times Sir Stafford Cripps

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said in the House that there would be no devaluation. Because his Government failed to take steps at home to give the foreigner confidence in the stability of the £, we had to devalue, and that was a great disaster. The Chancellor is taking these steps which we are discussing now, unpleasant and unpopular though they may be for himself and his party, to secure our livelihood. It is that point which we have to get over to the country.
In discussion with my constituents. I have found the question which concerned them was not what was in the Bill, but why it had been brought in and why it was thought necessary. It was necessary because it has been shown that in the last three or four months we have been consuming a greater proportion of our total production than we could afford. That is a fact. Consequently, there were two courses open to us. Had we continued to do that, the very basis of our stability, that is, belief and confidence in sterling—would have gone. We were not paying for the raw materials and foodstuffs which we were consuming.
The Chancellor has taken one course. I want him to take another. So far there has been a negative approach to the problem, a restrictionist approach, and I want an expansionist approach. If we are consuming too great a proportion of our total production, I want the Chancellor to say, instead of merely saying that we must cut down, that if we want to maintain our standard of life, we must increase our total production. Then, of course, we could fulfil our obligations in the export market, pay for what we receive and maintain our standard of life.
Suppose, for example, as the late Mr. Ernest Bevin said more than once, that we could obtain 20 million tons more coal per year from our mines. Then this problem would not exist. We should say to our people, "The problem is not one merely of consumption, it is one of total production." I want it explained in the simplest terms to our people. It is no use going into my factory or the factories of other hon. Members, and talking about "terms of trade" and "balance of trade" and "sterling exchanges." We must talk in simple terms which the people will understand, and we must convince them that what we are doing is absolutely necessary and just.
1738
Recently I had the privilege of spending a few weeks in Russia and Poland. I saw there with my own eyes—and that is the best witness—men and women working as I would like to see our people working at home because then there would be no problem like this. [HON. MEMBERS: "Slave conditions."] No. I saw what their working hours were and their standard of life. They are working to rebuild their cities. They are doing something, not only for themselves, but for the good of their nation. If we could get some of that spirit here among hon. Members on both sides of this House, we should be much better off. I would remind hon. Members that people there are working six days a week, eight hours a day and a voluntary shift—
Mr. Cyril Bence: And that is what the hon. Member wants here.
Mr. Osborne: I am saying that the United Nations statistics show that the average standard of life in this country was the equivalent of 773 dollars per annum; in Russia it is 308 and in Poland 300. To maintain our standard of life we must be prepared to work—[Interruption.] Please let me finish, I have waited all day for this opportunity.
I say to hon. Members on both sides of the House that this Budget—I am sorry Mr. Deputy-Speaker, that I have trespassed a little—that this Finance Bill cannot be looked at in isolation. It must be looked at against a wider background. An hon. Gentleman opposite said that we need a new Chancellor. It is not for him to choose. That is our choice, and we do not want a new Chancellor. We on this side of the House are quite satisfied that we have a first-class Chancellor.
I wish to make two suggestions which I consider are worthy of examination. Inflation at home, apart from external inflation, is coming because of a natural desire on the part of the working man to share in the bigger profits that he has helped to earn. It is unreasonable that attempts should be made to cure that inflation by saying to the working man, "No, you cannot have a greater share," when year by year he sees bigger profits for the concerns for which he works. The biggest trouble centre is the engineering industry in which at present it is easy to get highly paid jobs and make profits. I want both those conditions changed. In

1739
my opinion the fault lies with the Government, whichever party may be in power. Through the Ministry of Supply and the Admiralty the Government are the biggest buyers of engineering products, and I am not satisfied that, as taxpayers, we are getting the full value for the money which we are spending with the engineering concerns on armaments.
When the war ended the cost-plus system—that iniquitous system—was also ended. But now I understand that engineering contracts are subject to an escape clause by which the total price goes up if wages or the price of materials increase. If delivery is made within two months, the Government can get a firm price, but if the delivery date is more than two months, this escalator clause is included, which makes the contract really a cost-plus contract. While it is not reasonable to expect the great engineering firms to give a firm price for an article which will take two or three years to deliver, I think that we could insist on a firm price for delivery within twelve months—[HON. MEMBERS: "Try it."] I am speaking for the taxpayer.
Mr. Bence Mr. Bence rose—
Mr. Osborne: No, I cannot give way. I promised not to take up too much time.
I suggest that whoever deals with contracts in the Ministry of Supply and the Admiralty should be instructed to see how far they can squeeze the waste both in capital materials and labour out of Government contracts, because I am convinced that there is a great deal of waste, and there is much that could be done in that direction. Our problem is exports, and if my suggestion were carried out it would help those in the engineering industry who are engaged in exports and who have no Government contracts, because the firms with these almost cost-plus Government contracts can afford to pay higher wages than are agreed to by the trade unions, and they steal good labour from the firms engaged in export orders.
Mr. Bence Mr. Bence indicated dissent.
Mr. Osborne: It is no good shaking your head; you should stick to things you understand, and it is—
Mr. Deputy-Speaker (Sir Rhys Hopkin Morris): Order. The hon. Member must not tell me that I must stick to things I understand.
Mr. Osborne: I am sorry, Mr. Deputy-Speaker, I withdraw that remark. But I think this is fundamental. It has nothing at all to do with party politics, and I wish that I could get it across to the House.
The firms to which I have referred are doing a great disservice to the engineering firms engaged in export work. I could give an example from my own city of Leicester from which men have been taken to work in Coventry. From the moment they get in the bus to go to Coventry they are paid. It takes about an hour to get to Coventry and it is about an hour-and-a-half before they start work. But they are paid the full rate for that time and for the time taken in bringing them home. If these soft Government contracts were not in Coventry, those men would be content to work in Leicester for the firms executing export orders. If we are to help the export industries, that is a matter about which the Government could do something.
I am sorry that the hon. Member for Coventry, East (Mr. Crossman) is not in the Chamber. I think that the Government might consider reducing or taking away entirely the McKenna Duties which protect the motor trade and allowing the fresh air of competition into Coventry. I say that Coventry is the most "featherbedded" city in the country. We talk about "feather-bedding" the farmers, but that is nothing compared with Coventry today from the point of view both of employers and workers. If a bit of that protection were given to Lancashire instead of Coventry, where it is not required, it would make a lot of difference to our export trade.
My last suggestion is this.
Mr. Chapman: May I ask the hon. Gentleman a question?
Mr. Osborne: Please let me get on. The hon. Gentleman has already had one turn.
The suggestion which I now propose to make will, I fear, please hon. Members opposite, because I am going to ask the Government to look at the possibility of using physical controls if voluntary efforts do not secure more exports. I do not like physical controls, but if the other system will not work, then we have no option but to use them.

1741
After the war, the hosiery trade in which I am engaged had its yarn supplies rationed according to the amount of its exports. If those engaged in the trade increased their exports, then they were allocated more yarn to fulfil not only their export orders but also to expand their home trade. I suggest that my right hon. Friend should approach the trade organisations and should tell them that unless exports are increased within twelve months the Government will have to take measures which they would prefer not to employ.
This is not an entirely new suggestion because in another of our Leicester industries it is actually working at the present time. For many years now, if the footwear trade want to import the finer upper-leathers from soft currency countries, 80 per cent. of the finished goods manufactured from those leathers have to go back as soft currency exports, or 60 per cent. as hard currency exports. If those same high quality leathers are imported from the dollar area, then those who import them must export 80 per cent. back to the hard currency area.
If the trade associations will not voluntarily work harder in the export market—some firms are doing magnificently while others are doing nothing at all—we shall have no option but to extend this system. Little as I like the system, to no group would I say it quicker, harder and with more purpose than to the favoured and pampered motor car industry of Coventry. It is high time that the 33 per cent. duty was looked at again.
I think that my right hon. Friend the Chancellor was unjustly and bitterly attacked by the right hon. Member for Leeds, South (Mr. Gaitskell) ten days ago. [HON. MEMBERS: "No."] He was disgracefully and shamefully attacked, and I now want to say one or two things in reply to what was said by the right hon. Member for Leeds, South. I am sorry that the right hon. Gentleman is not here. I was hoping to catch Mr. Speaker's eye when he was in the Chamber, but I will address what I have to say to the right hon. Member for Huyton (Mr. H. Wilson) instead.
First, the right hon. Member for Leeds, South said that this Budget was unfair and inflationary. I remember the right hon. Member for Ebbw Vale (Mr. Bevan)
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making his personal statement on 23rd April, 1951, when, with regard to the right hon. Member for Leeds, South, he said:
"It is obvious from what the Chancellor of the Exchequer said in his Budget speech that we have no longer any hope of restraining inflation."
Talk of the devil rebuking sin—he is not in it—
"The cost of living has already gone up by several points since the middle of last year, and it is going up again. Therefore, it is no use pretending that the Budget is just…"
This is what the right hon. Member for Ebbw Vale was saying about the Budget of the right hon. Member for Leeds, South for which hon. Members opposite voted. How dare they say that my right hon. Friend was dishonest.
The right hon. Member for Leeds, South also said that this Finance Bill lacks proper economic planning. [HON. MEMBERS: "Hear, hear."] Who on earth is he to talk about economic planning. He does not know anything about it, and I have the authority of the right hon. Member for Ebbw Vale for saying that, because on 23rd April, 1951, he said:
"May I be permitted, in passing, now that I enjoy comparative freedom, to give a word of advice to my colleagues in the Government? Take economic planning away from the Treasury."
The right hon. Gentleman was talking about the right hon. Member for Leeds, South. He went on to say:
"They know nothing about it."
He then said, and I leave this as a final shot with hon. Members opposite:
"It has been perfectly obvious on several occasions that there are too many economists advising the Treasury, and now we have the added misfortune of having an economist in the Chancellor of the Exchequer himself."—[OFFICIAL REPORT, 23rd April, 1951; Vol. 487, c. 39.]
I am trying to show the House that the right hon. Member for Leeds, South should have been the last person to throw stones at my right hon. Friend the Chancellor.
Finally, and this is my last quotation to justify this Bill, the right hon. Member for Leeds, South, when speaking on his last Budget, said:
"…we have to recognise that there must be some reduction in our standard of living." —[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 827–8.]

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Do hon. Members think that after that confession and after that damning indictment by the right hon. Member for Ebbw Vale it was decent or fair of the right hon. Member for Leeds, South to attack the Chancellor in the way in which he did?
8.7 p.m.
Mr. H. Hynd: The efforts of the hon. Member for Louth (Mr. Osborne) to become the Tory Bevan are very praiseworthy, but singularly unsuccessful. However, he always amuses the House, and we are grateful to him for that. I can assure him that the workers of Louth and elsewhere will take careful note of what he said tonight, to the effect that he wants them to be in the same position as the workers in Poland and in Russia.
Mr. Osborne: That is not true.
Mr. Hynd: That is what the hon. Gentleman said. I challenge him to repeat what he said.
Mr. Osborne: I said that I had been to Poland and to Russia and had seen the people there working eight hours a day, six days a week, for a standard of life which the United Nations said was less than half of our standard, and that unless we worked harder we could not expect to maintain the differential which we now enjoy.
Mr. Hynd: The hon. Gentleman's memory is slightly at fault. If he will check up with the OFFICIAL REPORT tomorrow morning he will find that those were not the words he used.
The hon. Gentleman also said that in the last few months we had been spending more than we could afford. No doubt part of that spending was the £140 million which his Chancellor of the Exchequer gave away in his pre-Election Budget. I had hoped that in moving the Second Reading of the Finance Bill the Financial Secretary to the Treasury would say a word of apology for the breach of faith which occurred between the pre-Election Budget and the one which we are now discussing. It was a breach of faith for which the right hon. Gentleman will not be forgiven by the country, despite all the efforts of his supporters on the benches opposite.
The Government are apparently still quite unrepentant about their breaking of promises. They have done exactly
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what they did after the 1951 Election. In the first Budget after that Election they threw over their Election promises and put up prices sky-high, hoping that by the time the next Election came along people would have forgotten. They now have four years ahead of them, and I have no doubt that during that time there will be a reduction in the present rates of Purchase Tax, and that at the next Election they will point to the fact that they have reduced the burden and that everybody should vote Conservative.
Clause 2 deals with the Profits Tax. The Government claim credit for the fact that they have increased it by 5 per cent. The best comment that can be made about it has already been made by my hon. Friends, who have pointed out what a favourable reception it has had upon the Stock Exchange. These people seem to be far from frightened of the consequences which the Financial Secretary attempted to elaborate and exaggerate in his speech.
Clause 4 deals with what my hon. Friend the Member for Sowerby (Mr. Houghton) referred to as the "Indian rope trick." We had some very interesting revelations from the Financial Secretary about the sort of tricks which private enterprise gets up to in order to dodge taxation. This is a very interesting innovation in our Budget debates, and I would ask the Financial Secretary to pursue his researches and give us some further revelations of the way in which these things are worked, because they are very interesting and useful to us.
I now turn to Clause 1, which deals with Purchase Tax, to make a constituency point. It is not concerned with cotton, although that is one of the main interests of my constituency, which has suffered very greatly from the neglect of the present Government; neither is it the textile machine industry, which has also suffered greatly under this Government. There is another industry in my constituency which, although smaller, employs many people, namely, the washing machine industry.
That industry has had several blows in the last few months. One was the hire-purchase restrictions; another was Purchase Tax, and, like everybody else, it has suffered from the credit squeeze. The industry has approached the Treasury in connection with an anomaly which I

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hope will be put right during the Committee stage. The Financial Secretary made great play about certain anomalies, so I hope that he will show an interest in this one.
A wringer is subject to the full 30 per cent. Purchase Tax. If it is fitted to a table, or any other article of furniture, which normally bears 5 per cent. Purchase Tax—although that table can be used for any other purpose—it becomes subject to the whole 30 per cent. tax. That is the ruling which has been given by the Customs and Excise authorities, and the Financial Secretary will find that there has been certain correspondence upon this matter with the Washing Machine Makers' Association from my constituency.
The Financial Secretary would not claim that wringers are luxuries, or that they absorb an undue amount of metal, and as one of the purposes of this tax is to economise in metal I hope that the Financial Secretary will endeavour to put right this ridiculous anomaly. Up to now, if a trader sold a whole washing machine, including a wringer, it was subject to the full tax, but if he sold a boiler it was tax-free, and the purchaser could put inside something called an agitator, which bore tax. I know that the desire of the Government is to tax agitators, but this is a different kind of agitator. This could be put inside the boiler, and the lid could be thrown away.
I hope that the Government will not drive the industry to try to get round the position by selling a wringer and a stand separately. If the wringer must be taxed it should be taxed separately, and the rest of the article should be taxed upon the same basis as any other kitchen furniture.
I am against the inclusion of any of these household articles in the Purchase Tax range. There have been rumours that the Government may be inclined to look favourably upon an Amendment in that connection. I hope that they will do so, because there are indications of such a desire among Members on both sides of the House. It is no good the Financial Secretary telling us that the tax upon household articles will amount to only 4d. per week per family; people do not buy these household articles at the rate of 4d. per week per family. What usually happens is that a young couple
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want to get married and have to lay out a considerable amount of money upon these household articles in order to furnish their home.
At such a time this tax represents a quite considerable amount to be added to the expenditure with which they are faced at a very critical period of their lives, and when, at the same time, they are now having to face greater difficulty in trying to buy a house—because of the lower housing subsidy, the increase in interest rates, and the rest—and also the greater difficulty arising from hire-purchase restrictions. This 4d. per week tale does not hold water, and I hope the Government will not continue to pursue it.
The Bill must not be considered in isolation but as part of the Government's action in the present crisis. They have increased the price of telephones. Only this morning I received a letter which I can show to the Financial Secretary if he wants to see it. The writer says:
"I wonder whether you could raise a question to Mr. Butler for me. His last Budget came as quite a shock, particularly because of the increased telephone charges.
I am an invalid, confined to bed, and my mother is a diabetic. So you see, a telephone is to us an absolute necessity."
The writer goes on to talk about calling the doctor quickly, and finishes by saying:
"As we only have sick pay, pension, and National Assistance, you can guess that another 1s. 3d. a week will take some finding.
Surely it is hardly fair that many like ourselves should have to suffer this extra hardship…Just where we live it is country, and quite a distance to the nearest phone."
These things are all piling up upon the ordinary home. It is no good the Government Front Bench telling us that the tendency of the Government is to put the burden upon those people who can best afford it; the heavy end of the burden falls upon those who are least able to afford it. When this fact is coupled with the increase in rents and food, I am surprised that the Financial Secretary should try to tell us stories about Christmas trees. They seem more like Christmas fairy tales when we look at the provisions of the Bill.
On the question of wage restraint, I do not want to see any more of this spiral of wages trying to chase prices, because it is a very bad thing for the nation, but

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it must continue so long as prices continue to spiral upwards. This Budget will obviously cause prices to continue to rise, and it is equally obvious that wages will attempt to follow those prices. They always have, and they always must do. It is quite unfair to expect that they should not. Higher prices are always passed on to the consumer, as is higher taxation, so why should hon. Members opposite expect workers not to attempt to mitigate the effect of higher prices by asking for increased wages? Unless the Government show more consideration during the further stages of the Bill than they have so far shown in its Second Reading, these wages demands will continue, and unless those demands are conceded this Budget may well lead to a period of industrial strife.
8.21 p.m.
Sir Henry d'Avigdor-Goldsmid: I would not have troubled the House at this late hour did I not wish to address myself to a point which has scarcely come up, unless it was in the speech of the hon. Member for Orkney and Shetland (Mr. Grimond). We are confronted with a second Budget this year, but when one considers the extraordinary diversity of our economic life and the very slender resources we have with which to support it, it is not surprising that readjustments are necessary.
England plays four distinctive rôles in the economic world and they are bound to come into conflict with each other from time to time. In the first place, this is a great manufacturing country. I need say no more about that. In the second place, we are the centre of a world-wide Commonwealth which produces many of the raw materials of which the civilised world is most in need, and it is our responsibility to finance this production for the benefit of the whole world. Capital emanating from this country has brought forth the wealth of the copper mines of Rhodesia, the rubber and tin of Malaya, the wool of Australia and the gold and diamonds of South Africa, to name only a few commodities, to the markets of the world.
I remember with very great interest the remarks made last week by a neighbour of mine, the hon. Member for Wednesbury (Mr. S. N. Evans), who, in his
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most interesting speech, drew attention to the fact that we had been falling far short of our responsibilities in this connection in the last few years. Nevertheless, it is essential, if we are to keep our place in the world, that we should meet these responsibilities.
Thirdly, we are a merchandising country. We are concerned most intimately with nearly half of the trade of the world and we are, as shippers, providing for its marketing. We are also providers of insurance. We play a vital part in bringing the wealth of the world to its ultimate consumers. Finally, we are, at the same time, trying to run the greatest international bank in the world. We are inviting the nations to send us their funds for safe keeping and we are trying to offer them attractive possibilities of investment. To that, of course, I must add that we must take the responsibility for seeing that those investments that we have picked remain solvent and active.
These are the four main facets of our economic life. It is not surprising that in meeting their requirements we should sometimes find ourselves at cross-purposes. For example, the expansion which, as traders and manufacturers, we particularly desire, tends very often to cut across our responsibilities as bankers. Much as we should like to provide cheap and easy finance for innumerable projects in the Commonwealth, we find ourselves in a position in which we cannot meet the legitimate requirements of our home industry if we take on this added responsibility.
I take the view that, although the position may not have been put clearly to them, the people of this country accept their responsibilities broadly, and are willing to make sacrifices in order to fulfil them. If the position were put to them in clear and unequivocal language I have no doubt what the answer would be. In this Finance Bill we are asked to take a fairly stiff dose of medicine, and very disagreeable medicine at that.
During the debates of last week and today many objections have been voiced. I know that my right hon. Friend the Chancellor of the Exchequer dealt with them fairly and honestly, but he would not be so sanguine as to think that the country as a whole is pleased with the measures which we are now asked to

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adopt. The hardships caused to consumers by the Purchase Tax have already been dwelt upon. Alterations in Purchase Tax are particularly disagreeable to the trading community, because of the renewed element of doubt and uncertainty that they impart to what is already a chancy business. Moreover, an increase of Purchase Tax must bring with it the suggestion of a reduction in the future. That adds to the uncertainty.
Hon. Members who are connected with local authorities and have experience of their workings—this must include a very large number of hon. Members on both sides of the House—will know how disappointing it must be for local authorities that, ten years after the war, projects of many sorts must now be indefinitely shelved. Whether we talk about community centres, health centres, or other projects which are not classified as strictly necessary, they still carry with them the hopes and interests of very many local inhabitants, and every postponement is a damper to the enthusiasm in which they were conceived.
Finally, hon. Members who, like myself, have the privilege of representing industrial constituencies—I use the word "privilege" advisedly, because it is a privilege to be at close quarters with the industrial heart of England—will not gel much cheer from the proposals of my right hon. Friend the Minister of Housing and Local Government when they meet their constituents, many of whom are still living in pathetically overcrowded conditions. Nevertheless, I am firmly of the opinion that these hardships will be accepted by the majority of the people with cheerfulness and resolution because the proposals contribute to reaffirming the stability of our currency upon which, basically, the whole structure of our life depends.
I therefore think it all the more important that, having pushed themselves to make the sacrifices, the people should not find that their sacrifices have been wasted because of any ill-considered financial policy to which we may be led. It is in this connection that I would ask the Chancellor to ponder very deeply before giving way to the siren voices which, at the moment, are urging him towards convertibility. I need not tell my right hon. Friend that the shores of siren land are white with the bones of those sailors who
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listened to those voices and their song, and were wrecked on the rocks that lay ahead. I would suggest that a pad of cotton wool for stuffing into his ears should be part of the equipment of a Chancellor of the Exchequer. But I shall not dwell now upon these points.
I come back to the point at which I started. We are engaged in trying to establish a permanent basis for a free society, upon full employment. It is a big thing and has never been done before in the history of the world. There must be many countries in which our success in such a field would not be altogether welcome. The people of this country realise what we are doing. No one has been more sympathetic to this project or done more for it than my right hon. Friend the Chancellor of the Exchequer.
If I may, without presumption, urge upon him one word of advice, it would be to stop looking at the rates of foreign exchange which have preoccupied his mind so much lately and to look, and to ask his advisers to look, at the indices of production and cost of living. So long as the index of production rises and the cost of living remains steady, I have no doubt that the people will accept gladly the sacrifices that they are being asked to make today.
8.30 p.m.
Mr. Harold Lever: I shall not follow the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) beyond remarking that, having most succinctly damned every one of the Chancellor's proposals in particular, he very benevolently wound up by giving him his support in general. I rise with even greater diffidence than usual, because I am hit harder than most hon. Members by an autumn Budget. It always takes time to read the Economic Survey, and it takes me a whole year to read it, with the result that when we have an autumn Budget I am even less equipped than usual, because I have not even caught up with the Economic Survey relating to the previous Budget. I was thinking of not speaking at all, but felt that it would be wrong, if the Chancellor is to have more than one Budget in the year, that he should not have more than one homily from me in the year.
I take the somewhat eccentric view that, in principle, the Chancellor's April

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Budget was not altogether inapt to the situation which he then faced. I do not think that he was dishonest—I know that this is an eccentric view—in bringing in that Budget. His dishonesty lies in the financial and budgetry proposals now before the House. Since he brought in his Budget in April, the right hon. Gentleman has been rolling round the country looking like a time bomb not sure when it is due to explode and, every time a little alarm is caused, reassuring people that he may not go off at all.
Now the Chancellor has gone off, and very adequately blown up any reputation he ever possessed either for being a progressive, or for having the cure for the economic and financial ills of the country at present. Holding, as I do, a different point of view, I would have apportioned the tax reductions rather differently than did the Chancellor in April, but I think that I would have given away quite as much as he did. Where he failed was not in his budgetary measures in April, but in the extra-Budgetary measures he has taken, or failed to take since, and in the extra-budgetary measures being taken at present—or which he is omitting to take at the present time.
The assumption that our situation has got worse since April because someone has had the effrontery to make modest reductions in the burden of taxation, is quite unsusceptible of support in argument. For any serious ill to overtake this country would require rather more than the minor budgetary changes—in so far as they have taken place since last April—because most of them have not had time to work and will only take effect next year. We must, therefore, look elsewhere than to last April's Budget for our present troubles, and I suggest that "elsewhere" means that we have to look at the doctrinaire obstinacy of the Chancellor—and of the Tory Party which has largely coerced him and prevented adequate measures being taken in dealing with the financial situation or, when he has taken steps, made him take the wrong ones.
Broadly speaking, there are two major economic and financial problems besetting the country. One is inflation, the other is the balance of payments. Although there is some connection between them, they are by no means interconnected at all points, and the remedy for one is not
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necessarily the remedy for the other. If we solve inflation we by no means necessarily solve the balance of payments problem and vice versa. In fact, the remedies for one very often work against each other. For example, to solve our balance of payments problem we have to force goods on to the export market. That is inflationary, because there are then rather fewer goods in the country on which to spend money. Nor does it follow that to deal with the inflationary problem helps the export problem.
I shall not now refer to the rise in the interest rates, except to say that of any section of industry which is hurt by that it is the export section which is hit hardest. That is the section which has to finance, for the longest period of time the goods which it is shipping abroad. To the home trader, who buys goods on Monday and gets repaid for them the following week, the rise in interest rates means very little. To the textile exporter who has to carry and finance his stock of yarn and see it through the weaving, dyeing and finishing sheds, and then wait until it has got to his customer by ship before he can be paid, this is a very serious handicap.
What are the remedies suggested in the Budget of last April and the more recent one? I am going to criticise the Chancellor very severely. He used to come complacently to this House, and I warned him that he was the victim of his own little-deserved reputation for securing the economy. When the balance of payments was running quite fortuitously in his favour he used to enter the House to the accompaniment of an air of sacred adoration and hero-worship which would suddenly emanate from the respectful back benchers behind him. The Chancellor would bow with complacent modesty as if here, at last, one person could find the resolution of the age-old conflict between science and religion because he appeared to be the master of them both and relied freely upon his knowledge of both in his Budget speeches.
But that has all gone. The real Chancellor of the Exchequer, adrift, unable to form any coherent policy, is now revealed not only to this side of the House but obviously to hon. Members opposite. I do not often agree with them, but I am sure they are patriotic Members and I would appeal to them, as they have lost all confidence in the Chancellor of the

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Exchequer, to benefit themselves and the country by moving him out of his position.
Mr. Ellis Smith: What difference would that make if the same policy were applied?
Mr. Lever: It might be one step towards a modification of the policy. Unfortunately, the Chancellor has had the continuous advice of numbers of experts from the Bank of England and the Treasury, and this is to be held in his favour because although the hon. Member for Walsall, South was abundantly right when he recommended the Chancellor to have an ample supply of cotton wool in his ears when expert advisers are about, or, in default of that, at least a gag over his mouth, yet, unlike some of us, the Chancellor of the Exchequer was continuously beset by the misfortune of having an immense phalanx of economic advisers, especially those from the Bank of England, at his elbow every time he made a decision.
What are the prime decisions that he has made which have gone wrong? First of all, the Chancellor of the Exchequer, in his incautious echoing of what were known to be Bank of England views on convertibility of the £, did more damage to our balance of payments and our sterling position than all the inflation in this country since the Budget. When Chancellors of the Exchequer, or anybody else for that matter, especially economic experts, start bringing beautiful metaphors into play to describe economic and financial situations, I am one of those people who tremble—whether it is a horse that has been fed too rich a diet of Tory oats or whether it is a rose which needs the Tory pruner, or even songs in the heart—for I am quite impartial in this matter. Optimistic metaphors cause a panic in my breast.
When I hear our exports using a series of metaphors concerning the £ sterling I tremble in my seat. When they talk of the dash for freedom, I imagine the £ note leaping out from its incarceration watched enviously by the franc, the peseta and other currencies. Being English currency it needs to take healthy exercise, so into the icy water it plunges and we have the floating £—all this apparently with the idea that in due course it will emerge from the water, having floated
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and reinvigorated itself, and will look the flamboyant dollar firmly in the face.
All the pipe dreams of the Bank of England about the possibility of convertibility have cost us a lot of money and our balance of payments stability. Therefore, the Chancellor is much to be condemned for having encouraged abroad the idea that we were going to indulge in convertibility in any form. The hon. Member for Walsall, South has great authority and knowledge of these matters, and although he has expressed himself with far more tact and brevity than I shall do, I gathered that the purport of his remarks was to the same effect.
I think we ought to tell the Chancellor not to repeat that kind of folly. The trouble about that is that the Chancellor, having had that urge for convertibility, did what most of us do when faced with two intractable problems. We tackle the easier problem, and hope that somehow or other that will help to solve the more difficult one. So the Chancellor packed up all attempts to deal with the balance of payments position and proceeded to tackle the inflation problem. Having already lost the country a great deal of financial stability by pandering to the neurotic obsessions of the Bank of England on the question of convertibility, he then proceeded to partake of their nostalgic hallucinations about the effect of interest rates and proceeded to raise the Bank Rate. Everybody nodded approval and said how much it would help our economy.
Can anybody in this House or elsewhere produce a single fact that shows any sort of benefit to the economy coming from an increase in the Bank Rate? We are told that local authorities will have to abandon some of their plans because money rates will be dearer. Assuming for a moment that there is inflation and that that is desirable, have we really got to wreck the whole stability of money rates and upset and derange the whole of the housing programmes of the local authorities and the pricing of their houses to stop some kind of work by local authorities? Surely the Chancellor has a better means of doing it than that. He does not have to destroy the whole of the financial arrangements and the stability of local authorities, he does not have to put up the cost of borrowing money by

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exporters, who have to finance their exports over a long time ahead, but he dare not, within the framework of Tory reaction, impose ordinary commonsense controls.
He dare do nothing, and has to resort to the theories pushed at him from the Treasury advisers or the Bank of England. I challenge the Government to show us one single benefit which has accrued to our economy, or one scrap of evidence, that inflation has been avoided or any of our difficulties met by the rise in the Bank Rate.
Sir E. Boyle: I gave one instance during the debate on the Budget, when I said that the terms of trade had turned in our favour in a year of great industrial prosperity, when sterling area earnings were rising, and said that it could only be attributed to the fact that we had put up the Bank Rate quite sharply.
Mr. Lever: I do not want to read the hon. Gentleman a lesson in elementary logic, but if he thinks that that would convince anybody with an intelligence quotient above that of a child of five as evidence that the Bank Rate had caused the terms of trade to turn in our favour, any more than the low rates had turned them in our favour when the Chancellor was basking in the undeserved reputation to which I have referred, he is mistaken.
It is nonsensical to suppose that British Bank Rate changes can greatly alter the terms of world trade, and the very fact that the hon. Gentleman assures the House that this is so causes me extreme terror, because of the hands in which the economic affairs of our country are placed. As long as the terms of trade were fine, that was due to our "wonderful Chancellor." Now that we all know the Chancellor is not so wonderful any improvement in the terms of trade is due to the wonderful Bank Rate. Wonderful logic! What relation the Bank Rate has to the terms of international trade moving in our favour, I am at a loss to understand. No doubt the Economic Secretary will try to enlighten us.
I have dealt with the high rate of interest, the nibble at convertibility and the damage which it did, and I want now to suggest briefly what ought to have been done. The House will know from views which I have expressed here from time to time that I do not like detailed controls
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and do not believe they are in the interest of the country; but in my opinion the price for the minimum of detailed control of the home economy is that the major controls which are necessary for the safety of the economy must be properly organised and not allowed to go to rack and ruin, as has been the case under the Chancellor and under the doctrinaire theories which he has been pursuing. One fundamental is the protection of the currency, sterling, and the only way to protect sterling is by protecting the export-import relationship by Government intervention. Unless we want detailed controls at home we must see to it that our currency is protected in relation to the export-import situation.
Secondly, we have to build up adequate reserves so that each time there is a little difficulty with the terms of trade, when the Chancellor is not so wonderful or the Bank Rate so marvellous and the terms of trade move against us now and then, we do not have panic measures. The economists plan the terms of trade and our balance of payments as a straight line throughout the year, but the reality is different. The curve of the balance of payments never looks like a straight line, in spite of all the best wishes and efforts of the economists. It looks more like a silhouette of Marilyn Monroe and has a lot of ups and downs. This will happen in spite of the skilled advisers of the Treasury, who would have it otherwise.
Mr. Douglas Glover: Are they not more frequent than Marilyn Monroe's?
Mr. Lever: It is a matter of study which the analogy may warrant. It is a fact that life is often curvaceous when the theoretician would have it flat and straight.
The only way we can deal with this situation is by proper import-export controls and by building up adequate reserves. If, instead of cheering the Chancellor, in the years which the locusts have eaten, for having a good spree and tearing down export-import controls, hon. Members opposite had brought some pressure on him to use those circumstances wisely to build up our reserves, the country would not have to tremble every time there is a minor downward move in the balance of payments or the terms of trade.

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We cannot go on living as a great exporting nation in a state of nervous hysteria so that every time there is a drop in the reserves for a few months we have panic measures, such as this autumn Budget. The only alternative is to have adequate reserves. The Chancellor had a great chance to build up adequate reserves and threw it away. We should certainly like to see some sign that he has taken at least one single measure which will control our overseas balance of payments and build up those essential reserves.
I will not add much on the point beyond saying that one of the wisest ways to protect our reserves is to see that we secure proper arrangements in the holding of sterling by people doing favourable trade with us. That can be arranged; intelligent and flexible bilateralism in modern times should not be out of the reach of those who negotiate our trade agreements with other countries; but if hon. Members believe in unlimited liberalisation of trade and no attempt to control the financial consequences to our own currency, they will run into trouble. Free-for-all does not necessarily work out to the Chancellor's advantage as it did in the first year or two of his office.
Can we not stop pretending that inflation is the major economic problem of the country? If our balance of payments were right we should not worry unduly about the fact that we have certain inflationary pressure in our economy. If our balance of payments problem were not with us we would try to correct a little of the excesive inflationary demand, but certainly not contort ourselves in the strange manner of the Chancellor in his Budget to achieve that end. The Chancellor is confusing two things, the problem of inflation and the problem of balance of payments. I am sure that he will cure the inflation problem, which is relatively easy, but what he must solve is the balance of payments problem. Towards that end his incoherent Budget does little or nothing and must bring discredit on the Chancellor and on those who advise him.
8.51 p.m.
Mr. Julian Ridsdale: My concern with the Finance Bill is the effect that some of the irresponsible statements made from the other side of the House have had on wages. The debate on the
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Budget has been used deliberately by the Opposition, it seems to me, to fan wage demands. I ask myself, is there justification for that in this Budget?
Personally I do not like the Purchase Tax; I would prefer to have seen a further extension of hire-purchase restriction. But I am sure that all reasonable people in the country, when they examine the cost-of-living index, and when they listen to the demands which the Opposition have made, will see the falseness of the case made by the Opposition. Has the Chancellor cut education or health? Has the Chancellor cut pensions, or National Assistance rates? He has done none of those things. Has he raised the price of coal or gas or electricity? Those are things which reasonable people in the country will ask themselves when deciding about the effects of this Budget. I am sure that materially in this Budget there are not grounds for increased wage demands.
Mr. Walter Monslow Mr. Walter Monslow (Barrow-in-Furness)rose—
Mr. Ridsdale: I am sorry, but there is not much time to give way to other Members, and I am trying to keep my speech short.
I hope that the unions will consider this question with much more wisdom than has appeared on the other side of the House. Financially and politically, I feel that the country today faces the same problem as it faced over re-armament politically before the war. In the 'thirties the Opposition was largely to blame, in my view, for the failure to get over to the country the truth about Germany—[An HON. MEMBER: "What about Baldwin?"] There was so much talk of peace away from the realities of the situation. The trouble then was psychological as much as anything else. We had talked a lot about peace and were so mesmerised by it that we could not see the danger.
Mr. Deputy-Speaker: That appears to me to be rather far from the Second Reading of the Finance Bill.
Mr. Ridsdale: I was trying, Mr. Deputy-Speaker, to apply the political analogy of the situation before the war to the present situation. Today our problem is psychological, as it was in the 'thirties, but this time it is not peace that has blinded us but the froth of good living. For my part, I trust that it is still

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not too late to get over to the country, especially to the unions, who, I hope, are more thoughtful than hon. Members of the Opposition, the reality of our financial situation and the danger which threatens us and full employment if we continue to live without building up adequate reserves. We cannot meet our commitments as the financial centre of the sterling area unless we have a trading surplus of £300 million and not a surplus of £30 million as we have at the moment.
All talk about Imperial Preference, cementing the ties of the Empire and Commonwealth, our programme of road building and nuclear projects is useless without that reserve. Let us get this over to the country, otherwise not only shall we lose the position which we have held in the world for a very long time but we shall also see the virtual elimination of the middle class, faced as they are with amalgamations on the one side of employers and on the other the amalgamation of the employees, and with the realisation that it is heaven help those who stay outside.
If ever there was a call to Parliament at the moment it is to protect the middle class, for by so doing not only shall we give help to the old-age pensioners and to the fixed-income groups but also to our country, the Empire and the Commonwealth.
I support the Finance Bill therefore, although in detail I should like to see certain improvements made. I am satisfied that we are keeping prosperity from getting out of hand rather than staving off disaster as was the case at the end of the war. My only difference with the Government is that I should like to see them give a more decisive lead to the rest of the country.
8.56 p.m.
Mr. B. T. Parkin: I have listened today to all the speeches from the other side of the House, and the last one, by the hon. Member for Harwich (Mr. Ridsdale), continued along the same pattern. They have all criticised the Budget in some respects. Nearly all have attacked the Purchase Tax, and nearly all have reproached, with various degrees of indignation, horror and hard-feeling, this side of the House for the attacks which we have made upon the Chancellor's policy.
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I should like first to deal with the implications of the criticism coming from the Government side of the House of the Purchase Tax proposals. In my constituency, there is a distribution centre of kitchenware, handling the output of a large number of factories. When the Chancellor's announcements were made, I think that those dealing in kitchenware in this country accepted them with fortitude. They may or may not have believed that they had something to do with the curing of inflation, but at least they expected that the rates would be put up at once, and that people would go on buying kitchenware because they needed it. What has happened since then? We have had all sorts of rumours. We have had Government supporters denouncing these proposals. We have had Press statements that the Chancellor is going to modify them, and we have had indications today of the same split mind.
The Financial Secretary gave what I thought was a very revealing indication, that since April he has suddenly decided to tidy up Purchase Tax, and he speaks now as if it were to be a permanent feature of his fiscal system. On the other hand, he leaves the door open and says that the proposals are subject to discussion in Committee. That is an impossible situation for those handling these somewhat bulky consumer goods. I am not saying that anyone buys a saucepan for fun, but those who do so have had a fortnight in which to have their fun. They have had retailers calling attention to the fact that they can buy them without paying the increased tax. But what retailer is now willing to renew his stocks and get them invoiced to him at the new rate if he reads in the papers that the Chancellor is going to give way? I beg the Financial Secretary, if he is in any position to do so tonight, to make an announcement as to the Chancellor's intention on the subject of kitchenware, particularly metal kitchenware. In practice, trade is at a standstill. The output of factories cannot be used, and retailers' existing stocks are running out.
The other subject which has been worrying hon. Members opposite is a most interesting one. It has afflicted them all in turn. The hon. Member for Louth (Mr. Osborne) asked that something should be explained to him in simple terms, and I should like to try to explain

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it. The hon. Member for Southampton, Test (Mr. J. Howard), who spoke as an accountant, spoke of the support which he thought he was entitled to expect from the trade unions. He had lectured us, as we are accustomed to being lectured, on the fact that when share prices go up, it does not mean that everybody sells all his shares.
I should like to link my answer to the hon. Member, however, with what I thought was a very sincere and dignified disavowal on the part of the hon. Member for Yeovil (Mr. Peyton) of any intention of creating unemployment. Since that speech, at least, was made without anger, I should like to reply without anger to those Members and to explain to them why we think they are not entitled to support from the trade union movement at the present time, and why, while accepting the sincerity of their protestations, we do not think that their policy will bring about the results which they preach.
The hon. Member for Test, who spoke as an accountant, talked about the increase in the price of shares as not being of great significance. Let me say what it signifies to supporters of my party and to members of the trade union movement. It seems to us that if the price of ordinary shares on the Stock Exchange goes up, it can mean only one of three things. It means that more profits are to be made or that somebody has a great deal too much money and does not know how to invest it, or, worst of all, that the private opinions of those who are in a position to know is that there will be virtually continuous and runaway inflation over the next few years and they had better put what they can into equity stock. I do not know of any other reason why the price of shares should go up on the Stock Exchange. Members of the trade union movement are fully entitled to draw these conclusions and to act with the greatest caution when they are facing this problem.
It has been said, on both sides of the House, that the situation is a new one, and that we do not know how to cope with inflation during a period of brim-full employment. On this side of the House, we have advocated the use of controls—selective and intelligent controls—after consultation between the Chancellor of the Exchequer and his colleagues at the Board of Trade and the Ministry of
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Supply. On the other hand, we are perfectly well aware that those controls become extremely vexatious, and that if there is a Press which can sustain attacks on the Government for long enough, whatever Government tries to control inflation by that method will be thrown out at the following Election.
But we also believe that there is a remedy in that if the public sector of the economy is massive enough, it is a stabilising influence which could enable us to control inflation in a time of full employment. We have, however, seen no indication that the Government and their supporters are prepared to face those facts. Indeed, we have seen almost unanimous acceptance of the fact that the Budget is in fact inflationary—everybody has said it. Everyone has said that the raising of the Purchase Tax helps to create that situation.
There is supposed to be loose spending power, but we know where the loose spending power is. I do not want to make too much of minor provocations but there are many provocations for working people to see and there is a good deal of quite convincing evidence that there is too much money in the wrong places in society at present.
One tears out those paragraphs that one reads in the evening papers. One of them is of the story of a gold cigarette case with the red enamel panels which bore the monogram of Nicholas II and which was sold at Sotheby's for £1,207 10s. The really interesting thing about this story, however, is that the same case was sold two years ago by the same auctioneers, under the eyes of the same experts and in front of the same dealers, for £367 10s. There is a superfluity of free money among the upper income group. Indeed, how could it be otherwise since the whole policy of the Government has been to increase the incomes of those who do not earn them—those who receive interest?
The result of the successive increases in the rates of interest charged by the Public Works Loan Board has been to put a burden of an extra 10s. a week on anyone occupying an average-size house. There may be a case for that. It is possible that the Government might feel obliged to make that charge, if the Public Works Loan Board is to get the money.

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But the building societies have also put up their rates of interest, and that is simply money being transferred from a series of very small pockets into a few very large pockets.
What possible social or economic purpose can be achieved? How can the export trade be expanded or people be discouraged from buying motor cars or be encouraged to re-equip the basic industries by people in houses mortgaged to a building society being forced to pay higher rates of interest to those who loan the money? That is a subject which will have to interest the Chancellor very soon. It is a serious menace which springs from the activity of the freelance moneylender.
Building societies had to put up their rates of interest to the depositors, because the hire-purchase companies had been attracting the free funds available by offering higher rates of interest than that of the societies. Now the hire-purchase companies are in slight difficulties because the building societies have put up their rates and have attracted that money back to themselves.
The Chancellor has thrown away the help which he could have got from the experts had he given them political direction. He refused to use the banks, who know how to create credit, and who, when given suitable direction, use that power creatively and selectively. He refused to give any selective instruction to them and merely gave them a sort of over-all instruction to reduce the amount of their loans. The effect of that, of course, is that everybody suffers the same sort of cut and businessmen seek loans from other sources.
The amount of interest which a businessman is willing to pay is quite startlingly high in the circumstances in which a small firm finds itself in the conditions of the credit squeeze. That is why any adventurous British citizen who had perhaps gone to one of the Dominions or Colonies and made a fortune and come back with great capital, and who wanted to invest his fortune in fresh creative enterprises, would today be advised by friends in the City not to dig a canal, open a new industry or sink a mine, but to start a hire-purchase company and call himself an industrial banker, and so spread his risk.
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If a businessman with a full order book and a successful business, but with not too much capital, finds himself restricted by the bank, he makes the calculation that if he is faced with the loss of his discounts on his monthly payments to his suppliers, he is in fact in a position to pay at least 15 per cent. on borrowed money, even assuming that he gets only two months' extra credit. In other words, if one loses one's 2½ per cent. discount on monthly payments, it pays one to pay 15 per cent. to someone else to finance that part of one's business. If one owns a chain of retail shops dealing in articles normally handled by a hire-purchase firm and one can get those services no longer, one can afford to pay up to 18 per cent. for the use of money to finance one's own hire purchase.
That is the black market in the use of money which we have at present. In the ordinary way it might perhaps be neglected, but when one has withdrawn from the business world the creative work of the banks, one is in the danger—and this is a great evil for any economy and any country—of having one's economy slipping more and more into the hands of lazy landowners and lazy moneylenders. We have seen similar phenomena in other parts of the world. We have seen it happen in Asia, and we have given voice to expressions of great pity and then gone in and bled the people still more. But those people have shaken off this burden.
A year ago I had the opportunity of meeting some of the people of China in their own universities. In China the universities turn out 264 qualified geologists a year while the British universities turn out only fifty. I do not know how thorough are their qualifications, but they are sufficient to enable them to tear out from the barren mountains—barren because of the neglect and soil erosion of centuries—the raw materials that a new country needs.
What do we see in this country? We see the Prime Minister of this great country going out begging, like a film star at a charity bazaar, for £175,000 to finance an expedition to the Antarctic when there should be a proper scientific survey to find the resources which are undoubtedly available there, and which would make a contribution to our economy and lay the foundations of a planned increase in our standard of living.
Mr. Deputy-Speaker: Order. The hon. Member seems to be straying from the Second Reading debate on the Finance Bill.
9.11 p.m.
Mr. John Arbuthnot: I wish to follow up one point made by the hon. Member for Paddington, North (Mr. Parkin), who referred to the prices of equity shares and the extent to which ordinary dividends have increased in order to suggest that wage restraint is an unreasonable thing for us to expect. If we take three things, ordinary dividends, the price of equity shares and wages, and compare them like horses in a race, we find that, compared with 1938, wages have far outstripped either of the other two. Taking 1938 as 100, wages have gone up 256 per cent. The prices of equity shares are now 205 per cent. only, and ordinary dividends are a mere 157 per cent., so that would seem to knock the bottom out of that argument.
No Chancellor of the Exchequer could possibly welcome the prospect of having to introduce a second Finance Bill in the same year, and it redounds to the credit of my right hon. Friend and the Government that they should not have tried to slide over the difficulties in which the country finds itself, but should be determined to take measures to put right its finances. I am convinced that the measures which the Government are taking—and this Finance Bill cannot and does not stand on its own—are just the sort of measures required to put the country's finances straight. They will convince people outside this House who look dispassionately at the nation's financial situation that we are determined to see that we do not live beyond our means.
More important than this Finance Bill are the measures that go with it; the making of local authorities submit to the cold wind of economic realities—[HON. MEMBERS: "Oh."]—hon. Gentlemen opposite will see in due course that those measures are more important—and the putting an end to subsidised rents for those who do not need them. I hope that these measures represent a start towards freedom of choice based on the real cost of the amenities enjoyed.
Mr. Bence: The farmers, as well?
Mr. Arbuthnot: My right hon. Friend has come in for a good deal of criticism over his Budget and this Finance Bill. He has been criticised by the right hon. Member for Leeds, South (Mr. Gaitskell), who has said that the Finance Bill and the other measures have placed unfair burdens on the community. Were it not such a serious matter for all of us, the attacks which have been made on my right hon. Friend by the right hon. Member for Leeds, South would be laughable indeed, particularly when we look at who is talking.
The only Budget that the right hon. Gentleman ever introduced—and the country soon saw to it that he was not given the opportunity to introduce another—raised Income Tax by 6d. on all rates. It doubled the Purchase Tax on cars, wireless sets and refrigerators. The tax on undistributed profits was raised from 30 to 50 per cent., while initial allowances for industrial development were stopped altogether by the right hon. Member.
Mr. Charles Pannell: Cannot we stop the hon. Gentleman?
Mr. Arbuthnot: The duty on petrol was raised by 4½d. a gallon. Come on, cheer that one.
Mr. Percy Daises: Tedious repetition.
Mr. Arbuthnot: I wish it were. Unfortunately, it is rather a long list of perpetrations by the right hon. Member for Leeds, South.
The National Health charges were imposed on spectacles and false teeth and Entertainments Duty on cinemas and racing was also increased.
That is the record of the right hon. Gentleman who had the presumption to criticise my right hon. Friend the Chancellor. The main burden of criticism from the benches opposite suggests that this Budget will lead to wage claims. [HON. MEMBERS: "It will."] Hon. Gentlemen opposite confirm that that is their view. I do not believe it for one moment. [Laughter.] Wait for it. I do not believe that it will make one iota of difference to the wage claims being put forward. Hon. Members on both sides know perfectly well that wage demands will be put forward in any case.

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Any trade union leader who did not put forward wage claims would find himself out on his ear before he was very much older. Everyone knows that. Therefore, to suggest that this Budget, which only raises the cost-of-living index by less than 1 per cent., will have any effect whatever upon wage claims is merely trying to use the Budget as a peg on which to hang a hat. Wage claims will take place in any event.
The second criticism made by hon. Members opposite is that the Budget is inconsistent with that introduced by my right hon. Friend in April, in which he took 6d. off Income Tax. The only exception to this view was that of the hon. Member for Cheetham (Mr. H. Lever), who agreed with us that that was the right action to take at the time. To suggest that this Budget is inconsistent with the Budget produced in April is just not true. The April Budget was the right Budget at that time. [HON. MEMBERS: "An Election Budget."] The country needed and was given the incentives necessary at that time, with the result that production has gone up. This Budget, on the other hand, is also right. It does not reduce the incentives, but it does curb consumption.
The truth is that the wage increases which have taken place since the April Budget have upset the poise between home demand and available supplies which the April Budget sought to establish. This Budget now seeks to restore that poise which the increases in wages which have taken place since the earlier Budget was introduced have upset. My right hon. Friend's objective is to discourage immediate spending. I do not suggest that he should alter this Finance Bill, but I would say that next April he can do much to achieve this end and to encourage people to put by for the future instead of spending. He should implement some of the proposals of the Millard Tucker Committee.
I note that the hon. Member for Sowerby (Mr. Houghton) and I are at one upon this matter. I am sure the hon. Member would be the first to agree.
Mr. Houghton: I think I had better re-examine my views.
Mr. Arbuthnot: I am glad that the hon. Gentleman and I are in agreement. I feel that my right hon. Friend will
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advance his own ends if he implements some of the Millard Tucker proposals.
I should like to make one suggestion about savings, because it is, in part, to encourage savings that the Budget has been introduced. My right hon. Friend has confined the help he has given to savings to an increase in the amount of National Savings certificates which can be held by any one person. I hope that he will consider widening the Bill, so as to cover Trustee Savings Banks and other appropriate channels of savings.
I also hope that my right hon. Friend will reconsider the distributed Profits Tax, because, under his present proposals, it is at the highest rate at which it has ever been in our history. I was glad to hear from the Financial Secretary that the steps which the Chancellor is now taking will in no way prejudge the Report of the Royal Commission, because that Report produced some very sound sense upon that subject. I am disturbed about this tax. As the President of the Board of Trade pointed out in the debate on the Budget, the purchasing power of equity dividends is now 30 per cent. below the 1938 figure, whereas the purchasing power of wages is 30 per cent. above it. That means that the man who has already been hit hardest by inflation is the man who has put his savings into supporting our industry—and this Bill hits him harder still.
An increase in the distributed Profits Tax is against the national interest; it encourages the take-over bidder and the break up of companies; it operates unfairly against the company with a large preference capital; it encourages the retention of profits in a business when, in the national interest, those profits might well be better employed in some other outside enterprise; it is inflationary, in that it reduces the incentive to employers to resist wage claims; and, finally, it gives a still greater advantage than they already have to companies the majority of whose capital is foreign-owned.
The fundamental question, however, is whether this Bill and the related steps which have been taken will stop inflation. The truth is that so long as the public feels that if it needs something in eighteen months' time it had better get it now, so long will there be an inflationary pressure upon the economy. I believe

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that all these measures, taken together, will work. The credit squeeze is already being reflected in the substantial fall which has taken place not only in the gilt-edged market but in the equity market as well. Hon. Members opposite who referred to increases on the Stock Exchange are rather behind the times.
When the tax demands come in in January, as they surely will, I feel sure that the financial squeeze will really begin to bite hard and will remove the inflationary pressure upon the economy. The effectiveness of the measures already taken is to be seen in the marked improvement that has taken place in the exchange value of the £. The credit for what the Government have done lies very largely with my right hon. Friend the Chancellor and his far-sighted economic policy. Had it not been for that, we would have found the value of the £ steadily drift. It is upon the success of the measures proposed in stopping that drift that the nation will judge the Government.
9.26 p.m.
Mr. Victor Collins: Among the remarkable views put forward by the hon. Member for Dover (Mr. Arbuthnot) is that the Budget redounds to the credit of the Chancellor in that it does not attempt to gloss over the difficulties confronting the country. The Chancellor used so much polish in putting a gloss over those difficulties at the time of the Election that he must have run completely out of polish. It would indeed need a great deal of gloss to conceal a trade deficit of £60 million or £70 million a month and the drain on the gold reserves that has taken place in recent weeks.
The most remarkable tribute of the hon. Member was to the long-term planning of the Chancellor's policy, and the observation that the measures proposed in this dustbin Budget—I believe that it will be known as the "Dustbin Budget"—are what is required to surmount our difficulties. If we cast our minds back over only eight short months we shall get a sample of the long-term planning which industry has had. In February came the proposals of the Chancellor with regard to hire purchase, when he made to us a very grim statement. In April was a Budget which apparently succeeded in
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convincing many people that all the difficulties were over. Then, only a few months later, industry was confronted with a raised Bank Rate and what we now call the credit squeeze. Finally, we have had wholesale Purchase Tax changes.
If we are to direct industry into the channels which the interest of the country requires the must be controls of a physical character. Government supporters pretend not to believe in controls or in interference with industry, although in the last eight months there have been control and interference gone completely mad. We have had them hot and then cold, in alternate two-or three-month periods, so that industry is left in almost utter confusion and frustration.
Government supporters affect to believe that this is not an inflationary Budget and they protest when we suggest that it certainly is, because it is bound to lead to demands for higher wages. I wonder whether they read in this morning's financial columns in the News Chronicle a letter from a firm of stockbrokers. It said that the Stock Exchange verdict that the Budget was inflationary, because Stock Exchange prices went up immediately after the Budget statement, rested on the assumption that the Chancellor would not be able to dissuade organised labour from pressing increased wage demands. In other words, if the Chancellor cannot persuade organised labour to refrain from increased wage demands, the Budget is inflationary.
What chance has the Chancellor of doing that when, in my experience, the proposals of his Budget have caused more annoyance among housewives and ordinary workers, and more, the conviction that they must demand higher wages to protect themselves, than any previous proposals which the Government have made? What hope has the Chancellor of urging this restraint when the workers know, for example, that British Petroleum's interim dividend, recently announced, was eight times as great as the previous interim dividend? They know that that company is 52 per cent. owned by the Government and that there are two Government-appointed directors on the board. When the workers know that, and know that that is not checked, they know that the Government are not

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attempting to control inflation by restraints on dividends, and it amounts to positive incitement by the Government to increased wage claims. Therefore, I do not really think that, having brought forward these proposals, the Government have any real hope that they will persuade workers to restrain their demands.
I want to protest also about something which has been tentatively touched upon by other hon. Members in relation to Purchase Tax in particular and other Government measures in the last few months—this incredible "messing about" with industry. These proposals, although they are an amazing attack on the housewife, are also calculated to cause the maximum of confusion, resentment and wastage of labour in industry, with the very minimum of benefit to the Revenue.
In opening the debate, the Financial Secretary said that it was necessary to clear up the mess left by the Labour Government. Incredible though it seems—if he has even read the Finance Bill—he mentioned that the dearer goods would pay a higher rate of tax.
That is absolute nonsense. Under the D scheme many of the really expensive goods had a much higher rate of tax but now a very wide range of goods which were not formerly taxed will be. I am a furniture manufacturer, and I know that chairs that would formerly have sold for £2 will now be taxed 2s.; an article which we sold at 50 guineas, instead of bearing the former tax of £7 or £8, now pays 30s. tax. It is another example of the nonsense which hon. and right hon. Members have talked about.
I mentioned the annoyance and frustration caused to industry. I am a small manufacturer with a couple of hundred employees. That is a business which is small enough to keep one in direct day-to-day contact with the men. I also happen to have been for the last twenty years—and still am—the president of an employers' federation in a small industry with about 7,000 workers. That, also, is sufficient to keep one in intimate contact with the whole of the industry.
When the Chancellor speaks of industry he probably thinks of the I.C.I. and the other great industries, but the small industries, in the aggregate, are just as impor-
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tant as the very large ones. In these Budget proposals, which introduce for the first time to the field of Purchase Tax, not one or two but scores and scores of industries, he has caused, and is causing, in the work that has been given to office staffs, to sales people, to retailers, a far greater wastage and cost of labour than will ever be recouped by this taxation. He told us that about £50 million would come in Purchase Tax from the higher tax brackets. That does not take into account the fact that a great deal will no longer be recouped in Profits and Income Tax. The figures which have been given to us are perfectly unreal.
No reasonable person in industry or in the House—and when I say "industry" I mean employers and employed—really objects to any measures which are, without question, necessary in the interests of the country. When industry, however, has to administer a lot of nonsense like this, which inflicts a small but irritating burden on the whole population, and when they realise, too, that there is no increase in benefit to the country as a whole, they become exasperated, and that is why this Budget, with its irritation, is going to cause far more trouble and anxiety for wage demands than the Government expected.
I want to give the Financial Secretary two examples of the kind of thing he has done to defenceless people. The trade federation of which I am president includes in its membership all the workshops for the blind, employing two or three thousand workers. Hon. Members will be aware that in the workshops for the blind and other disabled men's workshops brush making and basket making form the major part of their output.
The Financial Secretary said—I took down his words—that he and his right hon. Friend the Chancellor had looked very thoroughly at everything before this Budget was announced. I do not believe that they could have looked very thoroughly at everything, because if they had done so, would they have taken steps which would almost certainly have deprived the most defenceless section of the workers of their chance of employment? When they decided to put a tax on brushes, for example, and said that household brushes would be subject to 30 per cent. tax for the first time ever—they were not taxed during the war and they have not been since—would they not have

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inquired into the definition of household brushes? I hope that whoever replies for the Government will tell us, because the Customs and Excise people want to know. My telephone was jammed one day with people asking me what the definition was. The Customs and Excise telephone was similarly busy, and they just did not know.
The normal-size brushes are used in the house. If they are a bit larger, they are scavenging brushes, farmyard brushes and industrial brushes. But Customs and Excise will not accept size as a definition, and quite rightly, because if the department said that 12-inch brushes were subject to tax and larger ones were not, all brushes would be 12¼inch ones. The Chancellor, who I am assured has looked very thoroughly into these proposals, cannot have looked into that matter.
At present every local authority—and goodness knows, they will be dealt with hardly by the Chancellor—has to pay a tax of 30 per cent. on these brushes, which I am sure the Chancellor did not intend they would have to pay. Lancashire and its difficulties have been mentioned. Scores of brushes are used in Lancashire for cleaning the machines in the textile mills. Of course, they are industrial brushes but because they look like ordinary brushes the Customs and Excise department says that they must be household brushes. That is the sort of nonsense that the Chancellor has inflicted on the blind, the halt and the maimed, simply because he has not looked at these things, which we are assured he has looked at.
I should like to mention one other example—shopping baskets. Here again, they were not taxed, but now they come into the class of kitchenware that is to be taxed. This is an industry which has been reduced and decimated, and now the final coup de grâce has been inflicted.
There is one thing to be thankful for. The Financial Secretary twitted my right hon. Friend with a long list of anomalies which had been wiped out by the Conservative Government. In the basket industry, it is otherwise. Now the Chancellor has placed a 30 per cent. tax on shopping baskets, which includes those which one wheels along by means of a stick. A Customs officer rang me up this morning to tell me that the Bill excludes
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garden weeding baskets, which are precisely the same kind of wicker basket, which may also be wheeled along by means of a stick. He reminded me that in 1948 he had consulted me about how to differentiate between the taxed white willow wheeled basket and the untaxed brown willow garden basket.
That was one of those peculiar Socialist distinctions which the right hon. Gentleman mentioned in his speech earlier. Of course, we wiped out that distinction by wiping out the tax. I am therefore gratified to see that the anomaly has now been restored, so that people no longer have to buy a white willow basket on wheels, but can quite happily buy a wicker garden basket, the only difference being that one is white and the other brown. The Chancellor, with his customary generosity, has agreed that if we buy the brown garden basket, we can put one or two white bands on it.
While many anomalies have been removed, a lot of new ones have been created, and industrial workers, administrative workers and industrialists are being driven almost crazy with a mounting feeling of frustration. This is the worst possible thing the Chancellor could do to industry. If he has to interfere with an industry, he ought to tell them why and let them see the sense in it, but this kind of mumbo-jumbo inflicted on industry is the worst possible thing to do and will have disastrous results.
I hope that some of the observations I have made will have been marked by the right hon. Gentleman, and that he will look into the matter again during the further stages of the Bill.
9.42 p.m.
Captain L. P. S. Orr: We have had a very good debate, and I do not propose to spoil it by a long speech, because the main anxiety in the minds of all my colleagues in the House is to know how soon the debate is to end. I understand that my right hon. Friend will get up in four or five minutes, and, therefore, I shall not be very long
Mr. Harold Davies: On a point of order. May I ask the hon. and gallant Member what right he has to assume, over the heads of other hon. Members of the House, that this debate is to be closed in a few minutes' time?
Mr. Speaker: In so far as that is a point of order, it should not be addressed to the hon. and gallant Member who is addressing the House, but to me, and the answer is that the Second Reading of the Finance Bill is exempted business.
Captain Orr: May I say, in answer to the hon. Member for Leek (Mr. Harold Davies), that it is often possible to detect a glimpse in your eye, Sir, which gives an indication of what may happen.
I want to make one short point about the Purchase Tax, and to tell the House about the predicament in which my right hon. Friend the Chancellor has placed me. In a very reputable and distinguished newspaper known as the Belfast Telegraph there appeared, about four days before the Budget, a report of a speech which described the Purchase Tax as being, without exception, the worst tax ever devised. The speaker described the Purchase Tax as "anomalous, clumsy and tyrannical." He said that it was supposed to check inflation, but that it did nothing of the sort. He went on to say:
"Finally, I say to the Chancellor 'For heaven's sake, forget about Purchase Tax, and away with this odious weapon'."
The predicament in which I find myself is the fact that I was the speaker, and four days later the Chancellor produced his Budget. [An HON. MEMBER: "And the hon. and gallant Gentleman voted for it."] Yes, I voted for the Budget Resolutions, and I want to explain precisely what is my position on this subject. The position is that this Finance Bill, as far as it relates to Purchase Tax, does three things. First, it abolishes the D scheme. That is something which we in Northern Ireland have wanted for a long time, in order to assist the linen industry, and it is a case which I have made on every Finance Bill which my right hon. Friend has introduced. In so far as this Bill removes the D scheme, we are entirely with my right hon. Friend.
In so far as the Purchase Tax arrangements tend to spread the Purchase Tax into something a little more like a sales tax, then I am with the Chancellor there: too, because I think the Purchase Tax should be spread rather than imposed arbitrarily upon certain commodities selected at the whim of the Government. But in so far as my right hon. Friend has raised the total burden of Purchase Tax, I am afraid that I must there part company with him, unless he can show
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me that it is genuinely anti-inflationary. [Laughter.] I am open to conviction, as I always am. I hope that the Minister who is to reply to the debate will be able to deal with this point.
If we consider the case of an average family in the country, I do not believe that the imposition of Purchase Tax upon certain commodities which that family might purchase means that the family budget is thereby underspent. I believe that if commodities cost more, the first thing which suffers in the family budget is the provision for savings. The first thing people do is to fail to put aside sufficient savings and the next thing is to withdraw existing savings. I earnestly put it to my right hon. Friend that Purchase Tax, or anything which comes between producer and consumer, either subsidy or tax, is bad.
Mr. F. H. Hayman: Or the middle man.
Captain Orr: Sometimes a subsidy is necessary for social reasons, sometimes the middle man is absolutely necessary, and sometimes some form of taxation is necessary, but, broadly speaking, every one of them is wrong economically and they are all inflationary.
I beseech my right hon. Friend to address himself to this point. If he can convince me that the increase in Purchase Tax is genuinely anti-inflationary—and anything anti-inflationary must be supported at this time, because inflation is our worst evil—then he will get me out of my predicament. [HON. MEMBERS: "Oh."] I said "if." I shall still be in my predicament if he does not get me out of it.
9.48 p.m.
Mr. Harold Wilson: I hope that the hon. and gallant Member for Down, South (Captain Orr) feels that he has successfully extricated himself from his predicament.
This debate has been slightly narrower than the Budget debate, but only just, and we have certainly dealt with a wide range of subjects. We reached the most interesting moment in the debate when the hon. Member for Harwich (Mr. Ridsdale), improving on the Chancellor, said that the trouble which the country was facing was that we were blinded with the froth of good living. Obviously, he had been blowing it off too hard. Up to

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then the debate had been remarkable for the number of speeches by hon. Members opposite severely critical of the Chancellor, not only on Purchase Tax, and on Profits Tax, as we might have expected—although we do not agree with them—but on the general balance of his proposals.
I should like to begin by supporting my hon. Friend the Member for Sowerby (Mr. Houghton) in the protest he made against the way in which the Bill has been handled and the effective gag which has been placed on it for when we come to the Committee stage. It is a narrow Bill, as the Chancellor said. The Financial Resolutions have been drawn so narrowly that it will be difficult to move constructive Amendments to some of the proposals in the Bill. For example, on the Purchase Tax on textiles I understand that we shall be faced with a simple choice between the D scheme, which I think both sides of the House abominate, or the 5 per cent. and 10 per cent. sales tax, which we consider regressive and unjust. It will not be in order, so we are advised, to move the only sensible alternative—removal of the Purchase Tax on textiles and clothing.
What I think is more serious is-1 think the Chancellor will agree—that it will be out of order to move new Clauses on this Finance Bill. It has been a time-honoured right to move new Clauses to deal with the problems of our taxation system, but this year we have had two Finance Bills and no opportunity to move new Clauses. I think that this is the first occasion since the war when the House has not had the opportunity to move new Clauses to a Finance Bill.
One thing has been clear about this Bill, and was clear for some time before the debate began. It marks a turning point. We are at the end of a period of four years in which the Chancellor has been living on the fat of increasing production and favourable terms of trade—increasing production due to the austerity measures and investment policies of 1945 to 1951, and terms of trade which have been due to more favourable conditions in world markets. Now we see how vulnerable is the Chancellor's much vaunted recovery and how thin is his achievement.
In recent days Government spokesmen have been expressing satisfaction about
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the fact that the £, for the first time for twelve months or more, has recovered to, and slightly exceeded, 2·80 dollars. We have warned the Chancellor before this year about these bouts of complacency based on purely short-run financial movements. In February, he was excited because the £ rose fractionally for a day or two, but by the summer he was in trouble again. At the end of July he was proud of the fact that the £ had recovered the day after his statement on 26th July, and again there were heavy losses of gold and dollars.
Even if this recovery to a little over 2·80 dollars lasts, what is the achievement the Chancellor is boasting about? It is that after four years of Tory Government—a Government of businessmen and sound finance—four years in which world economic conditions have been more favourable than at any time for a generation, the £ today is worth just five-sixteenths of an American cent more than the level to which Sir Stafford Cripps devalued it six years ago amid violent Tory denunciation. It has taken four years to gain that five-sixteenths of a cent.
Another turning point that this Bill measures is the end of any pretence that the much vaunted Tory remedies on which the Government stood and won a mandate in 1951 are either relevant or practicable. The one we used to hear most about during the 1951 Election was the claim that if only there were a Tory Government and a reduction in Government expenditure all would be well In the recent Budget debate we had a little discussion about a statement made by the Minister of Education in 1951. The Minister of Education said quite flatly that the cuts in central and local government expenditure would be about 6 per cent. of the national income. That was a promise that the cuts would be £700 million out of Government expenditure.
The Chancellor now repudiates the right hon. Gentleman and tells us that that statement was not endorsed by the party; it was not official policy, but it has taken him four years to find that out. There may have been a very large number of voters at that time who thought that the man who was to be Minister of Education was speaking for the party, and who took him seriously.

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If the Chancellor said that he did not agree with that at the time, perhaps we may examine his own words. In a Finance Bill debate in 1949, the Chancellor joined in, and this is what he said:
"Let me remind the House that, as a result of the crushing expenditure which it is now necessary to raise—£3,632 million in taxation, which is more than three times as much as was found necessary in pre-war years.… In two years, taking the total of national and local taxation, there has been an increase of no less than £655 million, or an 18 per cent. rise.…"
He went on,
"To take one single example, if we saved 5 per cent. on our total expenditure by eliminating waste, while yet retaining the essential services, we shall have £165 million available for tax relief, and if we do the same at 10 per cent., we shall find that we have £330 million available."—[OFFICIAL REPORT, 18th May, 1949; Vol. 465, c. 449–4511
Why did the Chancellor stop at 10 per cent.? That was his programme, a 5 per cent. or 10 per cent. cut in expenditure by eliminating waste. Let us measure his achievement against that programme. He has had four years to cut out waste in Government expenditure. What has actually happened is that the rate of expansion of Government expenditure under the present Chancellor has been greater than it was under the Labour Government.
From 1947 to 1951—four years—which included the period of the introduction of the Welfare State, central Government expenditure rose by £508 million, that is, by £127 million a year. In the three years to 1951 to 1954, while the Chancellor was busy cutting out waste, it increased by £819 million, a rate of increase of £273 million a year, more than double the £127 million a year by which Government expenditure increased under the Labour Government.
Where are the Chancellor's programmes about reducing Government expenditure? It is no good his saying that this is due to defence. Defence expenditure increased both under the Labour Government and under the present Government. If we take defence expenditure out of the figures, then under the Labour Government expenditure increased by £87 million a year for those four years, and under the Tories it has increased by £130 million a year, net of defence.
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The main reason why the right hon. Gentleman has failed to control expenditure is, of course, his failure to control inflation. Inflation has been the direct result of his policy, beginning with the slashing of the food subsidies in 1952, and followed by the successive removal of price controls and other forms of control and of bulk buying.
Now, of course, this inflationary policy will be intensified by the Government's new decision about rents. Ï would not dream, at this time of night, of worrying and embarrassing right hon. Gentlemen opposite with a recital of their broken pledges on the cost of living. I think that those are only too familiar in all quarters of the House. But we must ask the Chancell—and this is a question which his hon. and gallant Friend the Member for Down, South put to him—whether he really thinks that the Bill helps to reduce the cost of living and to produce a disinflationary situation. Certainly, the background to it does not, when we consider all the right hon. Gentleman's announcements about rents and housing.
Let us take Purchase Tax. Here we have another turning point. Here we have another moment of time where the Conservative Party has dropped one of its main arguments of those years when it was in Opposition. They always told us then that they were against Purchase Tax. In the 1950 Finance Bill, the Second Reading of that Bill was graced by the entry into our debates of the right hon. Gentleman who is now Prime Minister. He made, I think, his one and only speech on the Finance Bill. He referred on that occasion to some Amendments which his party was tabling and this is what he said about Purchase Tax:
"While we put forward these proposals we do not want on that account to accept that the Purchase Tax is to be a permanent means of raising revenue. It was a temporary expedient introduced during the war, and it would be most disagreeable to have to accept it as an enduring part of our economy."—[OFFICIAL REPORT. 16th May, 1950; Vol. 475, c. 1037.]
It was a temporary expedient, he said, five years after the end of the war; and now, the Government of which he is the head not merely perpetuate Purchase Tax, but increase it—and they not merely increase it, but they extend its range to cover items which were removed from

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it after the war and, in some cases, to cover items which never were on Purchase Tax even during the war.
Other right hon. Gentlemen made the same kind of speech. Lord Chandos, then Mr Lyttelton, called it "an objectionable tax." He objected particularly to the tax on soap, which the Chancellor has increased in this Budget. The Minister of Education said that he thought it was "a hateful tax." The Leader of the House regarded it as a danger to the export trade, and said:
"We do not know whether it is the Government's intention that it should stay on for ever. But we say that it should not, and we want to start reducing it."—[OFFICIAL REPORT, 20th June, 1950; Vol. 476, c. 1235.]
Those were all the policies that we heard on Purchase Tax when right hon. Gentlemen opposite were in Opposition. One must ask what views the Leader of the House, the Minister of Education and the Prime Minister expressed when the Chancellor disclosed his present Budget proposals to the Cabinet.
We do not say that Purchase Tax should be abolished as far as luxuries are concerned. We regard Purchase Tax as an important instrument in planning, but under the Chancellor of the Exchequer it is developing a much more sinister character. It is taking on the shape of a general sales tax, highly regressive in character.
Labour Chancellors of the Exchequer took essential items out of Purchase Tax. In 1946, my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) removed from Purchase Tax a wide range of household essentials. Even in 1951, in a tough rearmament Budget that increased taxes on cars, radios, television sets and electrical and gas household appliances, my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) at the same time took a very wide range of essential goods out of the Purchase Tax list. That was in 1951, shortly after the outbreak of war in Korea. I will not read out the whole list of goods that my right hon. Friend took off the Purchase Tax list at that time. What is significant is that the Chancellor of the Exchequer, in these present conditions, is putting them back.
The Financial Secretary to the Treasury, in a most lucid speech this afternoon, told us, among other things, that one reason why the Government were
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putting back on to Purchase Tax so many goods which had been off it for many years and were putting into the list others that had never been taxed before, was that there were anomalies in the Purchase Tax list that we had left behind. I would not deny that for one moment.
The case which seemed to worry the Financial Secretary a great deal was the fact that teapots were tax-free while teapot spouts bore tax. The extraordinary thing is that the Chancellor's reaction to that anomaly was not to take the teapot spouts off tax, but to put the tax on teapots. That seems to be the basis on which the Purchase Tax is being administered by the right hon. Gentleman.
I want to put two questions about Purchase Tax, which, I hope, the Economic Secretary will try to answer when he winds up the debate. In the last few days there have been many rumours about a change of heart by the Chancellor—if he has a heart—that he was about once again to take from the Purchase Tax list those household essentials which did not involve metal in their makeup. It was extraordinary that almost every newspaper, last Thursday morning, carried that story. Was that just an accident, or was any statement put out by the Treasury, either in the form of an official hand-out, or in the form of a hint to the Press, that the Chancellor was thinking about a change?
I hope that the Economic Secretary will answer this question, because I am bound to say that these Press reports have caused the gravest disruption in the retail trade for several days. It may be that the announcement that the Government were not going to make these changes—I am sorry if they are not going to make them—will end this period of disruption. Nevertheless, great harm has been done and the House has the right to know whether any Treasury representative was in any way responsible.
The second point is only small, but it is one to which Lord Chandos would attach importance, if he were here. That is the question of soap. I understand that the Chancellor has increased the tax on soap, but I have received reports to suggest that some of the big soap companies—and it is a highly monopolistic trade—as a result of the Budget are increasing their prices by a great deal more than the increase in the tax. Will the Chan-

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cellor look into this? He once promised his constituents that he would look into the detergent business last Christmas. Nothing much happened when he did, but will he look at this soap business and, if necessary reintroduce price control to ensure that the increase is limited to the increase in tax?
I will not take more than a moment in discussing Purchase Tax and the D scheme. On this side we pressed for the ending of the D scheme in textiles and furniture from the moment it was introduced. Several times we brought the attention of the Government to the effect of the D scheme on the manufacture of speciality textiles such as twofold poplins and other things. But in removing the D scheme now, the Chancellor has introduced a 5 per cent. sales tax. We are opposed to that.
Before the D scheme, all Utility clothing was exempt from taxation. Under the D scheme the top half in price of Utility clothing was taxed and the lower half was free. Now, under the Chancellor's proposals, all clothing and textiles, with the exception of those removed in April, are subject to tax. It is quite obvious that this means an increase in the cost of living where cheaper articles of clothing and textiles are concerned. Once again I suggest to the right hon. Gentleman that, if he would not be out of order, he could put this right on the Committee stage of the Bill and take our advice and remove Purchase Tax from textiles and clothing, including the wool goods referred to by the hon. Member for Shipley (Mr. Hirst) this afternoon.
I turn to the rest of the Bill. The question of Profits Tax was dealt with by my hon. Friend the Member for Sowerby this afternoon. We welcome the increase, but it is obviously a very small increase to judge from the Stock Exchange reaction. What was the Chancellor's motive in increasing it? Was he hoping by this to convince the T.U.C. that he was a good Chancellor and that it was a good Budget and that he could count on their full support for carrying through this policy? If he was counting on that, he had his answer in unequivocal terms from the General Council and my hon. Friend the Member for Sowerby this afternoon.
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Then we turn—and it is a very short Bill—to the anti-evasion measures. It is very interesting that the Chancellor should decide at this moment of time to deal with dividend stripping, the so-called Indian rope trick, as a matter of urgency. It would be interesting to know—and I hope that we shall be given this information—the figures of the developing loss to the revenue from this practice. The Financial Secretary said that he thought that the amount ran into six figures, but that is a bit vague. Is this becoming a matter of urgency? Is it developing into a major racket which makes it essential to deal with it in an autumn Budget?
The Chancellor of the Exchequer (Mr. R. A. Butler)The Chancellor of the Exchequer (Mr. R. A. Butler)indicated assent.
Mr. Wilson: The Chancellor nods and seems to think that it is a very serious racket. It was dealt with in the minority Report of the Royal Commission on the Taxation of Profits and Income as one of the most serious forms of tax avoidance. The minority Report recommended a Capital Gains Tax as the one effective means of dealing with it.
It is very extraordinary that the Chancellor, while obviously against a Capital Gains Tax, and while he is not yet ready to legislate on the Royal Commission's proposals, whether majority or minority, takes this one case out of the context and puts it into this little Finance Bill. I think that the right hon. Gentleman will agree that this and other forms of legal evasion, such as bond-washing, are due to the fact that we have a dual system of taxation under which the individual pays Surtax on income, but capital gains remains tax free, and while, to a finance dealing company, the same capital gain becomes an income loss and entitled to tax rebate. That is the result of a dual system of taxation.
In the case of bond-washing, sales-cum-dividend, and purchase back ex-dividend, Surtax is evaded by means of a "phoney" capital gain. That was supposed to have been dealt with by Section 12 of the 1937 Finance Act, but it is going on legally every day and, I should have thought, on a scale which is an embarrassment to the Chancellor; because Section 12, as was pointed out in the Minority Report, only banned collusive agreements, where A sold to B and B sold back again to A ex-dividend. I should have thought the Chancellor

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would agree, with Surtax at its present rate and with the quite indefensible tax freedom on capital gains that there are many potential buyers of cum-dividends bonds and stock at a price which will always represent a capital gain to the seller and a means of avoiding tax by both seller and buyer. It is still perfectly legal for this bond-washing to be going on. I am surprised that the Chancellor did think it necessary to deal with dividend stripping, while he did not find it necessary to deal with all these various still legal forms of bond-washing that are continuing.
I am afraid that the need for these measures shows, as was indicated by my hon. Friend the Member for Sowerby, the regrettable fact that far too high a proportion of the activities of gentlemen in the City are being devoted not to increasing production, not to increasing exports, but to fiddling and to diddling the Revenue. We read these advertisements by powerful companies asking for companies with losses so that they may buy them up for the purpose of tax evasion. We find advertisements by companies with liquid resources asking for advice as to how they shall be dealt with, meaning to say that someone should buy under these dividend stripping proposals.
I believe that the Chancellor will have to face this question. In an intervention during the speech of the Financial Secretary to the Treasury, I suggested that the simplest remedy for dividend stripping would have been to tax the vendor, as is done under Section 12 of the 1937 Finance Act. The proposals in this Bill run to six pages, three pages for the Clauses and three for the Schedule, whereas the bond-washing racket was dealt with—in so far as it was dealt with at all—much more simply. I am still wondering—and I hope we shall get a reply to this—whether the reason why the Chancellor did not go for this simple and effective means of dealing with the problem is that he is terrified of introducing what might even appear to be a minor form of capital gains tax.
My final word to the Chancellor is that he must go wider than this if he intends to deal with tax evasion. He must know that this is a dual basis when a capital gain is tax-free to one kind of taxpayer and still an income loss which is subject
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to tax rebate to another; and as the minority Report makes plain, the only effective way to deal with this is a capital gains tax. It says:
"in our view, so long as capital gain remains exempt from taxation it is impossible to deal with the problem of the conversion of income into capital gains in all its possible forms by specific pieces of legislation."
I think that the Chancellor, in trying to deal with this, has gone about it the wrong way, by singling out this one thing and trying to deal with it by all this complicated rigmarole which, no doubt, we shall be debating before long during the Commmittee stage of the Bill.
One of the questions asked by many of my hon. Friends today was whether this Finance Bill does anything to deal with the twin problems that the country is facing today, the problem of the gap and the problem of inflation. On the trade gap, a number of us gave the figures during the Budget debate. We showed that this very serious and ominous gap between imports and exports was already with us in January, February and March of this year and should have been known to the Chancellor at the time of the April Budget. That we pointed out to him on many occasions.
The President of the Board of Trade, who spoke in the Budget debate, showed that he had not a single idea for increasing the country's exports. At Question Time last week he showed that he was unwilling to tackle the motor car industry, which could make a bigger contribution to our export trade. When he was asked by my hon. Friend the Member for Rugby (Mr. J. Johnson) how much sheet steel was going to the motor car industry, he had not the remotest idea. We knew that the right hon. Gentleman had lost control of the situation, but we thought that he knew the figures. He did not even know them.
It was suggested by my hon. Friend and by other hon. Members that the right hon. Gentleman could have used the fact of this very expensive dollar import as a means of persuading that industry to increase its exports. The figures of the Board of Trade published in the last few days show that, relatively, our exports are stagnating compared with the rest of the world. In the first half of 1955, world exports of manufactures were 13 per cent. higher than in the same period in 1954, but British exports of manufactured

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goods were only 4 per cent. up on the same period in 1954. If we look at our main competitors, we see that when the United States increased their exports of manufactures by 16 per cent. and West Germany increased hers by 20 per cent., we in the United Kingdom increased our exports by only 4 per cent. in the first half of this year.
On the other of the twin problems, inflation, I should have thought that it would be the view of most hon. Members in this House who look at the facts objectively that this Budget and this Finance Bill will worsen and not diminish the inflation, particularly through Purchase Tax and the increase in rents. The Chancellor still obstinately refuses to deal with the real causes of the inflation. The Prime Minister has said more than once that, as a nation, we are doing too much, but the Chancellor still refuses to cut where the main expansion is going on.
I suggested to the right hon. Gentleman in the Budget debate that he ought to tackle the problem of excessive advertising. I still think that if the Chancellor had come forward with a Finance Bill which reintroduced the proposal of Sir Stafford Cripps that 50 per cent. of advertising expenditure should not rank as a business expense for tax purposes, it would have had a significant effect in cutting down on one of the more inflationary parts of our economy.
Some of my hon. Friends have said—and even the hon. Member for Louth (Mr. Osborne) said that he was prepared to contemplate it—that the Chancellor should, despite his doctrinaire objections, reintroduce building licences and cut out the inessential building that is going on at present. My hon. Friend the Member for Northfield (Mr. Chapman) gave some examples from the Birmingham area. I gave a number of examples to the House on 28th October, but the Chancellor did not answer them. He said that 8 per cent. was outside the industrial range. He did not deal with the question of the number of public houses, petrol stations and motor showrooms which are being built. It is very probable that some of those figures are included in the sacrosanct figure of industrial development. We want to know how much of the big increase in industrial building—and we welcome a great deal of it—is for export and for
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strengthening the industrial base of the nation, and how much is for completely inessential industry.
The Chancellor really ought to know the figures, even if he has got rid of building licensing. One of the first things which should be done when a control is taken off is to continue the collection of the figures, in case controls have to be reimposed, if the situation should get out of hand. By removing this control the Chancellor has opened the flood gates to the building of inessential factories, stores, distributive centres and all the rest, to meet the demands or the imagined demands of the Americanised consumption system that our advertising interests are busy creating.
If he had kept a firm grip upon the building situation this inflation could have been controlled, without any question of a Purchase Tax upon essentials; without any of the excesses, and the unpredictable and in many cases harmful effects of the credit squeeze. Hon. Members opposite, no less than my hon. Friends, have given examples of the very serious and, in many cases, unpredictable effects of the credit squeeze into which the Chancellor has been forced by his refusal to tackle the problem of inflation where it would be easiest to tackle it.
The Bill does nothing to deal with the problem of exports or of inflation. It worsens the inflationary position and, at the same time, continues the Government's policy of redistributing the nation's income and wealth in favour of the few, at the expense of the many. It is for those reasons that my right hon. and hon. Friends will vote against the Bill tonight.
10.22 p.m.
The Economic Secretary to the Treasury (Sir Edward Boyle): The House of Commons is notoriously a somewhat surprising place, but I do not expect that many hon. Members who have come into the Chamber during the last half hour thought that bond-washing would play such a prominent part during the closing stages of this debate. I cannot help feeling that if hon. Members were sitting for an examination paper and had to give a five-line answer on bond-washing, not many—myself included—would secure a very large number of marks.
I should like to say two things in answer to the right hon. Gentleman. He asked why we were singling out dividend-

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stripping at the moment. As the Financial Secretary said this afternoon, the answer is that this trick is at present perfectly lawful, and it has begun to be exploited upon a really big scale. It is our belief that if we waited until next summer's Finance Bill the loss of revenue would certainly run into six figures. That is why we are dealing with dividend-stripping at this moment.
The right hon. Gentleman also asked why we did not follow the bond-washing method of hitting the vendor of the shares rather than the purchaser. We can discuss that in more detail when we discuss Clause 4, but the answer briefly—it can be expanded in due course—is that the essence of the bond-washing transaction is that there is an agreement to buy back. The initiative is taken by the vendor, and the counteracting legislation is accordingly directed at him. In the case of dividend-stripping, however, the purchaser is the initiator of the operation, and therefore he is the man upon whom to impose the liability.
Having listened to the debate, I wish to start by mentioning what I believe to be the most important difference between the two sides of the House. We on this side fully recognise the intimate connection between our home domestic economic policy and our foreign balance of payments, and our Budget and Finance Bill must be viewed in the light of our long-term economic objectives; that is to say, a strong sterling currency and a secure surplus on our balance of payments.
Listening to some hon. Members I could not help feeling how very great was the difference between us. I listened with a great deal of interest to the speech of the hon. Member for Northfield (Mr. Chapman) who said he thought that my right hon. Friend had paid far too much attention to the reputation of sterling in the exchange markets of the world. The hon. Member must realise, first, that if sterling collapses it will be precisely those of our community who are least able to look after themselves who will suffer most; and secondly—and this is not simply an economic point—that a strong sterling is essential if Britain is to play its rightful part in the Western Alliance, and absolutely essential if strong cooperation between the United States and the sterling Commonwealth is to be preserved.
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It surprised me very much that the hon. Member for Northfield, who, as I have reason to know, stood up very strongly during the 1951 General Election for the £4,700 million arms programme, and has often in this House shown his courage in political matters, should not realise that a strong sterling is essential to our economic life and well-being. We make no apology at all for the prominence which we give to it in our economic policy.
Mr. Chapman: I am much obliged to the hon. Gentleman for giving way to me. He misunderstands what I was trying to say. In an effort to impress the world with our sterling strength the Chancellor has introduced measures which are supposed to be disciplinary on our economy but he has not adequately studied the home effect, which is that these measures are inflationary in effect.
Sir E. Boyle: I took down the hon. Gentleman's words, and he distinctly stated that my right hon. Friend was too busy following the overseas fortunes of sterling. That was why I made my comment.
One of the main points which emerge from our discussion on the Budget is that we have definitely turned our backs on the old idea of trying to cure our situation by physical import controls or returning to a war-time type of economy. We fully stand by that principle. We do not believe that it would be possible to clear up our position at home by import controls without making the inflationary position worse.
The right hon. Member for Huyton (Mr. H. Wilson) referred to building controls. It would, of course, be impossible to restore building controls for work such as cinemas and public houses—incidentally, as my right hon. Friend has pointed out, only three new cinemas are now being built—without restoring controls for office building as well. [Interruption.] I should have thought it was obvious that a considerable increase in office building was a very natural thing to go alongside an increase in productive investment, which is something which all hon. Members desire.
Mr. H. Wilson: Has not the hon. Gentleman yet got the point that the essence of all building-licensing control is that we can say "Yes" to the applications for productive investment, whether

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industrial or commercial, and "No" to the pubs, cinemas and petrol stations, and offices for football pools and the various inessential forms of commercial work? By so doing we could speed and promote the export drive and damp down entirely where necessary.
Sir E. Boyle: I just do not believe it can be worth while restoring the elaborate system of controls to deal with such a very small proportion of the national building. As we have often said, we believe in taking direct measures to cope with the situation at home. As I said in this House earlier, the most important measures which my right hon. Friend is taking are not those contained in this Finance Bill, but those relating to housing and to local authority borrowing. I am glad to see there is no dispute between us about that.
I should like to say just one word on local authority borrowing, if I might, to the hon. Member for Orkney and Shetland (Mr. Grimond), who made such an extremely thoughtful speech this afternoon, because I am not sure he quite grasped this point. If I may, I will quote to him what I said when speaking in the Budget debate ten days ago. The point is this:
"At a time when interest rates have been rising, local authorities have chosen to concentrate their borrowing on the Public Works Loan Board, as a result of which the Exchequer has had to raise large sums by increasing the floating debt, which has thus made the management of our monetary policy more difficult."—[OFFICIAL REPORT, 28th October, 1955; Vol. 545, c. 625.]
If we want our credit policy to work as it should this reform of local authority borrowing is essential.
The hon. Gentleman also made some very interesting remarks about inflation, and suggested that we needed some new kind of inquiry. My view is that it would be a mistake to think that inflation is, as it were, purely a monetary phenomenon. It is a very complicated thing. [Laughter.] I say this in all seriousness to the House. One of the valuable lessons which some modern philosophers have taught us is that problems which in the past have been thought to be largely unitary problems are in fact a complexus of inter-related problems. I think that exactly the same may very well be true about inflation.
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Now I want to come to the specifically budgetary proposals of my right hon. Friend, and I wish, first, to say to the House that I believe this to be a good Budget; and I ask the House to believe me when I say that I am fully as sincere in defending it as hon. Members opposite have been in attacking it. I want to explain why my right hon. Friend has had to increase taxation, because I think many people are still unaware of the nature of the problems which confronted him.
The British economy has recently been booming so fast—there is no dispute about this—that we have tended to outstrip our resources, both of manpower and materials. This in turn lowered foreign confidence in sterling, and also prevented us from earning a good surplus on our balance of payments. Indeed, it is fair to say—as I said myself in this House the week before last—that one of the principal reasons why sterling has been stronger in recent weeks has been precisely because people have known that my right hon. Friend would introduce the necessary measures when Parliament reassembled.
Anyone who analyses the present boom in British industry will find that it has been caused first and foremost by a very remarkable upsurge in investment in productive industry. This is in itself a most welcome development. In fact, my right hon. Friend, in his earlier Budgets, quite deliberately gave industry special encouragement because the modernisation and re-equipment of our industry is essential if Britain is to maintain her competitive position in world markets.
It is quite true that, owing to the overloading of the economy, we have had to take steps to slow down the tempo of new investment and, as my right hon. Friend the President of the Board of Trade said in the Budget debate, to encourage the postponement of marginal investment projects. But it would be wrong and absolutely contrary to the spirit of the Government's expansionist policy to make investment bear the whole brunt of the corrective action which is now needed.
Mr. Roy Jenkins: The hon. Member talks of investment in productive industry as having been perhaps the major cause of the difficulties of this summer, and I have no doubt that what he is stating is

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quantitatively correct. I wonder if he could tell the House what has been the rate of investment in productive industry this summer as a percentage of national income compared with that of, say, the United States and Western Germany?
Sir E. Boyle: I have not that particular figure with me, which I do not think will surprise the hon. Gentleman very much, but I have here quite a number of figures though I shall not weary the House with them. However, I can assure the hon. Gentleman that if he will look at the issue of the Economist for the week before last, and consult the article "Investment still growing" and see the figures there, he will get a very fair picture of the situation.
If we are agreed, as I think we are on all sides of the House, that investment certainly should not bear the brunt of all the corrective action that is needed, then it seems to me to follow quite inevitably that the Government had to take steps to reduce consumption. That is the reason for the increase in Purchase Tax and of the Profits Tax on distributed profits. I would add that I think that it is worth pointing out that a very large number of goods which are subject to Purchase Tax—I am thinking of durable consumer goods like cars, television sets and refrigerators, but a number of other goods besides—do compete for the same resources as those which are needed by investment goods and by exports.
It certainly would be a very great mistake for anyone to under-rate the burden on our metal-using industries at the present time. For my own part, I make no apology at all for the fact that this is a Budget to moderate consumer demand. I think that those who criticise my right hon. Friend ought honestly to ask themselves this question: in view of the present state of the British economy would it have been either right or wise for my right hon. Friend to try to correct the position without affecting the level of consumer demand at all? [Interruption.] The hon. Member for Accrington (Mr. H. Hynd)—and I am very glad that he has said it—says "What about April?" It is no good hon. Gentlemen opposite keeping on chanting about the April Budget, for the very simple reason that there is no evidence at all that the April Budget had any substantial effect on the level of consumer demand.
1794
If one looks at the figures for home demand this year—I am thinking here of consumption—one sees that the figures have in fact worked out exactly as my right hon. Friend foretold in his April Budget. The rate of expansion of consumer demand has in fact been falling, not rising. I would point out that when we were debating the April Budget in this House the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) complained of the Budget precisely because it gave so much away to companies. His whole complaint about the Budget was that not enough people had benefited from it and that it gave too much to companies. Perhaps he remembers that his right hon. Friend the Member for Bishop Auckland (Mr. Dalton) said that, after all, more people smoke and drink than pay Income Tax. There was a great deal of complaint from the Front Bench opposite precisely because not more was done to help the consumer in the April Budget.
Mr. Herbert Morrison: The hon. Gentleman has denied that the Budget had certain effects in April. Would he tell us what the effects of the Budget have been and what its purpose was? What was the use of the April Budget, and what did it do?
Sir E. Boyle: I must say that that really is an extraordinarily naive question. [Laughter.] Whatever the result of the trial gallops, I hope that the right hon. Gentleman never has any great responsibility for our economic affairs. He must know that if the Government reduce Income Tax they do not expect to see the results immediately, for the simple reason that companies' savings are increased but the new investment done with these savings is not necessarily done at once, and quite rightly.
Companies will put back money in one year to invest the next. I was going to mention this later in another connection. but the right hon. Gentleman must know better than to think that if Income Tax is reduced in April the full effects in strengthening the economy will be seen as early as the following November.
Mr. H. Wilson: If the Economic Secretary will permit another naïve question, since we are having some difficulty in following the complexus of his

1795
philosophical argument, are we to understand, as he has just said, first, that if he had to cut anything the Chancellor must cut demand and yet that now that demand is falling as a result of the spring Budget, and, secondly, that while the evidence is that the Budget did not expand demand yet, at the same time, he is not able to measure the effects yet?
Sir E. Boyle: That is not quite so naïve as the previous question, but I shall try to answer it—and I will gladly answer the right hon. Gentleman's question with two perfectly simple propositions. The first is that there is no evidence that the April Budget has had any substantial effect, one way or the other, on consumer demand. Secondly, if, in our present situation, with our resources overstrained, we none the less think it right that the situation should be met in part by moderating consumer demand—and I stick to that—I can assure hon. Members opposite, who have said time and time again that they want to see an expanding and growing investment programme, that no course could be taken different from that which my right hon. Friend has taken.
I want to say one word about Purchase Tax and exports, and also a word about taxation and inflation to which many speakers have referred during this debate. On exports I would only say that, as a matter of fact, if hon. Members opposite want to see a classic exposition of the relation between the increase in Purchase Tax and exports they should look at the speech made by the right hon. Member for Leeds, South in a debate on 19th June, 1951—but on this point I am glad to stand on my own feet, because the point seems quite obvious.
In some cases, there will be a direct connection. if Purchase Tax is increased, for example, on durable consumer goods—motor cars and so on—it is likely in many cases that there will be a slightly contracted home market, and manufacturers are encouraged to send more abroad. In any case, however, if, as we have done, we make a Purchase Tax increase over a very wide field, there will be an indirect connection as well, because the fact that the tax is put up means that there is less purchasing power
1796
available for other things and, as a community, we tend to import rather fewer inessentials and to export rather more.
I should like to say one word to those of my hon. Friends who feel, as I know some do, that all increases in taxation are inflationary or, at any rate, do not help to check inflation. I think we had the same view from the hon. Member for Orkney and Shetland. I certainly would not wish to claim—nor, I think, would anybody—that increases in taxation are either the only means, or necessarily the best means, to combat the inflationary situation. But do not let us go to the other extreme and imagine that they have no effect at all. They are one of the weapons which Governments must be prepared, if necessary, to use.
That is what the right hon. Gentleman did in 1951, and I think he will do us this credit that, on that occasion, although we had an enormous number of Divisions on the Finance Bill we did not vote against his Income Tax proposals—we voted on the Closure but not on the proposals. Nor did we vote against his increase in the Profits Tax on distributed profits—we moved Amendments to lower the tax on undistributed profits. Nor, as a matter of fact, did we vote against his main Purchase Tax proposals.
I wish to say a few words about the Profits Tax, to which several hon. Members have referred. It seems to me perfectly right that at a time when we are trying to restrain consumer demand we should increase the differential between the profits put to reserve and profits paid out in dividends. I should like to reply to the hon. Member for Orkney and Shetland and the hon. Member for Bolton, West (Mr. Holt), who also commented on this point, and who asked whether we wanted to encourage people at the present time to put profits to reserve. The answer is certainly "Yes," because we want to see a continuing investment programme over the years and, as I said just now, one puts profits to reserve in one year in order perhaps to invest one or two years later.
I tried to put the case as fairly as possible earlier this year during the debate on the April Finance Bill, by pointing out what I believe to be true—that although in total it may seem that companies have plenty of liquid assets at their

1797
disposal today, there are a number of small companies who are still not in quite as favourable a position as we should like.
The hour is late and I do not wish to detain the House longer. In conclusion, I am sure that we shall have cause in the future to be grateful to my right hon. Friend for introducing a supplementary Budget, without any regard for his own personal popularity, which will help to bring the British economy back on to an even keel without inflicting any serious damage on our earning power as a nation.
10.47 p.m.
Mr. Harold Davies: I have listened to this debate with interest—[HON. MEMBERS: "Divide."]—from three o'clock today and whether or not the concern of right hon. and hon. Gentlemen opposite is more for their own comfort tonight than for the destiny of the nation, I am not in the least perturbed and I intend to make my speech. I am concerned with the reality of the economic situation of the nation.
We have just listened to a speech from the Economic Secretary which, I admit, was an excellent speech but which was completely mixed up in one or two essential facts and factors. When he was asked what was the purpose of the Budget, we were told that that was a naive question. We can see what was the purpose of the April Budget; it was to put the party opposite in power, for it put into the hand of the higher income groups—
Mr. Arthur Lewis: On a point of order. Could you, Mr. Speaker, ask hon. Members on the Government side of the House, who are now wanting to get home, to be quiet? I am trying to listen to my hon. Friend.
Mr. Speaker: There is a certain amount of noise, but from where I sit it seems to be coming from both sides of the House.
Mr. Davies: I apologise for keeping you, Mr. Speaker, but I am exercising fully my right as a back bencher. Having justified my right by sitting here throughout the debate, I intend, whatever anxieties there may be on either side of the House, to use my rights as a Member.
Does the Economic Secretary know what he is talking about when he speaks
1798
of the influence of Purchase Tax on productive industry? He is one of the hon. Members who deal with percentages and graphs as though they were human beings. We had another example of missing the reality of the influence of Purchase Tax in the opening speech today, from the Financial Secretary. The right hon. Gentleman told us that because Purchase Tax fell on metal teapots, there could not possibly be a reduction of Purchase Tax on earthenware teapots. But earthenware teapots are earning dollars for this country and earthenware and china production comes from home-produced raw materials.
I am hesitating because of the noise. The longer the muttering goes on in the House, the longer I shall take to deliver my speech.
The figures of the exports of the pottery industry are of vital importance to a third of a million of our people, even if they are not of interest to the Conservative Party. I am concerned with the livelihood of those people and I want to point out the anomaly the Government have introduced by putting Purchase Tax on chinaware and earthenware produced in North Staffordshire. I shall not detain the House with a mass of figures. About 60 per cent. of the production of North Staffordshire potteries is dollar earning and nearly £200 per worker in the industry is earned in dollars. If that does not concern the Chancellor of the Exchequer and the Economic Secretary, I want to know why they are in the Government.
I refused to be hurried or ruffled by the noise in the House. I am referring to a great craft industry. When I heard a Government spokesman saying that because Purchase Tax was borne by metal teapots it had to be borne by china teapots, I knew that he did not know the economics of the industry. In 1950, we produced for the home market £1,700,000 worth of china and produced for export £4,500,000 worth of china. We produced £7 million worth of earthenware for the home market and £9 million worth for export. In other words, we were exporting nearly 60 per cent. of our production in North Staffordshire.
Last year, we sold £3,600,000 worth of pottery at home and earned £5,200,000 worth of dollars. We sold £12 million worth of earthenware at home and

1799
£9 million worth abroad. In other words, last year we sold 47 per cent. of our production in the dollar markets, yet we were told tonight that Purchase Tax would encourage sales abroad and encourage the search for dollar markets.
Mr. Bence: The hon. Member was talking about teapots.
Mr. Speaker: If the hon. Member for Dunbartonshire, East (Mr. Bence) wishes to intervene, he should address his remarks to me and not to the hon. Member for Leek (Mr. Harold Davies), who is sitting beside him.
Mr. Bence: I beg your pardon, Mr. Speaker. My hon. Friend was referring to teapots and, I presume, teapot spouts which were mentioned this afternoon by the Financial Secretary. Can my hon. Friend tell me whether teapots are retailed without spouts, and whether spouts are retailed for use without teapots?
Mr. Davies: I am not concerned with the complexities about which the hon. Gentleman is talking; I am concerned with the sum total of the value of this pottery industry to the nation at present, whatever Government be in power. To compare the industry producing metal teapots with the china industry shows a complete unawareness of the realities of the pottery industry.
Traditionally, the pottery industry is an exporting industry. Only 1 per cent. of its raw materials come from abroad. It is, therefore, bringing into this country a higher ratio of dollars per unit of output than most other industries in Britain. What would be the influence of the Purchase Tax on this craft industry? It would create a position where there would be a loss on the home market and we should lose skilled workers whose families have been connected with the industry for generations. If we lose our decorators and skilled print workers in this transitional period, it will be difficult to win back that workmanship—[HON. MEMBERS: "Order."] While some hon. Members opposite may think this unimportant, there are many on both sides of the House who are just as anxious about this as I am. I was determined not to let this stage of the debate pass without trying to impress on the Chancellor and
1800
his hon. Friends the urgency of this matter.
I claim that if jewellery and glassware are protected, which has been done—the tax has been taken off them—the tax should not be imposed on this industry which is earning money for Britain. I apologise to the House for speaking when it is getting late, but I consider that the future of this industry is more important than the fact that we should spend another hour sitting in the House of Commons.
We have had a Budget which has attacked the kitchen and undermined the crêche—[HON. MEMBERS: "Order."] Mr. Speaker, I shall insist on exercising my rights within the rules of the House. Each time when, because of the noise going on, I have not made my point clear to those hon. Members who wish to listen to what I have to say, and because I have been interrupted, I shall repeat it; and the quieter the House is the quicker my speech will be finished.
We have had a Budget that has attacked both the kitchen and the crêche and we have had comparisons of dividends with wages. The difference between dividends and wages can be illustrated in a sentence. If I earn £20 a week cutting coal at the coal face and risking life and limb, or I earn £20 a week from dividends, I know that there is no comparison between those two methods of earning £20. Therefore, when we are discussing the movement of dividends and wages—and I am quite prepared to admit that 90 per cent. of hon. Members opposite agree with me on this—we must not compare the two as though they both necessitated the same risk to life and limb or the same effort.
Early in the debate we were asked by an hon. Lady, to whom I always listen with pleasure, to make some concrete suggestions. Both sides of the House seem to be afraid of discussing the real issue. People are still asking a lot of elementary and silly questions. The real truth about our prosperity is hidden by the fact that we are pushing the debts of the present on to the as yet unborn. We have evolved a very wonderful system which enables civilisation to progress, but there is a limit to what the present generation can push on to future generations.
We are doing this in respect of war and in the preparation for war. If we in this

1801
House had had the courage to give a lead, we could have found a new approach to National Service and we could probably have saved £100 million, together with many of our overseas commitments; and, maybe, have introduced physical controls.
The Economic Secretary to the Treasury said that he refused to look at physical controls as a means of restoring prosperity to this country. In other words, he was admitting his infantile outlook. I can get as much metal as I like with which to build a dance hall, and if I can jump the market—and it is possible to do that—I can build a dance hall or a night club. But if I want to build a small engineering shed or a flint-grinding mill in North Staffordshire, I get no more help to obtain the raw materials which I need than does a person building a pub or a dance hall. Help could be given to that type of person without the introduction of too much in the way of physical controls.
I accused the Chancellor of speaking too quickly during the Paris talks. The Conservative Government are a little too inclined to gab. At one moment they say that we are in the uplands of prosperity, and the next moment that we are facing an economic crisis. I am not sure of the date, although I am sure about the figures because I checked them in the Library before speaking in this debate, but in the discussion in Paris on the future of the European Payments Union, the British delegation put forward the proposition that the convertibility of sterling might be allowed to fluctuate within as wide a margin as 2·78 or 2·82 dollars to the £.
That was just after the return to office of the present Government. Although we had had an April Budget and had been told that we were in the uplands of prosperity, we were by June and July already talking about the cold winds that were blowing around this island and people were already thinking that if we returned to convertibility we should return at the lower rate. If that is too difficult for hon. Members opposite to follow, they can look up the facts published by the Economist. That statement showed that there was a tendency towards a flight from sterling. I think that the sterling crisis was caused by what occurred at the Paris conference as much
1802
as anything; and the Chancellor had to rectify the situation at Istanbul, when he did give a definite statement to the world.
One other point, and then I have made the points I wanted to make—[Interruption.] I challenge some hon. Members opposite who are in such a hurry to get home to come to one of my public meetings in North Staffordshire, where the pottery industry has to earn its bread and butter and help to keep the value of the £ stable. I sincerely believe that with the Geneva spirit that is now in existence one other thing could be done; we could save £20 million worth of dollars a year by developing a new source from which to get feeding stuffs for agriculture. The small farmer is experiencing the squeeze under this Budget. The British farmer has been sacrificed to the City of London and to the moneylenders. He is paying high prices for feeding stuffs. I have just returned from China, and I know that we could get cheap soya beans and animal feedings stuffs. It would not solve the problem—[Interruption.] Hon. Members do not perturb me.
I know we could save £20 million a year in dollars if we had an intelligent East-West trade policy. I would ask the Government, if they are prepared to follow the policy of "Trade, not aid" at the next meeting of the United Nations organisation, to do their best to rescind the embargo on East-West trade, and at last to open the channels of commerce in the hope that we could build a better economy both in the East and the West.
I beg the Chancellor, when we reach the Committee stage, whatever other people may say about giving way on this question of Purchase Tax on pottery, to realise that that industry really is an island of industry in a sea of agriculture—an industry ancient, honoured, and one in which we have great craftsmen. I sincerely hope, although the right hon. Gentleman may not be able to give us all that we want, that he will do his best to help this industry in North Staffordshire to maintain its dollar trade.
Question put, That the Bill be now read a Second time:—
The House divided: Ayes 320, Noes 255.

Division No. 36.]

AYES

[11.9 p.m.

Agnew, Cmdr. P. G.

Errington, Sir Eric

Kerby, Capt. H. B.

Aitken, W. T.

Erroll, F. J.

Kerr, H. W.

Allan, R. A. (Paddington, S.)

Farey-Jones, F. W.

Kershaw, J. A.

Alport, C. J. M.

Fell, A.

Kirk, P. M.

Amery, Julian (Preston, N.)

Finlay, Graeme

Lagden, G. W.

Anstruther-Gray, Major W. J.

Fisher, Nigel

Lambert, Hon. G.

Arbuthnot, John

Fleetwood-Hesketh, R. F.

Lambton, Viscount

Armstrong, C. W.

Fleteher-Cooke, C.

Lancaster, Col. C. G.

Ashton, H.

Fort, R.

Langford-Holt, J. A.

Astor, Hon. J. J.

Foster, John

Leather, E. H. C.

Atkins, H. E.

Fraser, Hon. Hugh (Stone)

Leavey, J. A.

Baldock, Lt.-Cmdr. J. M.

Fraser, Sir Ian (M'cmbe & Lonsdale)

Leburn, W. G.

Baldwin, A. E.

Freeth, D. K.

Legh, Hon. Peter (Petersfield)

Balniel, Lord

Galbraith, Hon. T. G. D.

Lennox-Boyd, Rt. Hon. A. T.

Banks, Col. C.

Gammans, L. D.

Lindsay, Hon. James (Devon, N.)

Barber, Anthony

Garner-Evans, E. H.

Lindsay, Martin (Solihull)

Barlow, Sir John

George, J. C. (Pollok)

Linstead, Sir H. N.

Barter, John

Glover, D.

Lloyd, Rt. Hon. G. (Sutton Coldfield)

Baxter, Sir Beverley

Godber, J. B.

Lloyd, Maj. Sir Guy (Renfrew, E.)

Beamish, Maj. Tufton

Gomme-Duncan, Col. A.

Lloyd, Rt. Hon. Selwyn (Wirral)

Beattie, G.

Gough, C. F. H.

Lloyd-George, Maj. Rt. Hon. G.

Bell, Philip (Bolton, E.)

Gower, H. R.

Longden, Gilbert

Bell, Ronald (Bucks, S.)

Graham, Sir Fergus

Low, Rt. Hon. A. R. W.

Bennett, Dr. Reginald

Grant, W. (Woodside)

Lucas, Sir Jocelyn (Portsmouth, S.)

Bevins, J. R. (Toxteth)

Grant-Ferris, Wg Cdr. R. (Nantwich)

Lucas, P. B. (Brentford & Chiswick)

Bidgood, J. C.

Green, A.

Lucas-Tooth, Sir Hugh

Biggs-Davison, J. A.

Gresham Cooke, R.

Macdonald, Sir Peter

Birch, Rt. Hon. Nigel

Grimston, Hon. John (St. Albans)

Mackeson, Brig, Sir Harry

Bishop, F. P.

Grimston, Sir Robert (Westbury)

McKibbin, A. J.

Black, C. W.

Grosvenor, Lt.-Col. R. G.

Mackie, J. H. (Galloway)

Body, R. F.

Gurden, Harold

McLaughlin, Mrs. P.

Boothby, Sir Robert

Hall, John (Wycombe)

Maclay, Rt. Hon. John

Bossom, Sir A. C.

Hare, Hon. J. H.

Maclean, Fitzroy (Lancaster)

Boyd-Carpenter, Rt. Hon. J. A.

Harris, Frederic (Croydon, N.W.)

McLean, Neil (Inverness)

Boyle, Sir Edward

Harris, Reader (Heston)

Macleod, Rt. Hn. Iain (Enfield, W.)

Braine, B. R.

Harrison, A. B. C. (Maldon)

MacLeod, John (Ross & Cromarty)

Braithwaite, Sir Albert (Harrow, W.)

Harrison, Col. J. H. (Eye)

Macmillan, Maurice (Halifax)

Bromley-Davenport, Lt.-Col. W. H.

Harvey, Air Cdre. A. V. (Macclesfd)

Macpherson, Niall (Dumfries)

Brooke, Rt. Hon. Henry

Harvey, Ian (Harrow, E.)

Maddan, Martin

Brooman-White, R. C.

Harvey, John (Walthamstow, E.)

Maitland, Cdr. J. F. W. (Horncastle)

Browne, J. Nixon (Craigton)

Harvie-Watt, Sir George

Maitland, Hon. Patrick (Lanark)

Bryan, P.

Hay, John

Manningham-Buller, Rt. Hn. Sir R.

Bullus, Wing Commander E. E.

Head, Rt. Hon. A. H.

Markham, Major Sir Frank

Burden, F. F. A.

Heald, Rt. Hon. Sir Lionel

Marples, A. E.

Butcher, Sir Herbert

Heath, Edward

Marshall, Douglas

Butler, Rt.Hn. R. A.(Saffron Walden)

Henderson, John (Cathcart)

Mathew, R.

Campbell, Sir David

Hicks-Beach, Maj. W. W.

Maude, Angus

Carr, Robert

Hill, Rt. Hon. Charles (Luton)

Maudling, Rt. Hon. R.

Cary, Sir Robert

Hill, Mrs. E. (Wythenshawe)

Mawby, R. L.

Channon, H.

Hill, John (S. Norfolk)

Maydon, Lt.-Comdr. S. L. C.

Chichester-Clark, R.

Medlicott, Sir Frank

Cole, Norman

Hirst, Geoffrey

Milligan, Rt. Hon. W. R.

Conant, Maj. Sir Roger

Holland-Martin, C. J.

Molson, A. H. E.

Cooper, Sqn. Ldr. Albert

Hope, Lord John

Moore, Sir Thomas

Cooper-Key, E. M.

Hopkinson, Rt. Hon. Henry

Morrison, John (Salisbury)

Cordeaux, Lt.-Col. J. K.

Hornsby-Smith, Miss M. P.

Mott-Radclyffe, C. E.

Corfield, Capt. F. V.

Horobin, Sir Ian

Nabarro, G. D. N.

Craddock, Beresford (Spelthorne)

Horsbrugh, Rt. Hon. Dame Florence

Nairn, D. L. S.

Crookshank, Capt. Rt. Hn. H. F. C.

Howard, Hon. Greville (St. Ives)

Neave, Airey

Crosthwaite-Eyre, Col. O. E.

Howard, John (Test)

Nicholls, Harmar

Crouch, R. F.

Hudson, Sir Austin (Lewisham, N.)

Nicholson, Godfrey (Farnham)

Crowder, Sir John (Finchley)

Hudson, W. R. A. (Hull, N.)

Nicolson, N. (B'n'm'th, E.& Chr'ch)

Crowder, Petre (Ruislip—Northwood)

Hughes Hallett, Vice-Admiral J.

Noble, Comdr. A. H. P.

Cunningham, Knox

Hughes-Young, M. H. C.

Nugent, G. R. H.

Currie, G. B. H.

Hulbert, Sir Norman

Nutting, Rt. Hon. Anthony

Dance, J. C. G.

Hurd, A. R.

Oakshott, H. D.

Davidson, Viscountess

Hutchison, Sir Ian Clark (E'b'gh, W.)

O'Neill, Hn. Phelim (Co. Antrim, N.)

D'Avigdor-Goldsmid, Sir Henry

Hutchison, James (Scotstoun)

Orr, Capt. L. P. S.

Deedes, W. F.

Hyde, Montgomery

Orr-Ewing, Charles Ian (Hendon, N.)

Digby, Simon Wingfield

Hylton-Foster, Sir H. B. H.

Orr-Ewing, Sir Ian (Weston-S-Mare)

Dodds-Parker, A. D.

Iremonger, T. L.

Osborne, C.

Donaldson, Cmdr. C. E. McA.

Irvine, Bryant Godman (Rye)

Page, R. G.

Doughty, C. J. A.

Jenkins, Robert (Dulwich)

Panned, N. A. (Kirkdale)

Drayson, G. B.

Jennings, J. C. (Burton)

Peake, Rt. Hon. O.

Dugdale, Rt. Hn. Sir T. (Richmond)

Jennings, Sir Roland (Hallam)

Peyton, J. W. W.

Duncan, Capt. J. A. L.

Johnson, Dr. Donald (Carlisle)

Pickthorn, K. W. M.

Duthie, W. S.

Johnson, Eric (Blackley)

Pilkington, Capt. R. A.

Eccles, Rt. Hon. Sir D. M.

Johnson, Howard (Kemptown)

Pitman, I. J.

Eden,Rt.Hn.Sir A.(Warwick&L'm'tn)

Jones, A. (Hall Green)

Pitt, Miss E. M.

Eden, J. B. (Bournemouth, West)

Joynson-Hicks, Hon. L. W.

Pott, H. P.

Elliot, Rt. Hon. W. E.

Kaberry, D.

Powell, J. Enoch

Emmet, Hon. Mrs. Evelyn

Keegan, D.

Price, David (Eastleigh)

1804

1805

Price, Henry (Lewisham, W.)

Smyth, Brig. J. G. (Norwood)

Touche, Sir Cordon

Prior-Palmer, Brig, O. L.

Soames, Capt. C.

Turton, Rt. Hon. R. H.

Profumo, J. D.

Spearman, A. C. M.

Tweedsmuir, Lady

Raikes, Sir Victor

Speir, R. M.

Vaughan-Morgan, J. K.

Ramsden, J. E.

Spence, H. R. (Aberdeen, W.)

Vickers, Miss J. H.

Rawlinson, P. A. G.

Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)

Vosper, D. F.

Redmayne, M.

Stevens, Geoffrey

Wakefield, Edward (Derbyshire, W.)

Rees-Davies, W. R.

Steward, Harold (Stockport, S.)

Wakefield, Sir Wavell (St. M'lebone)

Remnant, Hon. P.

Steward, Sir William (Woolwich, W.)

Walker-Smith, D. C.

Renton, D. L. M.

Stewart, Henderson (Fife, E.)

Wall, Major Patrick

Ridsdale, J. E.

Stoddart-Scott, Col. M.

Ward, Hon. George (Worcester)

Rippon, A. G. F.

Storey, S.

Ward, Dame Irene (Tynemouth)

Roberts, Peter (Heeley)

Stuart, Rt. Hon. James (Moray)

Waterhouse, Capt, Rt. Hon. C.

Robertson, Sir David

Summers, G. S. (Aylesbury)

Watkinson, H. A.

Robinson, Sir Roland (Blackpool, S.)

Sumner, W. D. M. (Orpington)

Whitelaw, W.S.I.(Penrith & Border)

Robson-Brown W.

Taylor, Sir Charles (Eastbourne)

Williams, Gerald (Tonbridge)

Rodgers, John (Sevenoaks)

Taylor, William (Bradford, N.)

Williams, Paul (Sunderland, S.)

Roper, Sir Harold

Teeling, W.

Williams, R. Dudley (Exeter)

Ropner, Col. Sir Leonard

Thomas, Rt. Hn. J. P. L. (Hereford)

Wills, G. (Bridgwater)

Russell, R. S.

Thomas, Leslie (Canterbury)

Wilson, Geoffrey (Truro)

Schofield, Lt.-Col. W.

Thomas, P. J. M. (Conway)

Wood Hon. R.

Scott-Miller, Cmdr. R.

Thompson, Kenneth (Walton)

Woollam, John Victor

Sharples, Maj. R. C.

Thompson, Lt.-Cdr.R. (Croydon, S.)

Yates, William (The Wrekin)

Shepherd, William

Thorneycroft, Rt. Hon. P.

Simon, J. E. S. (Middlesbrough, W.)

Thornton-Kemsley, C. N.

TELLERS FOR THE AYES

Smithers, Peter (Winchester)

Tiley, A. (Bradford, W.)

Mr. Buchan-Hepburn and

Mr. Studholme.

NOES

Ainsley, J. W.

de Freitas, Geoffrey

Isaacs, Rt. Hon. G. A.

Albu, A. H.

Dodds, N. N.

Janner, B.

Allaun, F. (Salford, E.)

Donnelly, D. L.

Jeger, George (Goole)

Allen, Arthur (Bosworth)

Dugdale, Rt. Hn. John (W. Bromwich)

Jeger, Mrs. Lena(Holbn & St.Pncs,S.)

Allen, Scholefield (Crewe)

Dye, S.

Jenkins, Roy (Stechford)

Anderson, Frank

Edelman, M.

Johnson, James (Rugby)

Attlee, Rt. Hon. C. R.

Edwards, Rt. Hon. John (Brighouse)

Johnston, Douglas (Paisley)

Awbery, S. S.

Edwards, Rt. Hon. Ness (Caerphilly)

Jones, Rt. Hon. A. Creech(Wakefield)

Bacon, Miss Alice

Edwards, Robert (Bilston)

Jones, David (The Hartlepools)

Baird, J.

Edwards, W. J. (Stepney)

Jones, Elwyn (W. Ham, S.)

Balfour, A.

Evans, Albert (Islington, S.W.)

Jones, Jack (Rotherham)

Bartley, P.

Evans, Edward (Lowestoft)

Jones, J. Idwal (Wrexham)

Bellenger, Rt. Hon. F. J.

Evans, Stanley (Wednesbury)

Jones, T. W. (Merioneth)

Bence, C. R. (Dunbartonshire, E.)

Fernyhough, E.

Kenyon, C.

Benn, Hn. Wedgwood (Bristol, S.E.)

Fienburgh, W.

Key, Rt. Hon. C. W.

Benson, G.

Fletcher, Eric

King, Dr. H. M.

Beswick, F.

Forman, J. C.

Lawson, G. M.

Bevan, Rt. Hon. A. (Ebbw Vale)

Fraser, Thomas (Hamilton)

Ledger, R. J.

Blackburn, F.

Freeman, Peter

Lee, Frederick (Newton)

Blenkinsop, A.

Gaitskell, Rt. Hon. H. T. N.

Lee, Miss Jennie (Cannock)

Blyton, W. R.

Gibson, C. W.

Lever, Harold (Cheetham)

Boardman, H.

Gooch, E. G.

Lever, Leslie (Ardwick)

Bottomley, Rt. Hon. A. G.

Bowden, H. W. (Leicester, S.W.)

Greenwood, Anthony

Lewis, Arthur

Bowen, E. R. (Cardigan)

Grenfell, Rt. Hon. D. R.

Lindgren, C. S.

Bowles, F. G.

Grey, C. F.

Liptun, Lt.-Col. M.

Boyd, T. C.

Griffiths, David (Rother Valley)

Logan, D. G.

Braddock, Mrs. Elizabeth

Griffiths, Rt. Hon. James (Llanelly)

MacColl, J. E.

Brockway, A. F.

Griffiths, William (Exchange)

McGhee, H. G.

Broughton, Dr. A. D. D.

Grimond, J.

McInnes, J.

Brown, Rt. Hon. George (Belper)

Hale, Leslie

McKay, John (Wallsend)

Brown, Thomas (Ince)

Hall, Rt. Hn. Glenvil (Colne Valley)

McLeavy, Frank

Burke, W. A.

Hamilton, W. W.

MacMillan, M. K. (Western Isles)

Burton, Miss F. E.

Hannan, W.

MacPherson, Malcolm (Stirling)

Butler, Herbert (Hackney, C.)

Hastings, S.

Mahon, S.

Butler, Mrs. Joyce (Wood Green)

Hayman, F. H.

Mainwaring, W. H.

Callaghan, L. J.

Healey, Denis

Mallalieu, E. L. (Brigg)

Carmichael, J.

Henderson, Rt. Hn. A.(Rwly Regis)

Mallalieu, J. P. W. (Huddersfd, E.)

Champion, A. J.

Herbison, Miss M.

Mann, Mrs. Jean

Chapman, W. D.

Hewitson, Capt. M.

Marquand, Rt. Hon. H. A.

Chetwynd, G. R.

Hobson, C. R.

Mason, Roy

Clunie, J.

Holman, P.

Mayhew, C. P.

Coldrick, W.

Holmes, Horace

Mellish, R. J.

Collick, P. H. (Birkenhead)

Holt, A. F.

Messer, Sir F.

Collins, V. J.(Shoreditch & Finsbury)

Houghton, Douglas

Mikardo, Ian

Corbet, Mrs. Freda

Howell, Denis (All Saints)

Mitchison, G. R.

Craddock, George (Bradford, S.)

Hoy, J. H.

Monslow, W.

Cronin, J. D.

Hubbard, T. F.

Moody, A. S.

Crossman, R. H. S.

Hughes, Cledwyn (Anglesey)

Morris, Percy (Swansea, W.)

Cullen, Mrs. A.

Hughes, Emrys (S. Ayrshire)

Morrison, Rt.Hn.Herbert(Lewis'm,S.)

Dalton, Rt. Hon. H.

Hughes, Hector (Aberdeen, N.)

Mort, D. L.

Davies Ernest (Enfield E.)

Hunter, A. E.

Moss, R.

Davies, Harold (Leek)

Hynd, H. (Accrington)

Moyle, A.

Davies, Stephen (Merthyr)

Irvine, A. J. (Edge Hill)

Mulley, F. W.

Deer, G.

Irving, S. (Dartford)

Neal, Harold (Bolsover)

1806

1807

Noel-Baker, Francis (Swindon)

Rogers, George (Kensington, N.)

Tomney, F.

O'Brien, T.

Ross, William

Turner-Samuels, M.

Oliver, G. H.

Shawcross, Rt. Hon. Sir Hartley

Ungoed-Thomas, Sir Lynn

Oram, A. E.

Short, E. W.

Usborne, H. C.

Orbach, M.

Silverman, Julius (Aston)

Viant, S. P.

Oswald, T.

Silverman, Sydney (Nelson)

Wade, D. W.

Owen, W. J.

Simmons, C. J. (Brierley Hill)

Warbey, W. N.

Padley, W. E.

Skeffington, A. M.

Watkins, T. E.

Paget, R. T,

Slater, Mrs. H. (Stoke, N.)

Weitzman, D.

Paling, Will T. (Dewsbury)

Slater, J. (Sedgefield)

Wells, Percy (Faversham)

Palmer, A. M. F.

Smith, Ellis (Stoke, S.)

Wells, William (Walsall, N.)

Pannell, Charles (Leeds, W.)

Snow, J. W.

West, D. G.

Pargiter, G. A.

Parker, J.

Sorensen, R. W.

Wheeldon, W. E.

Parkin, B. T.

Sparks, J. A.

White, Mrs. Eirene (E. Flint)

Paton, J.

Steele, T.

White, Henry (Derbyshire, N.E.)

Peart, T. F.

Stewart, Michael (Fulham)

Wilcock, Group Capt. C. A. B.

Plummer, Sir Leslie

Stokes, Rt. Hon. R. R. (Ipswich)

Wilkins, W. A.

Price, J. T. (Westhoughton)

Stones, W. (Consett)

Willey, Frederick

Price, Philips (Gloucestershire, W.)

Strachey, Rt. Hon. J.

Williams, Ronald (Wigan)

Probert, A. R.

Strauss, Rt. Hon. George (Vauxhall)

Williams, Rt. Hon. T. (Don Valley)

Proctor, W. T.

Stross,Dr.Barnett(Stoke-on-Trent,C.)

Williams, W. R. (Openshaw)

Pryde, D. J.

Summerskill, Rt. Hon. E.

Williams, W. T. (Barons Court)

Pursey, Cmdr, H.

Swingler, S. T.

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

Rankin, John

Sylvester, G. O.

Wilson, Rt. Hon. Harold (Huyton)

Reeves, J.

Taylor, Bernard (Mansfield)

Winterbottom, Richard

Reid, William

Taylor, John (West Lothian)

Woodburn, Rt. Hon. A.

Rhodes, H.

Thomas, George (Cardiff)

Yates, V. (Ladywood)

Robens, Rt. Hon. A.

Thomas, Iorwerth (Rhondda, W.)

Younger, Rt. Hon. K.

Roberts, Albert (Normanton)

Thomson, George (Dundee, E.)

Zilliacus, K.

Roberts, Goronwy (Caernarvon)

Thornton, E.

Robinson, Kenneth (St. Pancras, N.)

Timmons, J.

TELLERS FOR THE NOES:

Mr. Popplewell and Mr. Pearson.

Bill accordingly read a Second time, and committed to a Committee of the whole House.
Committee upon Monday next.

CLEAN AIR [MONEY]
Resolution reported,
That, for the purposes of any Act of the present Session to make provision for abating the pollution of the air, it is expedient to authorise the payment out of moneys provided by Parliament—

(a) of the following contributions to expenses of any local authority, that is to say—

(i) four-sevenths of the approved expenses of the authority in making repayments of seven-tenths of the expenses, on adaptations to avoid contraventions of the provisions of the said Act relating to areas declared thereunder to be smoke control areas, of owners or occupiers of, or other persons interested in, private dwellings which are not new dwellings;

(ii) two-fifths of the approved expenses of the authority in making, in or in connection with private dwellings owned by them or under their control not being new dwellings, adaptations to avoid such contraventions as aforesaid; and

(iii) two-fifths of the approved expenses of the authority in carrying out, in or in

1808
connection with private dwellings which are not new dwellings, any such adaptations as aforesaid which have been required by notices served by them under the said provisions of the said Act;

(b) any administrative expenses incurred under the said Act by the Minister of Housing and Local Government or the Secretary of State; and

(c) any increase attributable to the said Act in the moneys to be provided by Parliament under Part I of the Local Government Act, 1948, or the Local Government (Financial Provisions) (Scotland) Act, 1954.

In this Resolution "approved" means approved by the said Minister or the Secretary of State.
Resolution agreed to.

DENTISTS [MONEY]
Resolution reported,
That, for the purposes of any Act of the present Session to amend the law relating to dentists being an Act which establishes a General Dental Council, it is expedient to authorise the payment out of moneys provided by Parliament of any part of the expenses incurred by that Council in connection with an experiment for ascertaining the value to the community of the existence of a class of ancillary dental workers undertaking dental work of a kind determined under the said Act
Resolution agreed to.

NATIONAL NAUTICAL SCHOOL, PORTISHEAD
Motion made, and Question proposed, That this House do now adjourn.—[Mr. R. Thompson.]
11.21 p.m.
Mr. E. H. Leather: I rise to air a subject which is of considerable interest both to my constituents and, I believe, to constituents similarly placed in a good many other districts in the country. In my constituency is one of the well-known national approved schools, the National Nautical School. The very location of these kinds of schools anywhere in the country by their very nature creates a problem for the people who happen to live around them.
I want to make it perfectly clear, as the Joint Under-Secretary knows very well, that in the very brief remarks I wish to make I am implying no criticism whatsoever either of the captain of this particular school or of the governors. All of them, without exception, are my personal friends and neighbours; I have lived among them for many years; they are public-spirited citizens who give up a great deal of private time for no gain to themselves to do a service to the community, and as such they are worthy of nothing but the approbation and thanks of this House.
But the fact remains that, no matter how hard they try, or how worthy they are, public opinion in the district is alarmed and worried, and it would be quite wrong for anyone concerned with this problem of the correction, training and discipline of young boys who go astray to overdo our enthusiasm, or our well-merited praise for those who are doing a good job of work, if in doing so we ignored the very real problems created and concern that undoubtedly exists among the residents of this district. The concern exists in spite of the excellent job of work done by those concerned. In my case—and I believe in that of hon. Members in other parts of the House similarly situated—I have received many letters, which, as my hon. Friend the Joint Under-Secretary knows from my personal conversations with him, I regret to say, have undoubtedly increased in the last few years, culminating in an official letter
1810
from the urban district council concerned expressing their apprehension at the existing state of affairs.
While paying all tribute—as I do, and as I am sure the Joint Under-Secretary does—to those who are running these schools, we must bear quite clearly in mind that, whether we regard it as fair or unfair, right or wrong, the residents of the district have rights which we must take fully into consideration, and those residents are worried and upset—indeed, alarmed is not, I think too strong a word. I will not burden the House for more than a few minutes with the problem, because those of us here who are concerned know very well, as does my hon. Friend, that the problem arises from the fact that under our modern methods of treating these boys they are granted a great deal more freedom and latitude than was the case twenty or thirty years ago. That being so, there are always some who abuse that freedom.
At the school in my constituency there are, I regret to say, constant cases of boys breaking out, breaking into people's houses, damaging property and generally doing a good deal of destructive damage and causing trouble. In this district, as in many others, the local populace are, by and large, people with very small incomes. Most of them in this part of Portishead are retired people. The loss or damage to even a few windows, which may cost £5 or £10—a small thing to us in this House —is to them a very serious proposition indeed.
I should like to make three specific suggestions whereby the situation might be improved and the residents in districts around this type of school might be given some reassurance. The first is—and I speak with some background knowledge going back over a number of years—that the rules laid down by the Home Office by which not only the boys but the governors and the officers and teachers are bound, are really a bit too rigid. They were laid down a good many years ago to try to prevent undue harshness on the part of masters, and so on.
One result is that if there is an especially awkward boy, or a particularly difficult situation, the masters and the governors concerned have very little latitude when dealing with the matter. They can do only what the rule says or write to the Home Office. If in the inevitable

1811
process of events it takes some weeks to get a decision from the Home Office, in the meantime the boy concerned may have done a great deal of damage and caused a great deal of unhappiness and misery to perfectly innocent citizens.
There are many instances where this had happened. I should like to ask the Joint Under-Secretary to give an assurance that these rules will be looked at again very sympathetically not only with the interests of the boys in mind but also bearing in mind the interests of the local residents who have to suffer if boys misbehave.
Secondly, I should like to ask my hon. Friend whether it is possible for him to give any directive or, indeed, guidance to magistrates. Quite clearly, there has been a good deal of change of attitude on these matters. I say with great respect that a number of magistrates these days are much too kind-hearted. We have boys sent to approved schools when, regrettably, their records show that they should have been sent to prison or Borstal. There have been no fewer than seven instances at this school since August, which in proportion is indeed a large number, of boys who had to be transferred to more rugged types of institutions. Five of them had to be transferred to Horfield Prison.
I would say that when these boys came to our school there was no doubt whatever that they were prison cases The magistrates sent them there in their desire to be kindly and lenient to the boys, when, frankly, I think a little toughness and discipline would have been more appropriate. They sent boys to nautical schools who should not have been sent there and who were beyond the stage when they could be dealt with at that type of school.
The results are bad from two points of view. First, boys of this kind immediately break out and commit damage and destruction, causing very real distress to decent citizens upon whom we have no right to impose this misfortune. Secondly, they set a very bad example indeed. They do harm by setting a bad example and showing bad moral leadership to other younger boys of impressionable age who may be at the school. By sending to the nautical schools youths who should be sent to
1812
Borstal or to prison we are not doing them a favour, and we do a great deal of harm to the others by giving them the worst possible example.
Finally, there is the compensation to be paid to these people when damage is done. My hon. Friend wrote to me on 10th October saying that where damage could be proved ex gratia payments were sanctioned. In the newspapers last July a statement appeared that my hon. Friend had told the Rural District Council of Deben, Suffolk, that in future any damage caused by youths escaping from their local approved school would be compensated. It may be that the report was not quite accurate, but that is what it said, and it appeared in a number of newspapers.
I know that there are legal difficulties, but I hope that my hon. Friend will be able to say tonight that this will be considered not merely as ex gratia payment. Ex gratia means, "If some of the boys for whom we are responsible get out and burn your house down, we will think about it, and perhaps give you something by way of compensation." Perhaps the Joint Under-Secretary will be able to tell us that the Home Office accepts responsibility—provided, of course, that legal liability can be established. No one expects payment in borderline cases. I hope that consideration will be given to those three points. It will be very reassuring to those people and, I think, no more than fair.
11.31 p.m.
The Joint Under-Secretary of State for the Home Department (Sir Hugh Lucas-Tooth): I am grateful to my hon. Friend the Member for Somerset, North (Mr. Leather) for the way in which he has raised this matter. I know what strong feelings these difficulties engender locally, and, if I may say so, I think he has put his case fully, fairly and without exaggeration.
Approved schools have, of course, much more intensive supervision than have boarding schools, but they are, nevertheless, open institutions; that is to say, in general they have no more physical restraints to prevent boys from leaving than have other schools. One of the principal aims of approved schools is to train the boys to conduct themselves under normal conditions. The essential requirement of these boys is the need to

1813
develop self-discipline. Putting physical restrictions upon them, or having continuous supervision over them, would deprive them of one of the best opportunities that they have to learn how to become respectable citizens.
There is, of course, restriction and supervision within reasonable limits, but those limits do mean that some absconding is bound to take place. While no general departure from the traditional method is contemplated, the House may like to know that it has recently been decided to conduct two small experiments in training persistent absconders. The experiments will be conducted with the agreement of the associations of masters and of the heads of these schools respectively. One experiment, which has not yet been started, involves having a small, closed block as part of an open school. In the other, which is in operation, we are trying out various special arrangements for training absconders. We are making use of special staffing arrangements and special house organisation, as it is called, to facilitate these schemes.
Approved school managers may, if the Home Secretary consents, bring absconders before the court and the court can then either recommit to another school or extend the term during which the boy is to remain at the school; or, if the boy is old enough, commit him to a Borstal. If a boy commits offences while he is at large as an absconder, the question whether or not he is to be charged with those offences is a matter not for the school authorities but for the police.
Apart from those powers, in the ordinary way absconders are dealt with by the school authorities, who have ample power to punish them. They do not have to refer the matter to the Home Office. The ordinary kind of punishment would be in the nature of forfeiture of privileges and, in appropriate cases, the managers have power to inflict corporal punishment. Boys who do not settle in any particular school are often transferred to other schools where it is thought that they may do better.
I agree with my hon. Friend that abscondings from the National Nautical School at Portishead have been giving cause for concern from time to time. Both the Home Secretary and the managers of the school deplore the inconvenience and the loss which these abscondings have caused to those who
1814
live round about and everyone concerned is anxious to take all the appropriate measures possible to minimise the nuisance, if that is the right word, which is caused by these abscondings. There have been local complaints and the question has been asked, why have the school in this area? The school is an ancient one. It was first on board a ship and it has been in its present premises for about half-a-century, so that it would be true to say that Redcliffe has come to the school rather than the school to Redcliffe. That is a fair way to put it.
I have looked into the possible causes of these abscondings. First, I am satisfied that there is no serious defect in the running of the school. Some improvements are no doubt needed from time to time, but that would be so with any establishment. There were, for instance, certainly defects in the catering at the school in 1952, and I think at that time, too, there were defects in the system of discipline at the school. That certainly led to an outcrop of abscondings, but those defects have been remedied and the position has since improved.
Secondly, there is the question of the type of boy at the school, and I can assure my hon. Friend that there is no special selection of bad boys to attend this school. I have no doubt that there are some specially bad boys at the school, but that would be in the ordinary nature of things.
My hon. Friend asked why these were not always sent to Borstal. Of course, most of the boys concerned would be too young and could not be sent to a Borstal institution. Those who are old enough could be brought before a court, as I have said, but it would be a matter for the court to say whether they should be sent to Borstal or to an approved school. I can only tell my hon. Friend that the Home Secretary cannot interfere with the discretion of the court, as my hon. Friend suggested. That is not possible.
My hon. Friend asked whether the rules might not be too rigid. The provision of restrictions against the possibility of escape would not be affected by the regulations. They are not responsible for any lack of restriction. That would be a matter for the policy of the managers and, as I have said, the reason greater restrictions are not imposed is that it is necessary, if the school is to do its job properly, to give some reasonable measure of freedom to those who are in it.

1815
Another possible cause of abscondings may be some special temporary circumstances. For instance, in 1952, there was a very severe staff shortage due to illness, and I think that was at the bottom of the particular difficulties which were felt at that time. In 1954–55 it so happened that a very large proportion of the boys at the school were new boys. In an establishment of this sort that tends to make discipline very much more difficult. In fact, at that time there was rather a large number of especially difficult boys. Most of those boys have been brought before the court and have either been sent to Borstal or have been recommitted to other schools.
Perhaps I may say a few words about recent events. I know that there have been two occurrences which can best be described as "walk-outs." On Sunday, 2nd October, 29 boys went out of the school and on the following Monday, 3rd October, no fewer than 39 boys left the school, contrary to what was permitted. But in both cases all the boys returned on the same day that they went out, and as far as I know there were offences committed by them while they were at large. I can tell my hon. Friend that all the boys concerned were punished and the five ring-leaders have been transferred to other schools.
With a view to preventing any recurrence of these incidents, there will be a thorough examination by Home Office inspectors of the supervisory arrangements at the school, and also—and I think that this is an important matter—of the leisure activities of the boys. It is of the highest importance that the boys at these schools should have plenty to do and plenty to keep their imaginations active. These matters will certainly be studied.
Mr. Leather: May I ask, then—and this is not frivolous—whether my hon. Friend is satisfied that the walk-out before church parade on Sunday night was not related to the fact that on the previous Sunday the sermon was preached by the local Member of Parliament?
Sir H. Lucas-Tooth: I had appreciated that that coincidence had occurred.
Mr. Leather: It was very embarrassing.
Sir H. Lucas-Tooth: I do not know whether it was that the boys felt that they had heard the last word, or could not bear to hear another word.
Every reasonable effort will be made to avoid abscondings and every effort has already been made. Steps of a practical kind have been taken. Additional night supervision of the dormitories has been recently instituted and the appointment of a night watchman was approved by the Home Office last month.
As I have said, steps are being taken to make the leisure activities of the boys more varied and interesting. There is an important aspect of this matter in which the captain-superintendent of the school has been active and that is securing the co-operation of the Redcliffe Bay Bungalow Association. I understand that relations have been good and arrangements made to inform local inhabitants of the times when the boys are outside the premises on leave and also promptly to inform them in the case of any absconding coming to the knowledge of the authorities of the school.
My hon. Friend asked about compensation. I cannot tell him much more than I have already told him in the letter which I wrote to him. We take the view that there is no legal liability on the managers of this or any approved school for loss or damage caused by boys when they abscond from the school. That is a legal question and I can only express the view which we take. If the managers recommend that payment should be made for such loss or damage, that would necessarily be ex gratia payment, if there is no legal liability. If such recommendations are forthcoming, we are always ready to consider them sympathetically in appropriate cases. This practice is the same as that which applies in other schools and also in the case of Borstals. In that case, of course, it is the Prison Commissioners who apply the principle which I have described.
I have seen in one newspaper a report of a communication which I sent to another Member of Parliament in this connection and I am sorry to say that that report was inaccurate. It was a report founded on a letter which I wrote to the local Member of Parliament and it was very much in the same terms as the letter which I wrote to my hon. Friend. I think that the best thing I can do is to

1817
send my hon. Friend a copy of the letter, so that he can see that the position is as I have stated.
I hope that I have answered the various points raised and I can certainly assure my hon. Friend that within the bounds of what is proper in the case of establishments of this kind the Home Office will certainly co-operate to the best
1818
of its ability with the managers in seeing that the abscondings are not a nuisance to those who live in the neighbourhood of this school.
Question put and agreed to.
Adjourned accordingly at twelve minutes to Twelve o'clock.