Commons Sitting of 26 October 1955

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  LONDON COUNTY COUNCIL (LOANS) BILL
  Read the Third time, and passed.
ORAL ANSWERS TO QUESTIONS
  WEST INDIES

    St. Vincent (Arrowroot Growers)
    Miss Leeasked the Secretary of State for the Colonies (1) the cost in interest rates paid by the arrowroot growers of St. Vincent, on an estimated crop of 1,250,000 West Indian dollars;
    (2) how long St. Vincent arrowroot growers wait before being completely paid off for the delivery of arrowroot.
    The Secretary of State for the Colonies (Mr. Alan Lennox-Boyd): The St. Vincent Co-operative Arrowroot Association, which takes delivery of, and prepares for shipment, all starch produced, makes a substantial advance payment on delivery. This takes place over the period November to June. The Association makes a further interim payment in the following December, bringing the total paid up to about 90 per cent. of the estimated full value, and a final payment the following June when the outturn is known.
    The Association borrows money to provide itself with working capital, and nearly all individual growers, depending on their circumstances, also borrow as necessary in anticipation of deferred payments by the Association. Interest payments by the Association are passed on to growers and these, together with interest payments by the growers themselves, are estimated to total about
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    60,000 dollars on an estimated crop of 1,250,000 dollars.
    Miss Lee: Will the Minister carefully consider the answer which he has just given? Is he aware that some of the smaller growers in particular find it difficult to do without their money and feel that they need to get their money paid more punctually and on shorter terms and should not have to pay so much in interest?
    Mr. Lennox-Boyd: I will gladly at all times consult the hon. Lady or anybody else on any difficulties that may arise. I have looked most carefully into this matter. I believe this is the best system, and with the setting up of the new Government central factory, which will open in November, the situation ought to improve. If the hon. Lady would like to discuss the matter with me, I will gladly tell her all I know.

    British Guiana (Local Government Reorganisation)
    Miss Leeasked the Secretary of State for the Colonies what decisions have been reached by Her Majesty's Government on the recommendations regarding local government made to the Government of British Guiana in the official Report presented by Mr. A. H. Marshall.
    Mr. Lennox-Boyd: Her Majesty's Government have decided that the reorganisation of local government in British Guiana should be carried out along the broad lines recommended in Dr. Marshall's admirable Report. As a first step, the extra staff recommended by Dr. Marshall is being selected. Copies of the Report and the statement made by Her Majesty's Government when it was published have been placed in the Library of the House.
    Miss Lee: While thanking the Minister for that reply, may I ask him to do all in his power to speed up constitutional development in British Guiana? Will he himself take active steps to see that prominent citizens such as Mr. Burnham, who are anxious to come with their delegations to this country, are not needlessly antagonised in terms of local and general government by having permission withheld?
    Mr. Lennox-Boyd: That supplementary question goes rather further than

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    this Question. It is partly because I believe that we want to fit the Colony for a return to representative government as quickly as we can that I took the step that I did of accepting immediately Dr. Marshall's Report.

    Hurricane Damage
    Mr. Vaughan-Morganasked the Secretary of State for the Colonies whether he will make a statement with regard to the effects of the recent hurricanes in Barbados, Grenada and British Honduras and what assistance has been afforded by Her Majesty's Government in the United Kingdom.
    Mr. Marquandasked the Secretary of State for the Colonies what additional grants have been made from the Colonial Development and Welfare Fund to make good hurricane damage done to houses and public services in British Honduras.
    Mr. Fisherasked the Secretary of State for the Colonies (1) what long-term financial assistance the Government have in mind to restore the agricultural productivity of Grenada and Barbados following the recent hurricane;
    (2) whether the Government will make available special re-housing grants to Grenada and Barbados following the recent hurricane.
    Mr. Lennox-Boyd: With permission, I will circulate a full statement in the OFFICIAL REPORT. I am sure, however, that all hon. Members will wish to extend the sympathy of this House to the inhabitants of the stricken territories, and particularly to those who have suffered bereavement or loss in this disaster. As hon. Members will learn from the statement I am circulating, the territories received help at once from many sources, including, of course, Her Majesty's Government, and already much progress has been made in the work of rehousing the people and providing for their immediate needs.
    Mr. Vaughan-Morgan: Would my right hon. Friend consider placing in the Library, for hon. Members to see, any photographs which his Department may have? Secondly, would he consider ultimately publishing a White Paper giving Her Majesty's Government's proposals for the rehabilitation of the
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    economy of Grenada, because public opinion does not entirely realise that that country may not be able to pay its way for five or even ten years?
    Mr. Lennox-Boyd: Yes, Sir. I certainly will make the photographs available to hon. Members, and I will sympathetically consider what my hon. Friend has suggested.
    Mr. Marquand: Is the right hon. Gentleman aware that there already existed in British Honduras grave arrears of housing, aggravated by recent rapid increases in population? Does not the hurricane now constitute an emergency and require a much larger effort than the right hon. Gentleman seemed to indicate in that rather comprehensive answer to several Questions?
    Mr. Lennox-Boyd: I hope that the right hon. Gentleman will await my comprehensive answer, because it deals with the various territories concerned. I agree with him that the blow is very serious indeed in British Honduras as well
    Following is the statement:
    Hon. Members will know that on 22nd and 23rd September Hurricane "Janet" struck with its full force the islands of Barbados. Grenada and Carriacou, a part of the Colony of Grenada, in the British West Indies and a few days later the northern part of British Honduras, taking a heavy toll of life and causing very serious damage. Other islands of the Windwards Group also suffered, but damage was less serious and no loss of life has been reported.
    Hon. Members on both sides of the House will, I am sure, wish to express their sympathy to all the inhabitants of these territories, and in particular to those who have suffered bereavement or loss in this disaster.
    In Grenada, which was the worst hit, the death roll is reported to be 115 and about three-quarters of all the buildings in the island have been either virtually destroyed or severely damaged by the storm. The pier and warehouses at St. George's, the capital, disappeared into the sea. All services were violently disrupted and it is only now that they are beginning to be brought back into use.
    Most serious in its long-term effects, however, is the damage which was done to Grenada's crops. Most of these are tree-crops which it takes a long time to rehabilitate. A survey has shown that 95 per cent. of the island's nutmeg trees, over half the coconut trees and the whole of the food and banana crops have been destroyed. Most of the island's cocoa trees were beaten to the ground, though many are expected to recover; and it may be possible to replant many of the banana trees. Fertiliser is being shipped urgently to the island to replace valuable soil nutrients washed away by the torrential rain.

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    In Carriacou the death roll was thirty-eight and, as in Grenada, the great majority of buildings and crops were destroyed.
    In Barbados the death roll was thirty-eight and 28,000 were made homeless. Large numbers of houses were destroyed, public services were disrupted, and the corn crop was lost. Fortunately, the sugar crop did not suffer major damage.
    In British Honduras sixteen people were killed. In the town of Corozal hardly a building remains untouched and surrounding villages were razed to the ground. Most crops were wiped out and the mahogany forests were damaged. Of the crops affected only sugar is likely to recover.
    A disaster of this magnitude might easily have had a numbing effect on the people concerned. In all the territories, however, people of all classes and, as always, the voluntary agencies turned immediately and energetically to relief work and the enormous task of rebuilding and rehabilitation was begun without delay. Emergency medical supplies, food, tents and building materials have been rushed to the affected territories from this country and from other territories in the West Indies.
    The assistance given by the Governments of British Guiana, Jamaica and Trinidad has been outstanding. Numerous voluntary agencies outside the area have rallied to the help of the stricken territories, in particular the British Red Cross and the American and Canadian Red Cross. The great prompt and practical help of the Royal Navy and the United States Navy was invaluable.
    Advantage was quickly taken of the prompt offers of a number of air lines and shipping companies to carry urgent supplies free. As hon. Members will be aware. I have myself in this country launched an appeal for funds to aid the affected countries and appeals have also been launched in Trinidad and in Jamaica to supplement the generous grants made by the Governments of these two territories. Considerable sums have already been received in response to all these appeals.
    It is not yet known what the total cost of making good the devastation caused by the hurricane will amount to, but clearly it will be large. There was obviously an immediate need for financial help to Governments concerned and Her Majesty's Government made grants of £50,000 each to Grenada and Barbados and £10,000 to British Honduras.
    Parliamentary approval will be sought in due course for these grants by means of a Supplementary Estimate; in the meantime such approval has been anticipated by the use of £110.000 from the Civil Contingencies Fund. At the same time as these grants were made, the Governments concerned were informed that further financial assistance would he made available by Her Majesty's Government where there is need when it has been possible to assess this. Surveys to this end are already in progress.
    Mr. Russellasked the Secretary of State for the Colonies if he will consider,
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    in conjunction with the various Governments in the West Indies, the setting up of a special fund, on an insurance basis, to make good the damage and personal loss caused so frequently by hurricanes.
    Mr. Lennox-Boyd: There are many practical difficulties about my hon. Friend's interesting suggestion, a major one being that a fund adequate to cover all contingencies would have to be so large as to be prohibitive. Nor is it Government policy to immobilise public funds in insurance against possible future liabilities.
    Quite apart from such difficulties, however, the widespread damage to communities as a whole so frequently caused by hurricanes involves Government decisions of major policy on rehabilitation and as such is not of the kind which can suitably be dealt with on the actuarial basis of an insurance fund.

    Citrus Industry
    Mr. Russellasked the Secretary of State for the Colonies if he will make a statement about the future prospects of the citrus industry in the British Caribbean.
    Mr. Lennox-Boyd: It would be most unwise for a Minister of the Crown—to whichever party he might belong—to predict the future market prospects of any commodity, but in pursuance of the undertaking given by my predecessor in June, 1954, the risks to the West Indian Citrus industry have been independently examined by a Fact Finding Mission whose Report was published as Colonial No. 314. On the basis of this Report, a price assistance scheme has been worked out with the West Indies to safeguard the industry against these risks over the next three years. I am placing in the Library a copy of the Press notice of 7th October which gives the details of this scheme.
    Mr. Russell: Can my right hon. Friend say whether the price assistance scheme has given satisfaction to the Governments and growers in the West Indies?
    Mr. Lennox-Boyd: I am delighted to see that Mr. Norman Manley said that it was a very satisfactory agreement.

  CYPRUS

    Situation
    Mrs. Castleasked the Secretary of State for the Colonies if he will make a statement on developments in Cyprus and particularly on the outcome of the conference with representatives of Greece and Turkey.
    Mr. Grimondasked the Secretary of State for the Colonies if he will make a statement on Cyprus.
    Mr. Lennox-Boyd: Since his arrival in Cyprus on 3rd October, the new Governor, Field Marshal Sir John Harding, has had three discussions with Archbishop Makarios, and has also met Turkish-Cypriot representatives. The Governor explained Her Majesty's Government's policy as put forward at the tripartite conference for the introduction of a new and liberal constitution to the Archbishop. These talks ended without agreement, though in a friendly spirit.
    The Governor broadcast to the people of Cyprus on 9th October. He referred to the proposals of Her Majesty's Government at the recent tripartite conference. He pointed out that they held out the promise of freely elected representatives of the people of Cyprus taking the main responsibility for the management of their internal affairs. He said that the proposals looked forward to a time when, self-government having been effectively established, elected representatives of Cyprus would be in a position to express their views on the future of the island.
    The Governor also announced that he would be putting forward specific proposals for economic and social development.
    The security forces in Cyprus have been reinforced, to ensure the maintenance of law and order, and the Governor has strengthened the arrangements for coordination between all security forces in the island.
    As regards the outcome of the tripartite conference, I would refer to the White Paper which has just been published—Cmd. 9594. Any questions in regard to international aspects of those discussions should be addressed to my right hon. Friend the Foreign Secretary.
    Mrs. Castle: Is it not a fact that no settlement of this problem can possibly
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    be reached so long as the British Government stand by their view that the right of self-determination is not a universal right and is to be withheld in this case? Has not this attitude already brought them into conflict with the draft Covenant of Human Rights now being discussed in the Third Committee of the General Assembly and so lowered our status in the eyes of the United Nations?
    Mr. Lennox-Boyd: The attitude of Her Majesty's Government was clearly explained by the Foreign Secretary at the opening of the talks and is spelled out in detail in the White Paper. As for the conditions precedent for a happy solution in Cyprus, I put, first of all, the return to law and order.
    Mr. Grimond: Will the right hon. Gentleman make it clear that we have moved from the quite untenable position which we took up that at no time would Cyprus be allowed to unite with Greece? Will he make it clear that it is now open to them, possibly after a period of self-government, to unite with Greece if they still desire to do so?
    Mr. Lennox-Boyd: The hon. Gentleman's attention should be drawn to the White Paper, in which the Government's attitude is clearly stated. If my memory serves me aright, paragraphs 10 and 11 answer his question.
    Mr. J. Griffiths: The right hon. Gentleman has told us what the Government suggested and proposed to Archbishop Makarios. Could he indicate to us what proposals, if any, were put forward by the Archbishop? I have not read the White Paper, which may cover the point. It would be of interest and value to the House if, before we have the debate, we could be given an indication by the Secretary of State of the proposals which were put forward by Archbishop Makarios in his talks with the Governor.
    Mr. Lennox-Boyd: The talks between the Governor and the Archbishop were informal and confidential, and no written record exists of the precise way in which they went. I will certainly consider the right hon. Gentleman's suggestion before we have a discussion on Cyprus, if we have one—and the Leader of the Opposition suggested that a debate might be desired. That appears to me to be a

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    better way in which to ventilate the respective views than by question and answer.
    Mr. Patrick Maitland: Does my right hon. Friend realise that his appointment of Sir John Harding has been very widely welcomed in the Island of Cyprus, and that public opinion there definitely looks to a restoration of law and order and is eager to co-operate to that end? Is he further aware that the public hopes that the contacts between Sir John Harding and the Archbishop will be renewed with a view to a reconciliation of the Commonwealth interest, strategic and otherwise, with the people's aspiration toward national sovereignty?
    Mr. Lennox-Boyd: I should like to take this opportunity, on behalf of Her Majesty's Government, of thanking the late Governor, Sir Robert Armitage, for the very fine work which he did under extraordinarily difficult circumstances. In view of the strategic importance of Cyprus, its position as a vitally important base, our membership—together with Greece and Turkey—of N.A.T.O. and the serious threat to law and order, the Government felt that a military governor was desirable in present circumstances. I join with my hon. Friend in agreeing that Sir John Harding's personality and liberal approach to modern problems have already endeared him to those who have met him in Cyprus.
    Mr. Dugdale: Does the right hon. Gentleman realise that his statement will have given very great satisfaction to those people who think that Sir Robert Armitage was very badly treated indeed? Will he say whether any different instructions have been given by the Government to Sir John Harding from those given to Sir Robert Armitage or whether Sir John is simply to pursue the same policy as that which Her Majesty's Government insisted that Sir Robert Armitage should follow?
    Mr. Lennox-Boyd: Like previous Secretaries of State, of course I cannot give in public, even to the House of Commons, the instructions which from time to time are given by the Government to various governors. The reason for the change was as I explained: because of certain military circumstances it seemed desirable that there should be a military
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    governor, although not military government, in Cyprus. Nothing which can be said about the propriety and wisdom of this appointment should in any way belittle the real contribution made by Sir Robert Armitage.

    Emigration
    Mr. G. Wilsonasked the Secretary of State for the Colonies how many inhabitants of Cyprus have migrated to the United Kingdom, the Commonwealth, the United States of America, and Greece, respectively, during the last three years.
    Mr. Lennox-Boyd: Accurate figures are available only for the first eight months of this year. During that period, 2,601 Cypriots emigrated to this country, 728 to other parts of the Commonwealth, 70 to the United States and none to Greece. The best estimates the Cyprus Government can supply for emigration during the preceding two years are 4,950 to the United Kingdom, 892 to other parts of the Commonwealth, 195 to the United States and 10 to Greece.
    Mr. Wilson: Does this answer not show that substantial numbers of Cypriots, when leaving their country, show their appreciation of membership of the Commonwealth by going to Commonwealth countries rather than elsewhere?
    Mr. Lennox-Boyd: In this country we have to listen to a great many harsh words, and it is sometimes rather comforting to find actual feelings expressed in this way.

    Education (Facilities)
    Major Wallasked the Secretary of State for the Colonies what proposals he has to develop technical education in Cyprus; whether he will expedite the completion of the new teachers' training college; and whether he will again consider the establishment of a university college in Cyprus.
    Mr. Lennox-Boyd: The Cyprus Government have appointed an Adviser on Technical Education. The existing Apprentices' Training Centre has been extended this year into a preparatory technical school. A technical trade school is to be opened next year. Plans for the new teachers' training college have been approved and the building will now be completed as quickly as practicable.

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    As to the last part of the Question, the new Governor is putting forward specific proposals for social and economic development, and I propose to await these.
    Major Wall: While thanking my right hon. Friend for that reply, may I ask whether he will not agree that anything that can be done to encourage higher education in Cyprus at this time will justify the expenditure of public money?
    Mr. Lennox-Boyd: Yes, certainly.

  FAR EAST

    Minister's Visit
    Mr. Fenner Brockwayasked the Secretary of State for the Colonies if he will make a statement on his official visit to Colonial Territories in Asia, particularly regarding the situation in Singapore and Malaya.
    Mr. Awberyasked the Secretary of State for the Colonies if he will make a statement on his recent visit to Singapore and Malaya, with special reference to his talks with the leaders with a view to bringing about an end to the emergency by political means.
    Mr. Lennox-Boyd: My recent visit to the Far Eastern Territories occupied six weeks, in the course of which I visited Hong Kong, North Borneo, Sarawak, Brunei, Singapore and the Federation of Malaya. In view of the length of the reply, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Brockway: While thanking the right hon. Gentleman for that reply, in anticipation, may I ask him whether he will bear two points in mind: whether he will realise that very many hon. Members hope that the forthcoming discussions with Mr. David Marshall will lead to an agreement about the advance of Singapore to self-government; and, secondly, whether he will use his influence to try to secure a successful conclusion of the discussions now beginning with the terrorist leaders with a view to ending fighting in Malaya?
    Mr. Lennox-Boyd: Replying to the second part of the question, I think the hon. Gentleman had better await the answer to a Question which follows on the Order Paper. Replying to the first
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    part of the question, I would say to the hon. Gentleman that it would be wise if he would first read my very long statement.
    Following is the reply:
    The purpose of my tour was, by travelling as widely as time permitted and meeting as many people as possible, to renew my firsthand acquaintance with those territories which I had visited before and to establish it with the others.
    It so happened that at the time of my visit there was a constitutional problem in Singapore. This arose from the Chief Minister's request that in future the Governor should accept his advice on all matters on which he was required by the constitution to consult the Chief Minister. These matters related to the appointment and dismissal of Appointed Ministers and Assistant Ministers and the granting of leave to them and also to the prorogation and dissolution of the Legislative Assembly.
    In my view, which was shared by the Governor, it seemed that provided the Governor continued to retain his discretion as regards the power of prorogation and dissolution it was only reasonable that he should accept the advice of the Chief Minister on the other matters which would normally be decided primarily on personal and political grounds. An agreement was therefore reached on these lines.
    I also stated that Her Majesty's Government would welcome a visit to London by a representative delegation from Singapore at a suitable date next year to consider the situation in the light of a year's working of the constitution. I regret that I cannot in the space of this reply go into greater detail about the many people and problems I met, or about the great progress being made in so many spheres. I would of course be glad to answer questions on any individual matters which hen. Members may wish to address to me.
    In Hong Kong I was impressed by the success achieved in tackling the formidable difficulties resulting from an immense increase in population and from the restrictions on international trade. In the territories in Borneo I saw convincing evidence of soundly based social and economic development.

    North Borneo (Philippino Settlers)
    Wing Commander Bullusasked the Secretary of State for the Colonies how many new settlers in the British Colony of North Borneo have come from the Philippine Isles; and how many from Britain.
    Mr. Lennox-Boyd: In the first half of 1955 permanent entry was granted to eighty-five persons from the Philippines. There have been no settlers from Britain, and none so far from the Philippines under the recent Agreement.
    Wing Commander Bullus: Would my right hon. Friend continue to bear in mind the necessity to give the maximum encouragement, in respect of Empire migration, to our own people?
    Mr. Lennox-Boyd: Yes, Sir, but there are, of course, many formidable difficulties in this case.
    Mr. G. Longdenasked the Secretary of State for the Colonies how many Philippino workers it is proposed to settle in North Borneo under the Agreement recently signed between Her Majesty's Government and the Government of the Philippines.
    Mr. Lennox-Boyd: The Agreement enables employers to recruit workers from the Philippines, but no specific number has been fixed.

  KENYA

    Emergency Situation
    Mr. Fenner Brockwayasked the Secretary of State for the Colonies if he will make a statement on developments in Kenya since July.
    Sir T. Mooreasked the Secretary of State for the Colonies if he is satisfied with the progress made in Kenya in stamping out Mau Mau terrorism; and if he will make a statement on the present position.
    Mr. Lennox-Boyd: I am glad to report a continued improvement in the emergency situation, and encouraging progress in tackling the problems of rehabilitation and resettlement. Meanwhile schemes for economic and social development in the non-emergency areas are going forward with all possible speed. I am circulating a full statement in the Official Report.
    Mr. Brockway: May I again thank the right hon. Gentleman in anticipation? While agreeing that the situation in Kenya has improved very greatly, particularly among the African population, who are now looking to constructive advance rather than to the methods of Mau Mau, may I ask the right hon. Gentleman to bear two points in mind: first, their desire to see some land redistribution promised at an early date, and, secondly, their desire to have direct elections for the Legislative Council without the limitations which are proposed in the Coutts Report?
    Mr. Lennox-Boyd: There is a Question on the Coutts Report later. In dealing with the whole problem of land and population in East Africa, I am, as the hon. Member knows, in constant touch with the Governors of the three Territories about the most interesting and romantic Report published some months ago.
    Sir T. Moore: Referring in particular [to the point in Question No. 40, does my right hon. Friend think this would be an appropriate time to pay some tribute to the courage and endurance of the settlers and soldiers alike during the last few trying years?
    Mr. Lennox-Boyd: I lose no opportunity, I hope, of saying that there could not have been this improvement in the situation in Kenya had it not been for the courage and endurance of settlers and also for the attitude adopted by the African population themselves, who have been the chief victims of this terrible movement.
    Following is the statement:
    In the last three months there has been steady progress in defeating the militant wing of Mau Maw In consequence it has been possible to release the bomber squadrons and to begin to reduce the military forces engaged. The transfer of the Reserves to control by the Administration and police has continued, and since the beginning of September the Army has been wholly deployed in the forest areas. Continuous patrolling and aggressive action by the security forces have brought about the dislocation and disorganisation of gangs into small fugitive groups, while closer administration and the system of defensive villages have cut off their usual sources of food and other supplies.
    Many groups have been driven by hunger to try to steal food in the settled areas, where they have suffered heavy casualties. Terrorist strength has been reduced by 1,500 since July, while thefts of stock for food have been cut by half. Morale is reported by surrendered terrorists to be extremely low, and the chief concern of the gangs is now survival. Every effort continues to be made to induce surrenders.
    Encouraging progress has been made in the formidable task of reclaiming Mau Mau adherents so that they can again take their places in the normal life of the Colony. More rehabilitation staff have been recruited, and the number of officers at work now exceeds 400. The total number of persons released from detention, is now 15,000, of whom some 12,000 have been set free this year. A notable feature of rehabilitation work is that none of those released is known to have rejoined Mau Mau.
    Important progress has also been made in the plans to resettle landless Africans. The survey

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    of the Mwea-Tebere Irrigation Scheme, which is expected ultimately to absorb up to 13,000 families and on which 10,000 men are already at work, has been completed, and that for the Garsen Scheme is well-advanced. Work has begun on the scheme to resettle 5,000 families on forestry work.
    The development of villages, primarily for security reasons, has continued, and by the end of this month the whole population of Kikuyu and Embu districts, and part of that in Meru, will be housed in villages. Although village life is alien to the Kikuyu, Embu and Meru, there are signs that it is becoming more acceptable now that the improvement in the emergency situation is enabling better amenities to be provided. Already most villages have a school or hall which is the centre of social and welfare activities.
    Interest in the progress of the emergency and the future of the Kikuyu, Embu and Meru should not obscure the great work being done for the advancement of all tribes and peoples in Kenya. A comprehensive account of developments in this work would be extremely lengthy but an idea of its scope and magnitude may be gained from the following examples.
    The Swynnerton Plan for African agriculture, on which expenditure of £1,750,000 is planned for 1955–56, is now in full swing. In Ukambana, tsetse infested bush has been cleared so that 50,000 acres will be opened up for cattle-grazing, and four dams have been completed. Farm planning and consolidation is making good progress in Nyanza. In Machakos the initiative in tackling overstocking is being taken by the local district council.
    In trade and industry, the International Cooperation Administration (I.C.A.) has provided £100.000, subject to the provision of local contributions, to assist African industrialists and traders. On the recommendation of the "Assistance to Industry" Committee, whose report has just been laid in Legislative Council, an Industrial Development Board is being established. A Unilever margarine factory, operated by East African Industries, opened on 15th October.
    Tenders for the Nairobi African housing scheme are due this month, the Mombasa £300.000 African housing scheme is four months ahead of schedule and legislation is in draft for comprehensive housing schemes to be undertaken by African district councils. The plan for educational expansion continues to go forward, and in this field too the I.C.A. is helping by providing finance for adult literacy and for a new medical training school, for which plans are now in hand.

    Kamau Case (Police Organisation)
    Mrs. Castleasked the Secretary of State for the Colonies (1) what reforms he proposes to introduce in the police organisation in Kenya in view of the state of affairs revealed by the case of the Kikuyu prisoner, Kamau Kichina,
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    who died after ill-treatment received in custody;
    (2) whether, in view of the widespread concern at the conduct of the case of Kamau Kichina, he will institute a high-level judicial inquiry into the circumstances leading to the death of Kichina and the proceedings in court, and into similar cases, in order to show his determination that justice shall be applied impartially to all races in Kenya.
    Mr. Swinglerasked the Secretary of State for the Colonies if his attention has been drawn to the magistrate's comments on the Kenya Police Force during the trial of four police officers following the death of Kamau Kichina; and what action he is taking to end the malpractices disclosed.
    Mr. Hamiltonasked the Secretary of State for the Colonies whether, in view of the continued abuses of the law by certain of the police in Kenya, he will now start an exhaustive independent inquiry with a view to restoring native African confidence in British administration of justice.
    Mr. Haymanasked the Secretary of State for the Colonies whether he will make a statement on the death of the Kikuyu Kamau and on the strictures of the magistrate on the behaviour of the two European police inspectors involved.
    Mr. Lennox-Boyd: With permission, I will answer Question No. 8 and Questions Nos. 9, 12, 38 and 47 together.
    Mrs. Castle: On a point of order. I do not wish my second Question, No. 12, to be answered with this Question as it [raises an entirely separate point from Question No. 8.
    Mr. Speaker: Perhaps the hon. Lady will wait to see whether the answer covers both Questions.
    Mrs. Castle: Further to that point of order. I wish respectfully to say that I understood the Colonial Secretary was asking my permission to answer this Question with my Question No. 12. Presumably I have the right to say that I do not give that permission.
    Mr. Speaker: I am afraid I have to say that the courteous introduction "With permission" is a matter of courtesy and not of anything else. I do not think that

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    any hon. Member has the right to object to an answer until he has heard it. I think that the Colonial Secretary ought to reply now.
    Mrs. Castle: Further to that point of order. With great respect, may I say that there are two quite separate aspects arising out of the case and I put down two separate Questions because quite clearly I wish to put two separate points? Can I have an assurance, Mr. Speaker, that I will be given an opportunity to press those two points separately if the Secretary of State gives an omnibus reply?
    Mr. Speaker: If the hon. Lady will give me an opportunity of listening to the answer, I shall be able to say whether it covers the two points or not. At the moment I do not know what the answer is.
    Mr. Lennox-Boyd: Perhaps I might be allowed to say that I read in "Tribune" that the hon. Lady was to assume leadership in matters of this kind. Therefore, I am not surprised at that intervention.
    Hon. Members: Very cheap.
    Mr. Lennox-Boyd: The Governor and I have been greatly disturbed by the Kamau case, which occurred at a time when a marked improvement had appeared in the control and discipline of the security forces following the measures taken after the amnesty offer of 18th January.
    I am satisfied, after a detailed examination of all the circumstances, that this was an isolated case and not symptomatic of a general disregard of lawful procedures by the Kenya Police Force and I therefore do not consider that an independent inquiry is required. I am also satisfied that the conduct of the judicial proceedings was entirely proper.
    I am nevertheless concerned that even one case of this kind should have occurred and the Governor is introducing or has introduced, additional safeguards against a recurrence such as closer supervision of junior officers and a longer period of police training. I am circulating a fuller statement in the OFFICIAL REPORT.
    Mrs. Castle: In the first place, may I ask the Colonial Secretary if he does not agree that the fact that the Supreme
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    Court had to step in and alter the sentence in this case proves that there is something seriously wrong with the adminstration of justice in Kenya? Does not the increase of the sentences leave unaltered the alarming fact that the charge in this case was altered from one of murder before the trial took place, and that that must have been done with the consent of the prosecution and, therefore, of the Department of the Attorney-General? Is the right hon. Gentleman aware that that fact has caused grave alarm among many responsible people with legal training in this country, who believe it shows that many cases in fact are not receiving the full treatment they ought to be getting in Kenya?
    Mr. Lennox-Boyd: I have, not unnaturally, gone with enormous care into this most distressing case and I say at once that I have found no one in Kenya, whatever their views, or to whatever race they belong, who has attempted to condone the disgraceful conduct of the people concerned. That shows the unanimity of feeling which prevails in Kenya about cases of this kind. In regard to the particular questions asked by the hon. Lady, the fact that the Supreme Court exercised its power of revision in this case appears to me to show that the rule of law and order does prevail in Kenya, which I believe we are all delighted to see reaffirmed.
    The second point which the hon. Lady made was about the alteration of the charge from murder to manslaughter. The magistrate who agreed to that change was a very experienced magistrate in whom I and the Government of Kenya have full confidence. The charge was reduced to one of grievous bodily harm because the medical evidence—this would apply in this country and anywhere else—was that death might have resulted from causes other than this maltreatment.
    As to the last part of the question put by the hon. Lady, I feel quite sure that this is an isolated incident. When the hon. Lady has read my very full report I shall be ready to discuss it with her and answer any Questions in the House of Commons to make certain, as far as is humanly possible, that these things do not occur again, but I would ask her to see this matter against the enormous improvement there has been in every field

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    of similar activity in Kenya over recent months.
    Mr. Alport: May I ask my right hon. Friend whether the new police training school has only very recently begun to produce a highly-trained European and African rank for the police force, when the first output from that school took place, and whether it is the intention of the Kenya Government to withdraw magistrates' powers from temporary district officers who, under the previous arrangements, received those powers?
    Mr. Lennox-Boyd: I think that both those questions will be answered in my full statement, but, because I think there is nothing more important for our good name in the Colonial Territories than considerations of this kind, I will answer them very briefly now.
    With the improvement in the emergency situation this year it has been possible to extend the training period for newly-recruited police officers from six weeks to four months and recall the earlier intake for refresher courses. In answer to the second question, it is true that these magisterial powers will in future be removed from temporary district officers. Although it is also a fact that they have not actually sat as magistrates in courts, nonetheless I think it is an anomaly which we are in a position now to remove.
    Mr. J. Griffiths: The Secretary of State is to provide a full statement, which we shall read, but may I ask him now to deal with a point which has caused serious concern and disturbance everywhere? That is the reduction of the charge in this case from murder to one of causing grievous bodily harm. The Secretary of State said that that was done on evidence. May I ask whether, in his statement, he includes that evidence; and, further, whether it would not have been better—because it is important in Kenya to see that justice is done impartially to all races—for that point to have been made in the trial without reducing the charge, which gave the impression that there was not an impartial administration of justice in Kenya?
    Mr. Lennox-Boyd: No, Sir. I had not intended to include in my statement any
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    evidence which came to the magistrate to convince him that the change was justified. I think it would be very unfortunate if Ministers were to attempt to interpret the mind of any magistrate in this country or in any Colonial Territory. I am absolutely satisfied that in good faith the magistrate arrived at the conclusion to which he came and his decision cannot be challenged. The important thing is that the case was reviewed by the Supreme Court under its powers of revision, and, secondly, that active steps are being taken to reduce to a minimum the possibility of a recurrence of similar affairs.
    Mr. Swingler: By what methods has the Colonial Secretary satisfied himself that this is an isolated case? Is he not aware that there have been cases of this kind before in Kenya in recent years? What kind of inquiry has he carried out, in view of the detention of large numbers of Africans in Kenya, to satisfy himself that this is an isolated instance? Is he aware that after they have read his statement, large numbers of people, having examined this case, will continue to be convinced that there is something fundamentally wrong with the police and judicial system under which this kind of thing can go on?
    Mr. Lennox-Boyd: I hope that the hon. Member will not give renewed currency to such a slanderous inaccuracy of that kind. I am satisfied by this simple fact, among others, that in the course of the whole of the present year there have been only three cases involving physical violence, all three of a very trivial kind, apart from this particular case; and I think that this, in the light of the present situation in Kenya, justifies what I have said.
    Mr. Hamilton: How does the right hon. Gentleman's original answer square with the description of these methods being used in Kenya with the remarks of Mr. Justice Cramm some months ago? Is it not the case that a delegation from this House, led by the right hon. Member for Kelvingrove (Mr. Elliot), reported in February, 1954, that these methods needed overhauling? Why has not something been done about it in the meantime?
    Mr. Lennox-Boyd: If the hon. Member had followed the position carefully throughout the last six months, he would know that there has been drastic overhaul. The remarks of Mr. Justice Cramm, to which the hon. Member refers, are now completely out of date. I would draw his attention to the remarks of Mr. Acting Justice Law more recently, and to the enormous improvement which those who follow this matter from day to day know has taken place.
    Mr. Hayman: Will the Minister bear in mind that, in spite of the legal satisfaction which he finds in what he has said, this case has shocked the civilised world? Will he convey to the Governor of Kenya just what we on this side of the House feel about it?
    Mr. Speaker: Mr. Paul Williams.
    Mrs. Castle: On a point of order. The Colonial Secretary has not answered the point contained in my Question No. 8, which I particularly wanted to stress, and which, if he had given separate answers, he would not have been able to evade in the way that he did by taking my two Questions together. May I have your permission, Mr. Speaker, to ask a supplementary question, because the right hon. Gentleman has quite deliberately evaded that point?
    Mr. Speaker: I heard the right hon. Gentleman say that he was publishing a full report on this case. I think the House could look at that report before pursuing the question. I also remind the House that although we have been engaged on Questions for nearly half an hour, we have reached only Question No. 10. Mr. Paul Williams.
    Mrs. Castle: Further to that point of order. I tabled two Questions on two separate points and it is within my rights as a Member to put down three Questions a day. In effect, I have had only two answered. Could I not have the opportunity of pressing my Question in a supplementary question, as I tabled it in the proper fashion?
    Mr. Speaker: I am afraid not. A full report is to be published. If the hon. Lady finds any material in it for further interrogation, she is quite at liberty to put down further Questions. I have to think of the other hon. Members who have Questions on the Order Paper.
    Following is the statement:
    The measures taken after the amnesty offer of 18th January to prevent situations in which malpractices by the security forces could occur included amendments to Emergency Regulations to restrict powers of holding suspects, the reciting of screening camps and the reorganisation of the Kikuyu Guard. The marked improvement which followed was the subject of favourable judicial comment. The Governor and I were, therefore, all the more disturbed when we first heard of the Kamau case.
    2. The three police inspectors and the district officer (Kikuyu Guard) who were convicted were young officers employed on contract terms. Following a mandatory inquiry into the cause of death of Kamau Gichina while in police custody, the officers were arrested on warrants issued by the resident magistrate. Police Inspectors Fuller and Waters were charged with murder, and Chief Inspector Coppen and Temporary District Officer Bosch with causing grievous harm.
    In the course of the preliminary inquiry the court, in consequence of the medical evidence, dismissed the charges of murder and substituted charges against Fuller and Waters of causing grievous harm. They pleaded guilty. Coppen and Bosch pleaded not guilty to that offence, and in their cases the prosecution accepted a plea of guilty of assault occasioning actual bodily harm. All relinquished their rights to be tried as Europeans before a jury.
    The magistrate sentenced the first two accused to eighteen months' imprisonment and Coppen and Bosch to fines of £25 and £10 respectively. All four officers have been dismissed from the service or had their contracts terminated and have forfeited gratuities and passage rights. Subsequently the Supreme Court, acting under its powers of revision, has enhanced the sentences on Fuller and Waters from eighteen months to 3½ years on grounds that original sentences were patently inadequate, and that on Bosch from £10 to six months imprisonment. Coppen has left Kenya.
    3. In his judgment, the magistrate commented on statements, before and at the inquest, by two other district officers who were not before the court. One of these was a temporary district officer in charge of a tribal police combat unit. Inquiry has revealed that, when questioned by the Criminal Investigation Department, he did not reveal all the knowledge in his possession (though he did later add to his statement on his own initiative). His contract has been terminated.
    The other district officer concerned is a regular member of the Administrative Service with a good record. The Governor has instituted an inquiry into his conduct in connection with this case and, until the results of that inquiry are known, I am not in a position to say any more about his conduct.
    4. The magistrate also made some comments on the subject of the combination of executive and judicial powers. In Kenya, as in many other Colonial Territories, members of the Administrative Service are ex officio magistrates. Officers of the regular Service not only are selected with the greatest care

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    but also undergo a course of training, which includes law and judicial procedures, before taking up their appointments.
    It has not been possible to give this training to temporary officers appointed by the Kenya Government in the course of the emergency and, although magisterial powers have been used by temporary district officers only for the issue of warrants or summonses and none has sat on the Bench and tried cases, the Governor has decided to remove the ex officio magisterial powers from such officers.
    5. The Governor and I are satisfied that this was an isolated case and not a symptom of a general disregard of lawful procedures in Kenya, and that the magistrate acted throughout with complete propriety. I do not, therefore, think that a high-level independent inquiry is needed. The essential point is that all possible measures should be taken to prevent a repetition. This is being done.
    With the improvement in the emergency situation this year, it has been possible to extend the training period for newly recruited police officers from six weeks to four months and to recall the earlier intake for refresher courses. Other measures being instituted include more frequent inspections and closer supervision by all senior officers and irregular surprise medical inspections of persons held in custody.
    The Commissioner of Police is using every possible means of making sure that all his officers realise that no mercy will be shown to any member of the force found guilty of violence to persons in custody and has, at a special conference of provincial police commanders stressed their personal responsibility for ensuring, by their own inspection and those of their subordinate officers, that those in custody are properly treated. The Governor is issuing parallel instructions to district administrative officers.

    Detained Persons (Releases)
    Mr. J. Johnsonasked the Secretary of State for the Colonies the numbers still in detention camps in Kenya; and the approximate number being released per week.
    Mr. Lennox-Boyd: Forty-eight thousand two hundred and forty-one on 10th October, of whom 45,406 were held on detention orders, of whom some 30,000 are in works camps under various degrees of control and supervision down to that in "open camps," where they are virtually on parole before release. The remainder are repatriates in transit to their reserves. The average rate of release during this year has been about 1,300 a month, but in September 2,520 persons were released.
    Mr. Johnson: In view of these figures, does the right hon. Gentleman not think that the total being released each week
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    is somewhat meagre by comparison with the number of 60,000—as I understand it—who are in these camps? What will he do to speed up releases, as 90 per cent. are under suspicion, not gangsters out of the forest?
    Mr. Lennox-Boyd: I think the hon. Gentleman knows very well that I am very anxious, as far as security considerations allow, to have the swiftest possible return of the people of whom it can be proved that their return is justified, but I should mislead the House if I did not also make it clear that there are a certain number of convicts who, having served their sentences, are then for public security reasons detained, and that this is not necessarily the net figure but a gross figure.

    African Franchise (Report)
    Mr. Alportasked the Secretary of State for the Colonies whether he will make a statement regarding the Report on African Franchise in Kenya prepared by Mr. W. F. Coutts.
    Mr. Lennox-Boyd: As I am awaiting the views of the Kenya Government, who are at present considering the Report, I am not yet ready to make a statement.
    Mr. Alport: Can my right hon. Friend say whether it is the intention that whatever decision is made in the light of this Report that decision will take its effect at the elections which, I understand, are to be held at the end of 1956?
    Mr. Lennox-Boyd: That is one of the matters I am also considering.
    Mr. J. Griffiths: May I ask whether African members of the Legislative Council will be taken fully into consultations?
    Mr. Lennox-Boyd: I should like notice of that question. Of course, when Mr. Coutts went round he was accompanied by African assessors, including members of the Legislative Council representing each area.
    Mr. Griffiths: Would it not surely be desirable in a matter of such importance, to take the African members of the Legislative Council into full consultation before a decision is reached?
    Mr. Lennox-Boyd: I think so, but I should like notice of that. It is a very important matter and I would rather not answer without thought, but my impression would be so, certainly.

  MAURITIUS

    Constitutional Development (Proposals)
    Mr. Fenner Brockwayasked the Secretary of State for the Colonies what decisions he has reached, following conversations with the Governor and representatives of the Legislative Council, regarding constitutional developments in Mauritius.
    Mr. J. Johnsonasked the Secretary of State for the Colonies if he will make a statement regarding further constitutional advance for Mauritius following the discussions he had in July last with the official delegation from the Legislative Assembly of that Colony.
    Mr. Lennox-Boyd: I am in consultation with the Governor about these proposals and am not yet ready to add to the reply given to the hon. Member on 27th July.
    Mr. Brockway: In considering these proposals will the right hon. Gentleman bear in mind that the educational standards in Mauritius stand very high among those of British Colonies, and that there is a strong demand for adult suffrage and responsible government? Will he be careful not to make proposals which are likely to intensify communal antagonism in the island?
    Mr. Lennox-Boyd: As the hon. Member knows, I recently had the pleasure of a visit from representatives of all parties in Mauritius and of the Governor. I am conscious of their views, and also of the problems and difficulties in a multiracial and religious society of this kind. I will certainly bear all those points of view in mind.
    Mr. Johnson: Without anticipating the final conclusion of the talks, will the right hon. Gentleman bear in mind the moderate and well-balanced arguments of the Mauritius' Labour Party delegation in July against changing the present electoral system?
    Mr. Lennox-Boyd: All the arguments made to me by those delegations were moderate and sensible.
    Mr. Hay: Will my right hon. Friend bear in mind that this subject of electoral reform in Mauritius is by no means uncontentious? Will he also bear in mind the strong Communist bias which exists in the Mauritius Labour Party?
    Mr. Lennox-Boyd: I am certainly aware that in the last election in Mauritius the people who had the most votes had the fewest seats, and that there is, therefore, a feeling of frustration.
    Mr. J. Griffiths: May I ask the Secretary of State if he will correct the statement made in the last supplementary question about the Mauritius Labour Party? He had an opportunity of meeting its members and knows that they are responsible persons, and the imputation of the statement was that this is a Communist organisation.
    Mr. Lennox-Boyd: I did not understand my hon. Friend the Member for Henley (Mr. Hay) to mean that the Labour Party in Mauritius was Communist-inspired. I have already said that all the representations made by the delegations who came to me, including that of the Mauritius Labour Party, were sensible and balanced.

    Rodriguez (Consultative Committee)
    Mr. Braineasked the Secretary of State for the Colonies whether the island of Rodriguez is represented in the Legislative Council of Mauritius.
    Mr. Lennox-Boyd: No, Sir. But there is a local Consultative Committee on which the different sections of the population are represented.
    Mr. Braine: Surely my right hon. Friend will agree that it is out of tune with the times that this small dependency should not be represented? Can he say whether consideration will be given fairly soon to its representation in the Legislative Assembly?
    Mr. Lennox-Boyd: The Governor has been there lately, and in view of the very large distance that the island is from Mauritius, and the small population, it is his considered advice that local institutions are a better way of associating the people with their own development.

  UGANDA

    Constitutional Reforms
    Mr. P. Williamsasked the Secretary of State for the Colonies whether he will make a full statement on the constitutional reforms recently carried out in Uganda.
    Mr. Lennox-Boyd: I would refer my hon. Friend to my despatch of 20th July to the Governor of Uganda, a copy of which is in the Library, and to my statement in this House on 22nd July. With the establishment of a Ministerial system at the centre, the enlargement of the Protectorate Legislative Council, the establishment of the new system in Buganda and the signature of the substantive Buganda Agreement, the constitutional reforms outlined three months ago have now all been successfully carried into effect.
    Mr. Williams: Is my right hon. Friend aware that most people will be deeply pleased that the Kabaka has been able to return to Uganda and hope that the future constitutional developments will take place in a peaceful atmosphere?
    Mr. Lennox-Boyd: Yes, Sir.

    Sudanese Refugees
    Mr. Spenceasked the Secretary of State for the Colonies how many refugees have crossed into Uganda from Sudan in the last six months; and what reports have been received from them regarding the state of affairs prevailing in the Sudan.
    Mr. Lennox-Boyd: It is estimated that, since the outbreak of disturbances in August, 2,000 to 3,000 civilian refugees, 167 troops and six police have entered Uganda from the Sudan. Such information as the Uganda authorities have been able to obtain from the refugees has been transmitted to my right hon. Friend the Secretary of State for Foreign Affairs, to whom I suggest all questions regarding the state of affairs in the Sudan should be addressed.

    Kabaka of Buganda
    Mr. Wadeasked the Secretary of State for the Colonies whether he will make a statement on the return of the Kabaka of Buganda to his own country.
    Mr. Lennox-Boyd: I would refer the hon. Member to my statement of 22nd July and to my reply today to my hon. Friend the Member for Sunderland. South (Mr. P. Williams) to Question No. 10 on the Order Paper.
    Mr. Wade: As one who is often critical of colonial administration, may I on this occasion ask the right hon. Gentleman
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    whether he agrees that the outlook now is somewhat more hopeful in Uganda, and, furthermore, that recent events have shown that the settlement of differences with restraint and mutual understanding is not unattainable in a British Colony?
    Mr. Lennox-Boyd: That is perfectly true.

  BRITISH HONDURAS

    Agriculture (Crop Trials)
    Mr. Russellasked the Secretary of State for the Colonies the results of the tests made on the experimental crops grown by the Department of Agriculture in British Honduras.
    Mr. Lennox-Boyd: Trials are being carried out by the Department of Agriculture on some eighteen different crops, including rice, sugar, citrus, cotton and cocoa. The latest information available is contained in the Annual Report of the Agricultural Department of British Honduras for 1954, a copy of which will be placed in the Library.
    Mr. Russell: Does my right hon. Friend not have some later information than the Annual Report, which I have already seen? Are not tests taking place which were started since that Report was published and which have not been reported upon?
    Mr. Lennox-Boyd: Yes, but I am rather loath to ask the Governor at this moment for a further report as he is so preoccupied with reconstruction after the hurricane. As soon as possible. I will do so.

    Development Plan (Grants)
    Mr. Marquandasked the Secretary of State for the Colonies what representations he has received from British Honduras concerning the need for additions to the current colonial development and welfare grants to meet an acceleration of the completion of the Colony's development plan.
    Mr. Lennox-Boyd: I have received no formal request but I understand that the matter is under consideration in the Colony. It would be premature for me to make any comment at this stage.
    Mr. Marquand: Is the right hon. Gentleman aware that leaders of the majority party in the Legislature have

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    complained of grave delays in obtaining sanction from London for projects already worked out and approved by the Government on the spot? If the right hon. Gentleman cannot receive a deputation, would he send somebody to inquire into the situation in British Honduras?
    Mr. Lennox-Boyd: I have the fullest confidence in those who are responsible for the administration of the Colony.

  SIERRA LEONE (POLICE FORCE)
  Mr. John Hallasked the Secretary of State for the Colonies if the police force of Sierra Leone has now been increased.
  Mr. Lennox-Boyd: The establishment of superior officers has increased from twenty-six to thirty-four. It is hoped to recruit another hundred constables this year. I understand further increases are to be included in the 1956 Estimates, which are to be presented to the Sierra Leone Legislature shortly.

  COLONIAL TERRITORIES

    Conference, London (Civil Servants)
    Mr. Albuasked the Secretary of State for the Colonies what advice he gave to Colonial governors on the attendance of representatives from the Colonial Territories at the recent conference on regional planning and development.
    Mr. Lennox-Boyd: The governors of those Colonial Territories from which civil servants were attending this conference were informed of the attitude of Her Majesty's Government towards the attendance of United Kingdom officials, and were invited to consider advising their officials in the same sense.
    Mr. Albu: Do I understand from that reply that the advice given by the Government was that the sponsors of this conference were politically undesirable? In view of the fact that it has now been conclusively shown that the evidence on which the Government arrived at this decision was completely false, will the right hon. Gentleman now agree that members of the Commonwealth services are quite free to take any part in the centre that has now been set up for regional planning development, without any interference from the Government?
    Mr. Lennox-Boyd: I have nothing to add to my answer and the statement made by the Home Secretary on 28th September.

    Administrative Service (Vacancies)
    Mr. Braineasked the Secretary of State for the Colonies how many vacancies there are for administrative officers in the Colonial administrative service.
    Mr. Lennox-Boyd: There are at present about 215 vacancies in the administrative branch of the Oversea Civil Service.
    Mr. Braine: Can my right hon. Friend confirm that the number of vacancies is greater than it was a year ago? Can he further say whether he is satisfied that the present conditions in the Service are attracting men of the right calibre, and whether continuing thought is being given to the idea of still further reforming the Oversea Service?
    Mr. Lennox-Boyd: It is rather difficult and unwise to compare one year with another, because establishment needs in different territories increase or decrease from year to year. This year, for example, 66 of the 215 vacancies are for Northern Rhodesia, which is a comparatively recent demand, but, of course, there are difficulties in the way of recruitment which I am at all times anxious to meet, and any help or publicity I can get I shall most gladly welcome.
    Mr. Snow: I notice that the right hon. Gentleman confined his answer to administrative officers. Is it not a fact that vacancies are much more numerous in respect of other allied services, and is it not a fact that there is a feeling of insecurity of tenure by many of these expatriate officers?
    Mr. Lennox-Boyd: I saw what was—if I may say so—the admirable letter in "The Times" today by the hon. Gentleman, and I believe I am having a discussion with him shortly about a matter which must, I think, cause anxiety to all Members of all parties in this House, namely, the maintenance of tranquil government before the period of self-government in various territories can emerge. I am only too anxious to treat this, as I hope it will be treated, as a non-party matter.

    Governors (Customs Exemption)
    Mr. Braineasked the Secretary of State for the Colonies to what extent it is the general practice that Governors be exempted from Customs duties in respect of goods imported for their personal use; and in what Colonies this concession is not made.
    Mr. Lennox-Boyd: In most territories Customs exemption is granted on all goods imported for the Governor's use. Two territories grant an annual allowance in lieu of exemption, two restrict the exemption to certain types of goods such as wines, spirits and tobacco and in two others, British Honduras and Gibraltar there is no form of exemption.
    Mr. Braine: Seeing that the goods for the most part are imported for the Governors' official functions, is not this distinction invidious, and would not my right hon. Friend look into the whole matter and at the same time see whether other anomalies in the Governors' pay and conditions of service cannot be wiped out?
    Mr. Lennox-Boyd: I will certainly look into it, but I am reluctant to give any impression that all circumstances are alike in every territory.

  EAST AFRICA (ROYAL COMMISSION'S REPORT)
  Mr. Wadeasked the Secretary of State for the Colonies into what languages, either in full or in an abridged form, the Report of the East Africa Royal Commission has been translated.
  Mr. Beresford Craddockasked the Secretary of State for the Colonies whether he will publish an abridged or popular version of the Report of the Royal Commission on East Africa.
  Mr. Lennox-Boyd: To be properly understood, the Report needs to be read and studied as a whole. The official preparation of an accurate, balanced and readily intelligible summary of so closely reasoned a document either in English, or still more in translation, presents great difficulties. Hon. Members will realise the danger of a popular summary replacing the Report itself.
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  It should be remembered also that the general contents of the Report have been made widely known through articles in the European and African Press, and through radio broadcasts. I am, however, still in consultation with East African Governments what may best be done. I do not think it would be practicable to undertake the enormous work of translating the whole of the Report into Swahili or other East African languages.
  Mr. Wade: Does the right hon. Gentleman agree that if the ideas propounded in the Report are to be accepted it is important that language should not be a handicap to any who are willing and ready to study it? Could he give an assurance that the fact that some of the economic proposals are far-reaching and controversial will not lead to this Report being shelved?
  Mr. Lennox-Boyd: I can certainly assure the hon. Gentleman that the Report will not be shelved, but language difficulties do exist, however hard we attempt to disguise the fact, and Swahili is not even a lingua franca in Kenya.
  Mr. Craddock: Would it not be possible, as, with great respect, I have suggested in my Question, to publish, not the full Report translated, but an abridged or popular version? Would my right hon. Friend be kind enough to give that consideration, because I think it is very important that it should be done if possible?
  Mr. Lennox-Boyd: My answer deals with the dangers of attempting to abbreviate such a lengthy and considered document as this, but it does also give some answer to what my hon. Friend, I think, has in mind.
  Mr. Wadeasked the Secretary of State for the Colonies whether he will now make a statement on the recommendations of the East Africa Royal Commission.
  Mr. Lennox-Boyd: I would refer the hon. Member to the reply which my right hon. Friend gave on 27th July to the hon. Member for Govan (Mr. Rankin). Examination of the Report on the lines described in that reply is going ahead with all possible speed but is unlikely to be completed until early in the New Year.

  NORTHERN RHODESIA (AFRICAN WORKERS)
  Mr. Alportasked the Secretary of State for the Colonies whether he will make a statement regarding an agreement reached between the copper mining companies and the European Mine Workers Union in Northern Rhodesia regarding African advancement.
  Mr. Lennox-Boyd: The Agreement, which has recently been consolidated to apply throughout the Copper Belt, provides for twenty-four categories of jobs at present held by Europeans to be thrown open to Africans. The companies and the union have agreed to employ jointly an independent firm of industrial consultants to make a detailed survey of every European job; and when this is done negotiations will begin for the opening up of further categories of jobs at the end of the three-year period which the Agreement covers.
  I feel sure the House will welcome this Agreement and congratulate those responsible. It has put an end to a dangerous deadlock and offers ground for hope that racial relations in the Copper Belt may develop harmoniously.
  Mr. Alport: May I ask my right hon. Friend whether, in addition to agreeing that this reflects the greatest credit on the unions and the managements concerned, he agrees that it also shows the practical working of the policy of partnership in the Federation of Rhodesia and Nyasaland?
  Mr. Lennox-Boyd: That is indeed so.

  MALAYA

    Amnesty Declaration
    Sir T. Mooreasked the Secretary of State for the Colonies the present position in regard to the terrorism in Malaya; and if he will make a statement on the subject.
    Mr. Awberyasked the Secretary of State for the Colonies if he is aware that Tunku Abdul Rahman and Dato Sir Cheng Lock Tan, leaders of the Federation of Malaya Government, have indicated their willingness to meet the leader of the insurgents at his request at the Alliance Headquarters at Kuala Lumpur
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    in an attempt to end the Malayan war by political means; if the meeting has now taken place; and what was the outcome.
    Mr. Lennox-Boyd: On 9th September the Government of the Federation of Malaya declared an amnesty applicable to all who had taken up arms against them. A similar declaration was issued by the Government of Singapore. This is a sincere and generous attempt on the part of the two Governments to bring the emergency to an end. There has however so far been no marked changes in the rate of surrenders and terrorist activities involving some loss of life have continued. These activities are of course on a greatly reduced scale.
    The Chief Minister of the Federation, Tunku Abdul Rahman, announced that he would be willing to meet the Communist leader, to explain the terms of the amnesty. Early in September he received a letter suggesting that such a meeting be held which it was hoped the President of the Malayan Chinese Association, Sir Cheng Lock Tan, would also attend. The Chief Minister intimated that he was ready to meet the Communist lead to clarify the declaration of amnesty and that he would be accompanied by Sir Cheng Lock Tan. The Chief Minister of Singapore also received a letter asking him to be present and he has agreed to attend. A preliminary meeting has been held between liaison officers to arrange details. No date has yet been settled for the main meeting.
    Hon. Members will be aware that Tunku Abdul Rahman has repeatedly declared his willingness to take part in such a meeting in order to explain the terms of the amnesty and to encourage their acceptance.
    Sir T. Moore: While welcoming the action of Her Majesty's Government and also of the local Governments concerned, may I ask my right hon. Friend whether he has any information that these bandits are still acting with Communist support, or have they any backing at all from their non-political fellow countrymen?
    Mr. Lennox-Boyd: I would hesitate to answer questions of that kind on matters of this grave importance, but clearly there has been a lot of Communist inspiration behind the whole terrorist campaign.
    Mr. Awbery: Can the right hon. Gentleman say whether the terms of the armistice recently made are any different from the terms of the armistice made six months ago?
    Mr. Lennox-Boyd: I am circulating the terms of the amnesty in the OFFICIAL REPORT and I think that the hon. Member had better read those first.

    Public Services (Recruitment)
    Mr. G. Longdenasked the Secretary of State for the Colonies from what sources civil servants are in the future to be recruited by the Government of Malaya.
    Mr. Lennox-Boyd: Vacancies in the public services in the Federation of Malaya are filled by Malayans whenever suitable candidates with the requisite qualifications are available. When no such candidates are available, the Federation Government normally request me to recruit candidates on their behalf from the United Kingdom and Commonwealth countries. No change in this policy is at present contemplated.

  GIBRALTAR (DEVELOPMENT)
  Mr. Doddsasked the Secretary of State for the Colonies to make a statement in regard to the proposals for developing the port of Gibraltar; and what other action has been decided upon to give needed assistance in dealing with the economic problems that have arisen.
  Mr. Lennox-Boyd: The Governor of Gibraltar is considering a report by the Port Development Committee, and I am awaiting his recommendations on the details of the scheme and the means of financing it.
  In answer to the second part of the Question, Gibraltar was allotted the sum of £500,000 from Colonial Development and Welfare funds made available by the latest Act. Of this £300,000 has been earmarked for port development. It is expected that the bulk of the balance will be spent on housing.
  Mr. Dodds: Does not the right hon. Gentleman think that this consideration has been going on for much too long now? In view of the state of affairs which has developed in Gibraltar, does he not
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  think that there should be some action instead of the fine words which we have had for so long?
  Mr. Lennox-Boyd: I was in Gibraltar a fortnight ago. No such impression prevailed, and they are satisfied that an important task of this kind needs careful planning.

  COLONIAL POLICY (INFORMATION SERVICES)
  Mr. Longdenasked the Secretary of State for the Colonies whether he is satisfied with the facilities at his disposal for publicising the colonial policy of Her Majesty's Government in quarters where it may not always be fully appreciated; and if he will make a statement.
  Mr. Lennox-Boyd: There are necessarily strict limits to expenditure of public funds on information services, as on many other desirable activities, but within these limits I am satisfied with the facilities at my disposal. I am, of course, always ready to listen to suggestions.

SOUTH-EAST ARABIA (SITUATION)
The Prime Minister (Sir Anthony Eden): With permission, Mr. Speaker, I will make a statement on the situation in South-East Arabia.
The House may recall that on 28th July, 1954, I reported that agreement had been reached with the Saudi Arabian Government to submit the Buraimi frontier dispute to arbitration. I expressed the hope that this agreement would enable us to resume the traditionally friendly relations between Her Majesty's Government and the Saudi Arabian Government.
I am sorry to have to tell the House that these hopes have been disappointed. The proceedings before the Arbitration Tribunal at Geneva have broken down and the British member of the Tribunal and its Belgian President have resigned. The reasons for these events were explained in detail in a statement issued by the Foreign Office on 4th October. I have just learned that Dr. Dihigo, one of the two remaining members of the Tribunal appointed as a neutral, has also resigned.

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For many years, Her Majesty's Government sought to reach an agreement in these matters by negotiating with the Saudi Arabian Government. These efforts led only to steadily increased Saudi claims against the territory of two Arab Rulers, the Ruler of Abu Dhabi and the Sultan of Muscat. Finally, in August, 1952, in the region of Buraimi, the Saudi official Turki bin Ataishan, after passing through the territory of the Ruler of Abu Dhabi, invaded the territory of the Sultan of Muscat and established himself in a village belonging to the Sultan.
Despite this provocative act, Her Majesty's Government continued to seek a solution by peaceful means, and dissuaded those local leaders who wished to meet force by force. For two years Turki remained in Buraimi, seeking to extend Saudi influence in the area. In 1954, Her Majesty's Government advised the two Arab Rulers to submit their case to arbitration. An Arbitration Agreement was drawn up which it was hoped would lead to a settlement and to more friendly relations.
The Saudi Arabian authorities have systematically disregarded the conditions of arbitration which were then agreed upon. The "police" group which they were permitted to keep in the Buraimi Oasis for the sole purpose of maintaining law and order was, in fact, led by political officers who persistently exceeded their functions. Bribery and intimidation on a wide scale have taken place in the disputed areas, with the result that it is no longer possible, I regret to say, to estimate where the loyalties of the inhabitants lay before Turki's armed incursion. The Ruler of Abu Dhabi and the Sultan of Muscat have scrupulously observed the conditions of arbitration which Her Majesty's Government, in good faith, recommended to them. They have had to stand by and watch their subjects being suborned, and the outcome of the arbitration itself being gravely prejudiced in advance. A fair and impartial arbitration is not possible in such circumstances.
These facts, combined with the conduct of the Saudi Government in relation to the Tribunal itself, have led Her Majesty's Government to conclude that the Saudi Arabian Government are no more willing now to reach an equitable
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solution by arbitration than they were previously by negotiation. Their actions and conduct amount to a repudiation of the Arbitration Agreement, and have made a continuation of the arbitration impossible.
Her Majesty's Government have, therefore, felt obliged, in the exercise of their duty, to protect the legitimate interests of the Ruler of Abu Dhabi and the Sultan of Muscat, to advise them that the attempt to reach a just compromise by means of arbitration has failed. The forces of these Rulers, supported by the Trucial Oman levies, have accordingly this morning taken steps to resume their previous control of the Buraimi Oasis, and areas to the west of it.
My latest information is that the Saudi force has been evacuated from the Buraimi Oasis, its only casualties being two men slightly wounded. They are being cared for by our forces.
Her Majesty's Government and the Rulers concerned have no doubt that, as a matter of law, they would be entitled to regard as a fair frontier between the Ruler of Abu Dhabi and Saudi Arabia the line many in this House know as the 1952 line, claimed in their recent Memorial before the Tribunal. However, while fully reserving their legal rights in that respect Her Majesty's Government have decided with the agreement of the Rulers, in order to act in as reasonable and conciliatory a manner as possible, to declare and uphold a line which is more favourable to Saudi Arabia. In 1935, when the present dispute may be said to have crystallised, a line, which is known as the Riyadh Line, was put forward by Her Majesty's Government. It involved substantial concessions to the Saudi Arabians. This line was further modified in 1937 in favour of Saudi Arabia and it is this modified line that we are now declaring as the frontier. The Saudia Arabian Government are being informed of these decisions.
I regret that this step should have been necessary. But, as negotiations and arbitration have both failed, we have no other means of honouring our obligations and standing by our friends. I hope that in time the Saudi Arabian Government will accept the solution that we have had to declare. Her Majesty's Government are ready at all times to discuss with the Saudi Arabian Government any minor

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rectifications of the line which may seem convenient in the light of local circumstances.
Mr. Attlee: It would appear that it was quite impossible to have a fair arbitration and I think that that is evidenced by the retirement of the neutral members. In those circumstances, we have no option but to stand firm and to say that we cannot have these things broken by force.
The Prime Minister: I am very grateful to the right hon. Gentleman.
Mr. Bellenger: Can the right hon. Gentleman say whether there are any British troops in the area and, if so, whether they are likely to be involved in this dispute?
The Prime Minister: I would rather not say anything about our military dispositions at this moment, for obvious reasons. Operations are now being carried out by the Trucial Oman levies which, as the right hon. Member for Bassetlaw (Mr. Bellenger) probably knows, are Arab troops with some British officers. I would rather not go beyond that. Up to the present I have had no information on any casualties among these levies, but I have not heard any details.

ORDERS OF THE DAY

  WAYS AND MEANS
  Considered in Committee.
  [Sir CHARLES MACANDREW in the Chair.]

  BUDGET PROPOSALS AND ECONOMIC SITUATION
  3.40 p.m.
  The Chancellor of the Exchequer (Mr. R. A. Butler): As has been announced, our first business must be to deal with the economic situation, and as we are in Committee of Ways and Means it will be clear to hon. Members that I have a variety of measures, including fiscal proposals, to put before the Committee. These Her Majesty's Government judge essential if we are to tackle the present situation thoroughly and effectively. The fact that my speech will include budgetary matters may lead hon. Members to think that things are more difficult than they had imagined. Actually, there has been a distinct improvement during the past month. Since I spoke at Istanbul at the meeting of the International Bank and Fund in the middle of last month, sterling, I am glad to say, has strengthened; the loss of reserves has been effectively halted, and our current deficit in the European Payments Union has been greatly reduced. Moreover, the September trade returns indicate that the gap between our export and import figures has been narrowed; and during 1955 the terms of trade have moved rather in our favour than against us.
  What, then, have been the causes for our anxiety over this long summer, and why is further action needed now? Since the last Budget, over six months ago, rumours and speculation arose in July about the future parity of sterling and the margins within which it might move. This was largely due to the discussions in Paris, in June, on the subject of a European clearing system. These discussions were necessary in order to secure the renewal of the E.P.U., and to preserve the invaluable co-operation of the European nations in O.E.E.C. This uncertainty coincided, however, with a second and separate factor—the emergence of a significant degree of internal inflation, due to wage claims and rising personal incomes—[HON. MEMBERS: "Oh "]—to increased

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  spending on both consumption and investment, and to industrial unrest, in which the effects of the dock strike should not be underestimated. Altogether, there has been shown to be excessive demand for our limited supply of labour and material. These two influences, the rumours and uncertainty and the emergence of a degree of internal inflation, of course, reacted one on the other, and the reserves suffered some losses.
  But a plain statement of our policy towards sterling—and I have nothing to add today to what I said at Istanbul on that subject—has altogether improved the standing of sterling, in so far as it was threatened by doubts about our exchange policy. That, the Committee will realise, is eminently satisfactory. Some people may, therefore, be inclined to ask whether we could not wait till the next Budget to take further action against the internal inflationary pressure. This would be a much easier and much more comfortable course than taking steps at once. But this Government are determined to restore the balance of the economy without delay, so that we may rebuild our reserves and create a firm basis for future forward moves in national policy. Thus we shall consolidate sterling's recent recovery and take advantage of the opportunities which world trade offers us.
  I discussed all this with the Commonwealth representatives at Istanbul, where my public assurance that further action was imminent did much to re-establish confidence, and I am quite clear now where my duty lies—[HON. MEMBERS: "Resign."]—namely, that we must take further action, and take it now. We shall be moving in company with the Governments of Australia and New Zealand within the Commonwealth. These and a number of other countries have been suffering from troubles somewhat similar to our own. [Laughter.] While the Committee may be entertained, it will observe that somewhat similar restraint is being applied in the United States and Western Germany, and we have recently had an example in Holland.
  Let us be clear, at the outset, that the problems which we in Britain are facing are not problems caused by a slack or enfeebled economy. We are moving on the tide of a vigorously growing expansion, which is outstripping the resources available to maintain its strength.
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  Twenty-five years ago John Maynard Keynes said,
  "We are suffering not from the rheumatics of old age but from the growing pains of over-rapid changes."
  That statement is equally true of our situation today. I do not doubt that, had he been with us, Keynes would have noted and prescribed for the symptoms of over-ebullient prosperity, just as he diagnosed and treated the indications of underemployment in his day.
  In addressing ourselves to the cause and cure of our growing pains, we must reflect that we have not experienced the problems of a free economy for some seventeen years; secondly, that we have taken on many and varied overseas burdens far greater than many of our competitors, such as Western Germany, and thirdly, that we are sustaining, and mean to continue to sustain, a system of social services which is the envy of the world. In view of these three postulates which I have laid down I have made it clear that, in my view, the problems of the British economy demand a dual policy, combining both incentive and restraint. We need, and have needed, incentive to secure the maximum expansion of production and employment at home and I presume that hon. Members opposite will not laugh when they reflect on the fact that during the last four years we have maintained what may now be said to be the fullest employment we have known in the history of this country. We need restraint to enable us to combine internal expansion with external solvency, and to ensure that the demand which results from full employment—and many people have not thought this out sufficiently—does not imperil our balance of payments or prevent us from honouring our manifold commitments overseas.
  We have had both these considerations in mind during this year. In February, when the first signs of serious strain appeared, we took action by raising Bank Rate to 4½ per cent., and by reimposing a moderate degree of restriction on hire purchase transactions. At the time of the Budget, in April, I could point both to the strengthening of sterling and to the improvement in the reserves which had resulted and I am ready, on a future occasion, when I shall be really controversial, to answer any technical point raised this afternoon. Although I can point to an improved and strengthened

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  sterling and the improvement in the reserves position, I warned the Committee—these were my words—that it would
  "naturally take some time for the effects of Bank Rate and of the tightening of credit to make themselves fully felt on our balance of payments."—[OFFICIAL REPORT, 19th April, 1955; Vol. 570, c. 40.]
  I then examined the probable trends in both demand and production as they could then be foreseen.
  With all the evidence and advice at my disposal, and after deciding to hold about half the prospective surplus in reserve, and taking into account, as I thought, the probable effect of the tighter credit policy, I proposed those incentives which I thought most calculated to encourage higher productivity and output.
  Looking back, what analysis can I make? It is as follows. With the single and disquieting exception of coal, my confidence in our ability to increase production has been fully justified. So far this year, industrial production has been running between 5 per cent. and 6 per cent. above the corresponding period of last year, thus maintaining the momentum of the expansion of the last two or three years. Our exports have improved, and there is a generally high level of activity and well-being in the country. So much so that some people may find it hard to understand why, with full employment and better rewards, there is any need for remedial action to be taken. But the truth is that, while the incentive side of our policy has worked to the advantage of the country as a whole, the disciplinary side, in the form of the restriction on credit—of which we had little practical experience in conditions of full employment when the trend of consumption and investment was rising, which was opposite to what was happening when I applied it on first taking office—has proved to operate less rapidly than we either expected and intended. That was the reason—I am trying to put the situation clearly before the Committee—for the further measures which I introduced on 25th July.
  We cannot be certain as yet, how far the various restraints which we have progressively brought into force during the year are exerting, in their totality, their effect on the economy. Bank advances generally are gradually falling; the trade gap is becoming rather smaller; and, as
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  I foretold in the Budget—and my calculation was correct—there has recently been some slowing down in the rate at which personal consumption has been growing. So my forecast of both production and consumption in the Budget, I claim, was correct. But I am conscious of too many signs that, before the original pressures have been sufficiently checked, new pressures may develop to reinforce them. Here are some of the indications. Let us take, first, the unsatisfied demand for materials and labour, which has been marked throughout the year, and which still persists. In spite of new production records, we are faced with a shortage of steel, and of other essential materials; and we are managing to overcome these only by additional imports. And these are significant figures. For every individual unemployed there are now more than two vacancies notified to employment exchanges. Whereas, in Australia, the Prime Minister has explained, in introducing the measures himself in the absence of the Treasurer, that it is personal consumption which is running at too high a level, in the United Kingdom the excess of demand is showing itself not only in terms of personal consumption but also in a tempo of new investment which threatens to outstrip the growth of our resources.

  PERSONAL INCOMES AND SPENDING ON CONSUMPTION
  Before announcing what measures Her Majesty's Government propose to take to deal with these, I will just indicate some of the other factors which have caused us to take action. The sum total of consumers' expenditure remains too high. The Index of Weekly Wage Rates, for example, rose by no less than 5 points between December and March, when a good many of the large wage claims were settled. But the figures now available show that it rose by another 3 points between March and June, and has since risen again by a further point. And new wage claims are now being pressed forward. At the same time, the level of dividend distribution has continued to rise—reports published by industrial companies in the first nine months of this year show an increase in net dividends of 22 per cent. over the corresponding period of 1954; on a gross basis, that is before deduction of tax, the increase is about

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  19½ per cent. The conclusion is inescapable, that we must design our policies so that they face up to, and cope with, the danger to the economy—and especially to our competitive power—of a further expansion of incomes and of consumer demand.

  INVESTMENT
  With the support of hon. Members on both sides of the Committee—indeed, I was very much pressed by right hon. and hon. Gentlemen opposite—I have made great efforts to encourage investment, both public and private. I have been even more successful than I or the Committee would have expected. In addition to the evidence of continuing expansion in the amount of work actually done on fixed investment, all the indications of future intentions—the increase in the plans approved for new factory construction and the rising value of orders on hand for machine tools—point to a gathering momentum of demand in this field of investment which, taken with an increase of industry's stocks and work in progress and with the rise in incomes and consumption, is now overloading the economy.
  COSTS AND PRICES
  What is the effect of this? When a productive machine is working at such brimful capacity, it becomes easier not merely to obtain higher money incomes but also to pass on in higher prices the increased costs which result. Both costs and prices have been gradually edging upwards, reflecting the continuing rise in personal incomes. This leads to social strains at home; and abroad it threatens the competitive power of our exports in a world market where prices are becoming increasingly keener. For example, it is significant that the index of our export prices has risen by 3 per cent. since the end of last year.

  EXPORTS
  Just a word about exports. It is difficult to define the trend of exports exactly, because of the interruptions of the dock strikes. So far as we can tell, the trend is rising at an appreciable rate. Our exports to the U.S.A. in particular will do better this year than they have been doing for some time past. But it is becoming increasingly clear that home
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  demand and home spending are not only sapping the competitive power of our exports but are also drawing in a larger volume of imports than we can afford.

  IMPORTS
  In the first nine months of this year, the excess of our total imports c.i.f. over our total exports has been no less than £676 million as against only £425 million in the same period last year. And although higher prices account for some part of this increase—the Index of Import Prices during this period has been, on average, some 3 per cent. higher than over the same period last year—it is an expansion in the volume of imports which is mainly responsible. In volume, imports have been no less than 11 per cent. higher in the period from January to September of this year than in the corresponding months of 1954; and the strain which they have imposed on our balance of payments has been aggravated particularly by the need to import substantial tonnages of coal.
  Mr. Austen Albu: And steel.
  Mr. Butler: I mentioned steel earlier as something which had to be imported.

  BALANCE OF PAYMENTS AND THE RESERVES
  As a result, we are faced with too wide a gap in the balance of our visible trade, and with a marked decline in the reserves of gold and dollars. The facts about our balance of payments position can be read by hon. Members in the recently published paper, Cmd. 9585. When we assess the balance of our overseas income and payments, we must always remember that nowadays practically any payment which we have to make in the non-sterling world may involve a loss of dollars. The revised estimate for the overall current balance of the U.K. recently published, shows a surplus for the second half of 1954 of £21 million; and the provisional estimate for the first half of 1955 is £17 million. This surplus of £38 million—including aid—for the 12 months ending in June, 1955, is at any rate a surplus, but it is insufficient to enable us to discharge the full range of our commitments and responsibilities overseas.
  By 30th September of this year the reserves figure had fallen to £838 million,

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  and during October we have had to pay to the European Payments Union £28 million in respect of our September deficit, which was incurred—the Committee should note—almost entirely in the first half of that month, because, as I said earlier, since then things have been comparatively stable and, in fact, improvements have been seen. On the other hand, at 30th June, 1953, the International Monetary Fund still held sterling in excess of our original subscription to the extent of £96 million; the whole of that excess has now been redeemed. Thus, our borrowing rights have increased, and this constitutes a significant reinforcement to our own reserves. In short, we have room in which to make effective our determination to reinforce and maintain sterling; but we have no room for complacency.
  Now, when world trade is expanding, is the time for the level of our reserves to rise rather than to fall. As far as we can foresee, it would appear that the rest of the sterling area should, with improved commodity prices, do a little better in the months to come. On the other hand, the closest possible examination I can make of our own prospects shows that results in the United Kingdom are not likely to show sufficient improvement—though they may show a small one—unless we moderate the pull of home demand. In judging what further measures of domestic restraint are required for this purpose, we must remember that a near balance or a small surplus on our overseas current account is not good enough. It is essential that we should earn a good surplus, if we are to honour our manifold commitments overseas while allowing for adverse swings in our balance of payments, and if confidence in sterling is to be maintained.
  Having watched the recent course of events—the continuing high level of demand, both public and private, the persistent shortage of labour, the renewed pressure for higher wages, and the strain to which our reserves remain subject—I see both reason and need to reinforce the restraints which we have so far applied, in order to give the economy, in good time, the degree of relief which it needs and to strengthen the foundations of our balance of payments.
  The methods by which the Government propose to deal with this problem will be consistent with their economic policy as a whole, as it has developed during the past four years. We shall not fall back on physical import cuts, which, so far from correcting inflation, may aggravate it still further, and, in any case, can be effective only if they are reinforced by rationing, allocation and controls. Our measures, therefore, must be of a more general character, consistent with our set policy of freer trade and payments, and designed to moderate the expansion of demand without distorting the natural pattern of growth of a free economy. The measures I shall outline are of this kind.
  But however firmly and wisely the Government act, it is only if their measures are recognised by public opinion as being taken in the best interests of the country as a whole that the economy will be restored to full health. It is an illusion to suppose that full employment, price stability, and a healthy balance of payments, can be secured by the Government, irrespective of the contributions made, or withheld, by the people. Our plans are, therefore, framed to create the economic climate in which all elements of the community can play their full parts, and so balanced as to command the support of the whole country.

  THE MEASURES
  I now come to the variety of measures in different fields which I propose to lay before the Committee. The measures of restraint which were imposed in the earlier part of the year will, of course, be maintained and allowed to develop their full effect. We shall see their full result as we approach the end of the year. But the progressive operation of credit policy will now be reinforced by further, and more direct, measures, designed to restrain demand in both the public and the private sectors of the economy, and to reduce expenditure on both investment and personal consumption.

  THE PUBLIC SECTOR
  I will deal first with expenditure by the whole range of public authorities. I shall be making our decisions and actions clear as I go along. But, first, I must define the real nature of the problem which confronts us. I sometimes hear it said—indeed, I read—that there is one simple

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  solution for all our economic difficulties, namely, to make dramatic reductions in Government current expenditure. Most people who say this are the victims of two fallacies. First, that Government expenditure is making increasing demands upon the nation's resources; secondly, that vast economies can be made by squeezing administrative costs without changing the functions of the Government or reducing the scope of any important service.
  In fact, the truth is that we have been wielding the knife continuously for four years now; and during that period we have been much more successful in restraining Government expenditure than is commonly realised. I will give this figure—and this is the first time it has been published: Four years ago Government current expenditure was eating up 29 per cent. of gross national production. This year we have got it down to 26 per cent. The squeeze on administrative costs goes on all the time, and it will tighten still more; but it is not in administrative costs that the big money lies. It lies in quite a small number of very large and important functions which the Government have to discharge—defence, law and order, social services, National Insurance, assistance to agriculture, Colonial and Foreign Services, and so forth. When we look at Government expenditure, not in detail but in the large, the question of major changes of policy arises at once—for I emphasise that we are now at a point where major reductions in expenditure can only flow from major policy changes.
  I ask: Do those who say that Government expenditure could be drastically reduced propose a reversal of policy in education, or a cut in the cost of pensions? Or are we to hold up work on the roads? Perhaps I can answer by saying that in each of these spheres we have to do all we can to meet imperative needs—in the case of education, of a rising school population, in the case of the old, of an increased number of retired persons, and, in the case of the roads, with a programme which I cannot increase but which is already insufficient to deal with the industrial needs of the country.
  Are we, then, to make a big cut in our defence obligations? The Defence Estimates will be published at the usual time;
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  and they will show that we are carrying out our commitments with the utmost economy which is consistent with maintaining the efficiency of the Services in a period of revolutionary changes in strategy and equipment. This same criterion of economy and efficiency will have to be applied at the right time to the range of subsidies which fall within the field of my right hon. Friend the Minister of Agriculture, Fisheries and Food.
  But at the present time I tell the Committee—and I have been over the whole field of Government expenditure very thoroughly—that the main possibilities for major economies do not lie in cutting back existing services. They lie in restraining the rate of development, in moderating the capital outlay on the expansion of services over the whole of the field where its cost affects Government finance—whether directly, or through grants or loans or guarantees—and so reducing the increased operating costs to which that expansion inevitably leads. It is in this way that we can best constitute a balanced and considered pattern of economy in public expenditure, such as the country needs.

  LOCAL AUTHORITIES
  I now come to the field of the local authorities. In the public sector, the investment expenditure of the local authorities is a very important element. It represents about a quarter of the total of the nation's investment. Ever since the first formulation of full employment policy in the White Paper of 1944, it has been common ground that this area of public investment is of particular significance in the task of keeping the economy on an even keel.
  By far the largest element is subsidised housing, which represented a capital expenditure of £390 million in 1954. House building continues at a high rate; and there is no reason to doubt, in accordance with what I said in July, that the total number of houses completed in Great Britain will substantially exceed 300,000 this year, and will, if all goes as we expect, probably be somewhere near that figure in 1956. Thus, in the five years since the end of 1951, about 1½ million houses will have been built; and just under 2½ million since the end of the war. Of these, about 2 million are houses built by public authorities for letting.

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  Nevertheless, local authorities still need to build a very large number of houses, more especially for two purposes: first, to rehouse families now living in slums, and, secondly, to provide homes and industrial facilities in new and expanded towns for the excess population of the large congested cities.
  It is against this background that the Government have been examining the problem of housing subsidies. This matter is very complicated and will take a long time to explain. My right hon. Friend the Minister of Housing and Local Government will, therefore, tomorrow be announcing the revised rates for future housing subsidies in England and Wales. It will be our policy in future to concentrate the subsidy as far as possible on the special purposes to which I have referred, namely, slum clearance and providing new homes and industrial facilities for the excess population. Our intention is to abolish the Exchequer housing subsidy for other purposes as soon as possible, and, meanwhile, to reduce it substantially. My right hon. Friend the Secretary of State for Scotland will also be making a statement tomorrow about housing in Scotland.
  As for the other capital expenditure of local authorities, which represents well over £200 million a year, the Government have now decided to reinforce their appeal of last July by a message to all local authorities, asking them not only to observe particular restraint in their current expenditure, but also to review their capital expenditure, with the object of ensuring that, in the financial year 1956–57, it will not exceed the expenditure of the year which ended last March in England and Wales and last May in Scotland.
  The Government are leaving it to the authorities to decide, in the light of local conditions, which of the various capital projects can be delayed with the least damage to the standards of their services. I have made arrangements for the convenience of hon. Members that a Command Paper giving the terms of these important messages, which have already been despatched, will be available in the Vote Office at the end of my speech.
  So far, I have dealt with direct action by the Government on the capital expenditure of local authorities, but I intend to support this action further by monetary
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  measures. It would be wrong to exempt the local authorities from the pressure of interest rates, and, as the Committee knows, I have not hesitated to vary the lending rates of the Local Loans Fund in order to keep them in line with the market. But further action is needed if we are to restore financial responsibility to the local authorities and financial health to the Exchequer.
  Hitherto, the local authorities have used the Exchequer as a source from which they can borrow as it suits them. But within their loan sanctions there has been no limit to the amount of their borrowing from the Exchequer; and they have had the benefit of rates based on Government credit.
  This system has had two disadvantages. First, since the tap is open from which the local authorities can draw the money when their capital commitments mature, they have less incentive to consider, before they incur the commitments, how the money to meet them will be found. Their sense of financial responsibility is also weakened if they borrow at rates which reflect not their own credit but the credit of the Government. Secondly, the system is unhealthy for the Exchequer. The Budget of last April provided £320 million below the line for loans to local authorities this year. In the 29 weeks so far, demands on the Exchequer for this purpose have already amounted to £223 million, an increase of £83 million by comparison with the same period last year.
  This drain is not due to any increase in the capital formation of local authorities. It is due to the fact that, when interest rates have been rising, the local authorities have chosen to concentrate their borrowing on the Public Works Loan Board. As a direct result, the Exchequer has been obliged to raise these large sums by increasing the Floating Debt, and this increase, by the operation of the monetary system, has diminished the pressure on the liquidity of the banks and added to the difficulties of credit control.
  In the next eighteen months or so, however, the capital expenditure of the local authorities may be expected to fall. It is probable that the reduction in housing expenditure will continue; at the same time, if the local authorities

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  succeed, as I am sure they will, in carrying out the Government's wishes in the rest of their programmes, their other capital expenditure will be no larger than it was last year. This contraction of expenditure provides the opportunity for a change in the local authorities' arrangements for raising the capital finance.
  I have, therefore, decided to exercise a check on the volume of Government lending to local authorities. I am not suggesting that any local authority, or class of authority, should be denied the right of access to the Public Works Loan Board. But I have asked the Board, before it grants any advances in future, to put all applicants on inquiry as to their ability to raise the finance on their own credit, either in the stock market or in the mortgage market. I intend that all authorities who can borrow on their own credit shall make full use of the capacity of both markets, with corresponding relief to the demands on the Exchequer.
  This is a serious addition to the burden of unpaid work done by the Public Works Loan Commissioners. I am grateful to them for undertaking it, and I am sure that the Committee will join me in paying a tribute to their public spirit.
  I know that this change implies a substantial modification in the financial practice of the local authorities. Transitional arrangements may well be needed to avoid dislocation, and to ensure that there is no risk of delay in meeting commitments which the authorities, relying on past practice, have already incurred. We are fortunate, however, in having standing machinery for consulting the local authorities about arrangements for borrowing from the Public Works Loan Board; and I intend to use this machinery in order to ensure that the transition is carried out as smoothly as possible.
  At the same time, I propose to change the present practice whereby an authority is charged a rate based on its own credit if it borrows on the market but a rate based on Government credit if it borrows from the Public Works Loan Board. In future, an authority which makes its case for borrowing from the Board will pay a rate reflecting not Government credit, but the credit of local authorities of good standing in the market for loans of comparable periods. The local loans rates
  216
  now in operation are 5 per cent. on advances for periods of five years and over and 4½ per cent. on advances up to five years. Given current market levels, I consider that these rates provide at least a fair starting point for the new policy of local loans rates based on local authority credit, and for the present I do not propose to change them. But the local loans rates will be kept under close review as the new policy develops.
  I have said before, and I say again, that day-to-day fluctuations will be avoided, but the local loans rates must not be insulated from the market and the Treasury will continue to adjust them, in either direction, as may be required to keep them in line with future changes in the level of the relevant rates in the market.

  NATIONALISED INDUSTRIES
  I now come to the nationalised industries. I gave some account on 26th July of the preliminary surveys of capital expenditure and borrowings which the nationalised industries had made at the request of the Government. In particular, I mentioned various measures which the Central Electricity Authority and the Gas Council, together with their area boards, were prepared to take, including the deferment of certain capital projects. I can now give the result.
  The gas industry will make do with older equipment, such as carbonisation plant, for a longer period, and will be able to reduce expenditure this year by something approaching £3 million. The Central Electricity Authority has asked the area electricity boards for an all-round percentage cut in their expenditure in the current year, and even in the priority field of generation they have been able to postpone certain less vital projects while pressing on urgently with the nuclear power programme. The Secretary of State for Scotland has, of course, also been in touch with the Scottish electricity boards on these matters.
  In both industries, what is called "promotional expenditure" is being cut back, and working capital employed in hire-purchase activities, and stocks held for those activities, have been curtailed, as a result both of the boards' own efforts and the Government's restrictions on hire-purchase arrangements.
  These initial measures will produce some useful savings in this year's capital expenditure. In addition, the Committee will be aware that, owing to the funding operations undertaken during the summer, the overdraft limits of the two industries authorised by the Government, have fallen from a peak of £280 million earlier this year to a figure of £130 million.
  But it is only in the period ahead that substantial changes can be made. For that period the nationalised industries have been carrying out a more detailed survey of capital projects as well as of internal resources, the results of which will be incorporated in the investment programmes they are about to submit to the Government. These, as the Committee may be aware, are submitted every year to the Government. The industries are fully conscious that on this occasion their proposals for future investment will necessarily be examined with a much more critical eye than in previous years.
  This examination is not, of course, confined to gas and electricity. I said on 26th July that the coal mines must have their full investment, but I am glad to learn from the National Coal Board that it is pursuing the possibility of some saving by deferring projects such as brickworks and office buildings which do not affect output.
  The modernisation and re-equipment plan for British Railways is at an early stage of its development. It does not, therefore, at present, involve any substantially increased demand on labour and resources; but the British Transport Commission is well aware of the general needs of the economy, and in carrying through its programme will have those needs in mind.

  OTHER PUBLIC AUTHORITIES
  Other public authorities are being asked to co-operate in restraining both current and capital expenditure. My right hon. Friends the Minister of Health and the Secretary of State for Scotland are communicating with hospital boards in this sense. In the hospitals, as in the local authority services, we are not reducing the programmes which have already been announced but, subject to this, we are asking the hospital boards to ensure that only those works are undertaken which
  218
  are of the most urgent and necessary character.
  My right hon. Friend the Minister of Transport and Civil Aviation is going ahead with the roads programme which has been announced, but in present circumstances the Government cannot agree to an extension or acceleration of it, much as we should like to.

  GOVERNMENT BUILDING
  The Government must exercise a similar restraint on their own capital programmes. We have, therefore, examined the present programme of new Government building, and have considered which projects can be postponed with least detriment to our interests and without waste of expenditure. By way of illustration, I will mention one or two of the larger schemes which we have had under review.
  First, the Westminster Hospital site. The Committee will be aware that this site was acquired in 1947 for the purpose of providing a new Colonial Office building at an estimated cost of about £3 million. We have now decided that, for the present, we must discontinue the work at the point it has now reached—that is to say, at basement level. Then there is the site in Horseferry Road, which has been acquired for the erection of new Government offices. These were estimated to cost nearly £3 million. Here, again, we have decided to halt the work at basement level.
  We have also had to look particularly closely at plans for Government building overseas, since this is a field in which savings have a double effect—on the balance of payments as well as on the total of Government expenditure. One major project, which has now reached the sketch-plan stage, is that for a new office in Washington to house the staff of the Embassy and other United Kingdom missions, at a total cost of about £1 million. We had hoped to make a start with this building by the end of 1956, but we have reluctantly decided that we should not be justified, in present circumstances, in proceeding with plans that may involve us in heavy dollar expenditure, if not now then in twelve or eighteen months' time.
  There are a number of other, more long-term projects where we may have to consider spreading expenditure over a

  219
  longer period than we had hoped. One of these is the Royal Mint, in which I have a particular interest because, as Chancellor of the Exchequer, I am ex officio Master, Worker and Warden and I have long wished to see the Mint more adequately housed than it is at present. We shall have to look at the timing of the plans for this and other projects.

  POST OFFICE
  All that I have said indicates the Government's intention to set an example of restraint in their own capital expenditure. It is in this spirit that we have also considered the investment requirements of the Post Office, and the steps necessary to bring Post Office finance into line with current economic needs. My right hon. Friend the Postmaster-General is laying a White Paper today which sets out his plans in detail. In common with other authorities, the Post Office must restrain the rate of its capital investment, and I am sorry to say that it will not be possible for the Postmaster-General to reduce the size of the telephone waiting list quite as quickly as we should have liked; but we shall do all we can.
  It is also necessary to bring charges into closer relationship with the cost of the services offered to each class of subscriber, including a proper allowance for the present high costs of equipment. Many telephone subscribers at present have a telephone for half of what it costs the Post Office to instal and maintain it. The adjustments which my right hon. Friend is proposing will bring us nearer to a position in which the waiting list consists of persons who are prepared to pay the economic price for the service. Together with some necessary increases in postal tariffs, these changes will produce no less than an extra £26 million a year. The Postmaster-General's White Paper will be available in the Vote Office when I sit down.

  PRIVATE INVESTMENT
  I want to say a word about private investment. It would not be in accordance with the Government's policy to try to control directly investment in the private sector. But I look to all those who provide or control the finance for capital expansion by private enterprise to bear well in mind the spirit of the decisions which the Government have
  220
  taken for their own part, and the requests which the Government have made to local authorities, to other public boards and to the nationalised industries. I know that the banks and the Capital Issues Committee took note of my statement on 25th July and have applied it in their scrutiny of applications. I take this opportunity to underline, with fresh emphasis, what I then said, and to make it clear that there can be no question, for the time being, of the authorities relaxing their critical attitude. To the extent that those concerned with investment programmes are willing to enforce a stricter order of priority in giving effect to their projects and to move rather more slowly for the time being in implementing their projects, they will be contributing directly to the stability of our economy and thus ultimately to their own prosperity.

  NATIONAL SAVINGS
  I come now to personal consumption. The measures which I have so far described are directed to controlling the growth of expenditure in the public sector. They need, therefore, to be supplemented by a policy to deal with the growth of personal consumption. Restraint in this field can be achieved by self-discipline no less than by external compulsion; and I am anxious to give every encouragement to those who are willing to forgo a little of the luxury of immediate spending for the sake of the future well-being of their country.
  Last April, I paid tribute to the results of the National Savings Movement's campaign for 2 million new savers, and the great success achieved in raising the level of new savings. I should like to thank hon. and right hon. Members on both sides of the Committee for the part they have played. I renew my thanks to the Movement, its leaders and workers alike; and I urge them to remember that their efforts are even more important today. If hon. Members will turn to Table 27 of this year's National Income Blue Book they will see the great rise in personal savings, under this and the last Administration, since 1951. In particular, the amounts invested through the National Savings Movement increased by £86 million in 1954, and the first nine months of 1955 show a further increase of some £80 million.
  The Committee are aware that a new Defence Bond will be available on and after the 1st November, with the same bonus and limit on holdings as the present Bond but carrying interest at 4 per cent. I have also looked at the National Savings certificate very closely in order to be sure that it does all that it can to attract real savings. Lord Mackintosh has represented to me that an increase in the limit of holdings would be of very timely assistance to the Savings Movement. The Government have, therefore, decided to give the Movement this encouragement, and to increase the maximum permitted holding of certificates of the current issue from the present figure of 1,000 units or £750, to 1,200 units or £900. This measure, like the new Defence Bond, will come into effect on 1st November. These are fresh and attractive incentives, and I am confident that the National Savings Movement will rise to both the needs and opportunities of the present time, backed by public opinion and by hon. Members on both sides of the Committee.

  CUSTOMS AND EXCISE
  I am satisfied, however, that some direct restraint on consumption is also required. For this purpose there is one revenue measure which lies ready to hand and is immediate in its effect—an increase in the Purchase Tax. I therefore propose a general increase in the existing rates of Purchase Tax. These are at present 25 per cent., 50 per cent. and 75 per cent.; and I propose that they should be 30 per cent., 60 per cent. and 90 per cent. respectively—an increase of one-fifth—subject to certain exceptions which I shall mention in a moment. I am also taking the opportunity to modify the tax, bringing into its ambit certain goods which at present lie outside and reducing its impact in some cases where industry is undoubtedly suffering from its effects. Two of the changes are major.
  The first affects a range of kitchenware, tableware and other household goods which were, for the most part, at one time subject to tax but have for some years been exempt. The general case for an increase in Purchase Tax applies equally to these goods; moreover, the exemptions are abitrary in their nature, and give rise to a number of anomalies
  222
  which are a source of frequent friction with the trades concerned. This range of articles will now be brought within the Purchase Tax field, and made subject to the lowest rate of 30 per cent.
  The second major change relates to the D allowance schemes, which now apply to clothing and footwear, textiles, furs and furniture. The levels at which the D figures now stand have for some time been too high, and have resulted in a far larger range of items becoming exempt from tax than was the intention when the levels were fixed. This situation was thus, in any case, overdue for revision. Moreover, with the D levels in mind, manufacturers at present tend to concentrate design and production on lower quality goods for the home market. The Government have, therefore, decided to abolish the D schemes, in order to open up the home market in quality goods, and so provide a better base for the export market. We shall, therefore, be encouraging exports and thereby assisting the balance of payments. I believe that traders in general will welcome this change.
  While abolishing the D schemes, however, I am not proposing to apply the full rigour of the new rates of Purchase Tax to the articles affected. Apart from fur garments, which will remain chargeable at 50 per cent. but with no D allowance, the whole range of articles now affected by the D schemes will be made liable to tax at rates of 5 per cent. or 10 per cent., corresponding broadly to the previous rates of 25 per cent. or 50 per cent. with D allowances. For example, headgear—that is, hats—will be charged at 10 per cent. This and other details will be found set out at length in the White Paper. These low rates cannot be held to constitute any serious burden on the industry or on the consumer, and the general financial effect of the changes will be that the yield from textiles and clothing will not be significantly increased.
  The other adjustments of Purchase Tax which I propose to make—these are important adjustments—will give some help to the silverware and cut glass industries, by reducing the amount of tax paid on most of these craft products. The results of all these alterations in Purchase Tax will be a simplification which will give much more freedom to the designer and

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  much more opportunity to the exporter. They therefore fit into the general pattern of the needs of the moment, and I recommend them to the Committee. They will come into effect as from tomorrow, and should produce in a full year additional revenue of approximately £75 million. Their yield in this year will be £15 million. Their effect on the cost of living index will be an increase of a little under 1 point.

  INLAND REVENUE
  Now I have certain proposals to make in the field of direct taxation. The Finance Bill will be very short, and will involve little detailed amendment of the tax codes. When hon. Members examine the Resolutions they will see that there will rightly be opportunity for discussion of various aspects of the Purchase Tax, and of the other measures which I am about to mention; but there will be no need for a General Resolution. I must, however, include provisions to deal with two subsidiary matters which are related to the main purpose of the Bill.
  The first of these—and they are comparatively minor, but I will mention them—will deal with an avoidance device known as "dividend stripping," operated by certain financial concerns, by which the liquid reserves of companies are extracted free of Surtax at considerable loss to the Revenue. I cannot allow either this practice or this loss to continue.
  Secondly, I propose, subject to conditions, to extend the relief from Surtax which is allowed to Lloyd's underwriters on profits which they pay into special reserve funds. Lloyd's is an important source of overseas income, and I hope this measure will enable them to maintain and expand their foreign business in the face of adverse circumstances, so as to assist our balance of payments.

  MAJOR PROPOSALS
  I now come to something more important. In considering whether I need do anything further in the field of direct taxation, I am governed by the conclusion reached in the earlier part of my speech. I will repeat what I said. "The conclusion is inescapable that we must design our policies so that they face up to, and cope with, the danger to the economy—and especially to our competitive power—of a further expansion of
  224
  incomes and of consumer demand." The Committee will also remember that I said that our policy, which all sections of the community must support, must combine incentive with restraint.
  I do not propose to single out personal incomes, not even the highest personal incomes, for further taxation or for some reduction of the relief from taxation which I have already given them. Personal incentives, especially to those who give a lead on the shop floor or in the office, are hard enough to give, with taxation at its present level, and they should not lightly be withdrawn.
  In the case of death duties also, the rates are already very high; nor, indeed, would any practicable change in these duties make any direct contribution to the solution of our problem, which, as I have said, requires an early reduction in the call which we are making on our resources.
  There remain the taxes on profits. It is clear that the leaders of industry, large and small, as well as of organised labour, realise that what may be described as a "Demand Race" will price us out of overseas markets, unless we take care. This is true whether the demand derives from increased wages or from bigger incomes resulting from a considerable enlargement of the distribution of profits. It is true that there are reasons for some of the increased wage claims. It is true also that many of the increased dividends have been due to a pent-up restraint over a number of years. Provided that productivity per man increases at least in proportion, there are great advantages in higher wages and there is positive virtue in making profits.
  Profits are an indication both of the efficiency of production and of the directions in which economic changes are needed. Unless the economy incorporates some index by which to evaluate the reward for efficiency, and to distinguish between the results of greater and smaller success in the business of risk-taking, it will soon lose the powers of adaptation and innovation which are essential to our survival. Nevertheless, at a time when our resources are overloaded and the demand for the products of industry exceeds the supply, the level of profits can contribute to this excess demand. It is, therefore, appropriate that profits should make some contribution to the

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  effort of restraint which is required of all sections of the community.
  I spend most of my time looking forward; but when I look back I feel thankful that on more than one occasion I have been able to reduce the general burden of industrial taxation, which we have only recently got below the high peaks of war-time necessity. The Committee should recall the favourable adjustments we have made in respect of industrial taxation. In my Budget of 1954, when I was criticised for being dull and unadventurous, I gave industry the advantage of the investment allowance. Certainly, few critics at that time raised their voices; in fact, I was pressed to encourage industrial investment more, as I was in my last Budget. We do not propose to withdraw the investment allowance. We propose to rely on the good sense of managements and on the credit squeeze to moderate the pace of investment.
  I have, therefore, come to the conclusion that if we are to tackle excess demand as stimulated by the general level of profits I must deal with the difficulty by other means. In the United States, for example, they find it necessary, in the interest of the community, to check undue fortuitous increases in personal fortunes. I have studied the arguments of the minority of the Royal Commission in favour of a capital gains tax; I confess that I am far from convinced by them. In any case, I am sure that it would be premature for the Government to jump to conclusions about a capital gains tax. It would also be most unwise to revert to any conception of an Excess Profits Tax or a special contribution or levy. I have, therefore, turned my attention to the existing profits tax.
  This tax is now charged at two rates—22½ per cent. on distributions and 2½ per cent, on amounts put to reserve. The whole question of its structure, and of the taxation of corporations generally, has recently been exhaustively reviewed by the Royal Commission. The majority Report recommends that the existing differential rates should be replaced by a single flat rate; the Minority propose a wholly new system of taxing companies.
  I was attracted at first by the majority recommendation; but on examination I have found that it would be very variable
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  in its incidence and have the most anomalous, and in some cases, most surprising results. For example, companies which distribute a high proportion of their profits would gain, while those which put a large proportion to reserve would lose—and the latter include a number of new and important industries. Therefore, I have decided, at any rate for the present, that such a change would not be directed to our present needs. Nor am I ready to make up my mind on the permanent alterations in the structure of the tax recommended by the Royal Commission, and so I must do my best within the existing framework of the tax.
  I have considered whether I should increase the rates of Profits Tax both on distributed and on undistributed profits. I am reluctant to increase the rates specifically charged on amounts put to reserve, since to do so would tend to impede the necessary replacement of capital assets and to discourage future investment rather than current consumption.
  Here, our long-term interests diverge from our more immediate needs. I realise that the tax on distributions has to be paid by the company. Nevertheless, I consider that, in present circumstances, when increased dividends may imply increased consumption, there must be an increased tax on the profits which companies distribute.
  I have, therefore, decided to increase the rate of Profits Tax on distributed profits from 22½ per cent. to 27½ per cent., as the measure which is most appropriate to our requirements. The increase will apply to accounting periods beginning on or after 1st November, and, in the case of accounting periods which overlap that date, to so much of the period as falls on or after that date. As on previous occasions when the rate has been increased, there will be provisions for splitting companies' accounts, and for ensuring that a company cannot avoid the increased rate of tax by declaring on or after today an increased dividend for a period before 1st November. The yield in the current financial year will be negligible—naturally; that is always the case with Profits Tax—but eventually, in a full year, it will approach £40 million.
  I trust that the prospect of this additional charge on profits, combined with the effect on the whole economy of the

  227
  sum of the measures which I am proposing, will exert a significant degree of restraint on the amounts actually distributed.

  CONCLUSIONS
  These, then, are the measures which the Government propose to restore the balance of the economy. We must not under-estimate our achievement over the last four years. We have removed restrictions and controls and restored liberty of choice; we have opened markets, widened the channels of trade and moved nearer the freeing of payments. Now, if we show responsibility at home we shall prove ourselves worthy of the position of leadership in the Commonwealth and among the nations of Western Europe.
  Moreover, the Committee may observe that this Government has always taken action in time and has looked forward. It is our conviction that by taking action of this sort in time, we can look forward not only to many years of successful government but to a continuance of our standard of living and to the happiness of our people if all combine in unity in carrying out this task.
  1. Purchase Tax
  Motion made,
  That as from the twenty-seventh day of October, nineteen hundred and fifty-five—

  (a) section nine of the Finance Act, 1952 (which provides for reducing or discharging purchase tax on certain wearing apparel, textiles and domestic furniture by making a deduction from wholesale value), shall be repealed;

  (b) subject to any order of the Treasury under section twenty-one of the Finance Act, 1948, Part I of the Eighth Schedule to that Act shall be amended as provided by the Table appended to this Resolution, but this paragraph—

  (i) shall not authorise the amendments in paragraphs 1 to 5 of that Table unless provision is made by any Act of the present Session relating to finance for the repeal of the said section nine of the Finance Act, 1952, at least so far as it applies to all descriptions of wearing apparel, textile articles, soft furnishings and bedding, or for its repeal to that extent subject to a saving for articles made wholly or partly of fur-skin, and

  (ii) shall not authorise the amendments in paragraph 6 of that Table unless provision is so made for the repeal of the said section nine at least so far as it applies to all descriptions of furniture;

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  (c) subject as aforesaid, in Part I of the said Eighth Schedule (with any amendments authorised by the foregoing provisions of this Resolution)—

  (i) each rate of 25 per cent. in any Group shall be increased to 30 per cent.,

  (ii) each rate of 50 per cent. in Group 11 or any following Group shall be increased to 60 per cent., and

  (iii) each rate of 75 per cent. in any Group shall be increased to 90 per cent.,

  but this paragraph shall not authorise any increase under one of the foregoing subparagraphs which does not apply equally to all rates mentioned in that sub-paragraph;
  and in paragraph (a) of subsection (1) of the said section twenty-one of the Finance Act, 1948, the reference to the rates of tax provided for by the enactments relating to purchase tax shall include not only the rates provided for by this Resolution but also any other rate not exceeding the highest rate at which tax is for the time being chargeable in respect of goods of any class.

  TABLE
  1.—(1) In Groups 1 and 3 (which comprise garments, footwear and gloves) each rate of 25 per cent. shall be reduced to 5 per cent., and in Group 2 (which comprises headgear) each rate of 25 per cent. shall be reduced to 10 per cent.
  (2) Articles of headgear suitable only for babies' wear and gloves suitable only for babies' wear shall cease to be chargeable goods.
  2. Handkerchiefs, scarves, shawls and braces shall be chargeable under Group 4 (which comprises haberdashery) at 5 per cent.
  3.—(1) Paragraph (a) of Group 5 (which charges textile articles containing wool at 50 per cent.) shall be omitted.
  (2) Cushions, cushion pads, pillows, bolsters, overlay mattresses and mattress shapes, being articles of a kind used for domestic purposes, shall be chargeable under Group 5 at 5 per cent. but subject to an exemption for air pillows and cushions and water beds, pillows and cushions, being articles of that kind.
  4.—(1) All goods comprised in paragraph (a) of Group 6 (which relates to tissues and fabrics) shall be chargeable at 10 per cent. under that Group and the goods so comprised shall include tissues and fabrics of whatever material not exceeding twelve inches in width and not comprised in any of the following paragraphs of that Group.
  (2) The goods comprised in Group 6 as so extended shall not be chargeable as haberdashery under Group 4, and the material referred to in Group 6 as woollen material shall be known as Class A material.
  5. Sub-paragraph (iii) of paragraph (b) of Group 9 (which charges rugs other than fur rugs and floor rugs at 50 per cent.) shall be omitted.
  6.—(1) Furniture of a kind used for domestic purposes and of the following descriptions shall be chargeable under Group 11 at 5 per cent.:

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  Wardrobes, cupboards, tallboys, cabinets other than refrigerator cabinets, chests, chests of drawers, dressing chests, sideboards, bureaux, bookcases, bookcase units, sets of shelves (but not including any of the above-mentioned articles which are made of metal);
  Tables, including writing tables and dressing tables, and trolleys;
  Chairs, settees, stools, pouffes and other seats;
  Divans, bunks, ottomans, spring-bases, box-spring mattresses and other mattresses, not being overlay mattresses;
  Headboards and bedstead ends;
  Fireside curbs.
  (2) Babies' high chairs, babies' cradles and stands therefore, cots and playpens shall cease to be chargeable goods.
  7.—(1) Goods of the following descriptions shall (so far as not already chargeable) be chargeable goods and, subject to the provisions of this paragraph, shall be chargeable at 30 per cent.:—
  Vessels designed for use primarily as containers for food or drink in the course of its storage, preparation or consumption, lids for use with vessels so designed, serving trays, bread boards, bowls and jugs and ewers;
  Household brushes, brooms and mops;
  Dustbins, buckets and pails, and lids for dustbins, buckets and pails;
  Pedal-operated sanitary bins, coal hods and coal scuttles;
  Baths, wash tubs, wash boards, ironing boards, shields and stands for smoothing irons or pressing irons, clothes line posts, clothes pegs, clothes props and clothes airers (other than heated airers);
  Pot scourers and steel wool;
  Pastry boards and rolling pins;
  Coal or cinder sieves and sifters;
  Electric kettles and other cooking utensils incorporating heating elements;
  Smoothing irons and pressing irons;
  Interval timers incorporating an alarum mechanism;
  Kitchen scales and weights therefor, kitchen weighing machines, hand operated wringers and hand operated mangles;
  Shopping-baskets and shopping-bags, not being baskets or bags fitted with lids or any other means of closing them.
  (2) The charge of 30 per cent. on goods becoming chargeable under this paragraph shall be subject to any higher charge applicable under any Group except that sub-paragraph (i) of paragraph (a) of Group 12 (which charges articles designed for operation by electricity or gas at a higher rate than other articles) shall not apply to electric kettles and other cooking utensils incorporating heating elements or to smoothing irons or pressing irons.
  8. Glassware of cut glass falling within Group 11 shall be included in paragraph (a) of that Group and paragraph (d) of that Group
  230
  (which charges such glassware at a higher rate than the rate in the said paragraph (a)) shall be omitted.
  9.—(1) At the end of paragraph (b) of Group 12 (which comprises space heating appliances and heaters and boilers suitable for operation from electric or gas mains) for the words "suitable for operation from electric or gas mains" there shall be substituted the words "designed for operation by electricity or gas."
  (2) Appliances of the following descriptions shall not be chargeable goods:—
  Appliances incorporating electric fans or electric pumps or both such fans and such pumps, being—

  (a) solid fuel burning or oil burning space or water heaters or oil burners of a kind used for space or water heaters, or

  (b) radiators or convectors for connection to hot water or steam central heating systems.

  10.—(1) In Group 25 (which charges pictures, figures, busts, reliefs, vases and similar articles) references to vases shall be omitted.
  (2) Frames for pictures, frames and stands for photographs and similar frames and stands shall, subject to the exemption in paragraph (g) of Group 11 (which relates to wooden frames of moulding not less than three inches wide), be included in Group 25 and shall be chargeable at 30 per cent. under that Group.
  (3) The tableware, kitchenware and other articles of given materials excluded from Group 25 by paragraph (g) thereof shall include such articles whatever the material of which they are made.
  11.—(1) No goods shall be chargeable under Groups 27 and 28 (which relate to goldsmiths' and silversmiths' wares and articles of semiprecious materials).
  (2) Group 26 (which relates to jewellery) shall include the following entries:—

  Articles of personal adornment and other articles of a kind worn on the person, being articles made wholly or partly of gold, silver or other precious metal (not including base metal which is coated or plated with precious metal)

  60 per cent.

  Trophy cups, bowls and similar articles of a kind awarded as prizes

  30 per cent.

  —[Mr. R. A. Butler.]
  The CHAIRMAN put the Question there-upon forthwith, pursuant to Standing Order No. 86 (Ways and Means Motions and Resolutions):—
  The Committee divided: Ayes 314, Noes 227.

  Division No. 30.]

  AYES

  [5.2 p.m.

  Agnew, Cmdr. P. G.

  Erroll, F. J.

  Kirk, P. M.

  Aitken, W. T.

  Farey-Jones, F. W.

  Lagden, G. W.

  Alport, C. J. M.

  Fell, A.

  Lambert, Hon. G.

  Amery, Julian (Preston, N.)

  Finlay, Graeme

  Lambton, Viscount

  Amory, Rt. Hn. Heathcoat (Tiverton)

  Fisher, Nigel

  Lancaster, Col. C. G.

  Arbuthnot, John

  Fleetwood-Hesketh, R. F.

  Langford-Holt, J. A.

  Armstrong, C. W.

  Fort, R.

  Leather, E. H. C.

  Ashton, H.

  Foster, John

  Leavey, J. A.

  Astor, Hon. J. J.

  Fraser, Hon. Hugh (Stone)

  Leburn, W. G.

  Atkins, H. E.

  Fraser, Sir Ian (M'cmbe & Lonsdale)

  Legh, Hon. Peter (Petersfield)

  Baldock, Lt.-Cmdr. J. M.

  Freeth, D. K.

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

  Baldwin, A. E.

  Galbraith, Hon. T. G. D.

  Lindsay, Hon. James (Devon, N.)

  Balniel, Lord

  Gammans, L. D.

  Lindsay, Martin (Solihull)

  Banks, Col. C.

  Garner-Evans, E. H.

  Linstead, Sir H. N.

  Barber, Anthony

  George, J. C. (Pollok)

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

  Barlow, Sir John

  Glover, D.

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

  Barter, John

  Godber, J. B.

  Lloyd, Rt. Hon. Selwyn (Wirral)

  Baxter, Sir Beverley

  Gomme-Duncan, Col. A.

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

  Beamish, Maj. Tufton

  Gough, C. F. H.

  Longden, Gilbert

  Beattie, C.

  Gower, H. R.

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

  Bell, Philip (Bolton, E.)

  Graham, Sir Fergus

  Lucas, Sir Jocelyn (Portsmouth, S.)

  Bell, Ronald (Bucks, S.)

  Grant, W. (Woodside)

  Lucas, P. B. (Brentford & Chiswick)

  Bennett, Dr. Reginald

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

  Lucas-Tooth, Sir Hugh

  Bevins, J. R. (Toxteth)

  Green, A.

  McAdden, S. J.

  Bidgood, J. C.

  Gresham Cooke, R.

  McCallum, Major Sir Duncan

  Biggs-Davison, J. A.

  Grimston, Hon. John (St. Albans)

  Macdonald, Sir Peter

  Birch, Rt. Hon. Nigel

  Grimston, Sir Robert (Westbury)

  Mackeson, Brig. Sir Harry

  Bishop, F. P.

  Grosvenor, Lt.-Col. R. G.

  McKibbin, A. J.

  Black, C. W.

  Gurden, Harold

  Mackie, J. H. (Calloway)

  Body, R. F.

  Hall, John (Wycombe)

  McLaughlin, Mrs. P.

  Boothby, Sir Robert

  Hare, Hon. J. H.

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

  Bossom, Sir A. C.

  Harris, Frederic (Croydon, N. W.)

  MacLeod, John (Ross & Cromarty)

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

  Harris, Reader (Heston)

  Macmillan, Maurice (Halifax)

  Boyle, Sir Edward

  Harrison, A. B. C. (Maldon)

  Macpherson, Niall (Dumfries)

  Braine, B. R.

  Harrison, Col. J. H. (Eye)

  Maddan, Martin

  Braithwaite, Sir Albert (Harrow, W.)

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

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

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

  Harvey, Ian (Harrow, E.)

  Maitland, Hon. Parick (Lanark)

  Brooke, Rt. Hon. Henry

  Harvey, John (Walthamstow, E.)

  Manningham-Buller, Rt. Hn. Sir R.

  Brooman-White, R. C.

  Harvie-Watt, Sir George

  Markham, Major Sir Frank

  Browne, J. Nixon (Craigton)

  Hay, John

  Marlowe, A. A. H.

  Bryan, P.

  Head, Rt. Hon. A. H.

  Marples, A. E.

  Buchan-Hepburn, Rt. Hon. P. G. T.

  Heald, Rt. Hon. Sir Lionel

  Marshall, Douglas

  Bullus, Wing Commander E. E.

  Heath, Edward

  Mathew, R.

  Burden, F. F. A.

  Henderson, John (Cathcart)

  Maude, Angus

  Butcher, Sir Herbert

  Hicks-Beach, Maj. W. W.

  Maudling, Rt. Hon. R.

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

  Hill, Rt. Hon. Charles (Luton)

  Mawby, R. L.

  Carr, Robert

  Hill, Mrs. E. (Wythenshawe)

  Medlicott, Sir Frank

  Cary, Sir Robert

  Hill, John (S. Norfolk)

  Milligan, Rt. Hon. W. R.

  Channon, H.

  Hirst, Geoffrey

  Molson, A. H. E.

  Chichester-Clark, R.

  Hope, Lord John

  Monckton, Rt. Hon. Sir Walter

  Clarke, Brig.Terence (Portsmth, W.)

  Hopkinson, Rt. Hon. Henry

  Moore, Sir Thomas

  Cole, Norman

  Hornsby-Smith, Miss M. P.

  Morrison, John (Salisbury)

  Conant, Maj. Sir Roger

  Horobin, Sir Ian

  Mott-Radclyffe, C. E.

  Cooper, Sqn. Ldr, Albert

  Horsbrugh, Rt. Hon. Dame Florence

  Nabarro, G. D. N.

  Cooper-Key, E. M.

  Howard, Gerald (Cambridgeshire)

  Nairn, D. L. S.

  Cordeaux, Lt.-Col. J. K.

  Howard, Hon. Greville (St. Ives)

  Neave, Airey

  Corfield, Capt. F. V.

  Howard, John (Test)

  Nicholls, Harmar

  Craddock, Beresford (Spelthorne)

  Hudson, Sir Austin (Lewisham, N.)

  Nicholson, Godfrey (Farnham)

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

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

  Nield, Basil (Chester)

  Crosthwaite-Eyre, Col. O. E.

  Hughes Hallett, Vice-Amiral J.

  Noble, Comdr. A. H. P.

  Crouch, R. F.

  Hughes-Young, M. H, C.

  Nugent, G. R. H.

  Hulbert, Sir Norman

  Nutting, Rt. Hon. Anthony

  Crowder, Sir John (Finchley)

  Hurd, A. R.

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

  Crowder, Petre (Ruislip—Northwood)

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

  Orr, Capt. L. P. S.

  Cunningham, S. Knox

  Hyde, Montgomery

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

  Currie, G. B. H.

  Hylton-Foster, Sir H. B. H.

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

  Dance, J. C. G.

  Iremonger, T. L.

  Osborne, C.

  D'Avigdor-Goldsmid, Sir Henry

  Irvine, Bryant Godman (Rye)

  Page, R. G.

  Deedes, W. F.

  Jenkins, Robert (Dulwich)

  Panned, N. A. (Kirkdale)

  Digby, S. Wingfield

  Jennings, J. C. (Burton)

  Partridge, E.

  Dodds-Parker, A. D.

  Peake, Rt. Hon. O.

  Doughty, C. J. A.

  Jennings, Sir Roland (Hallam)

  Peyton, J. W. W.

  Drayson, G. B.

  Johnson, Dr. Donald (Carlisle)

  Pickthorn, K. W. M.

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

  Johnson, Eric (Blackley)

  Pilkington, Capt. R. A.

  Duncan, Capt. J. A. L.

  Johnson, Howard (Kemptown)

  Pitman, I. J,

  Duthie, W. S.

  Jones, A. (Hall Green)

  Pott, H. P.

  Eccles, Rt. Hon. Sir D. M.

  Joynson-Hicks, Hon. L. W.

  Powell, J. Enoch

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

  Kaberry, D.

  Price, David (Eastleigh)

  Eden, J. B. (Bournemouth, West)

  Keegan, D.

  Price, Henry (Lewisham, W.)

  Elliot, Rt. Hon. W. E.

  Kerby, Capt. H. B.

  Prior-Palmer, Brig. O. L.

  Emmet, Hon. Mrs. Evelyn

  Kerr, H. W.

  Profumo, J. D.

  Errington, Sir Eric

  Kershaw, J. A.

  Raikes, Sir Victor

  232

  233

  Rawlinson, P. A. G.

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

  Tweedsmuir, Lady

  Redmayne, M.

  Stanley, Capt. Hon. Richard

  Vaughan-Morgan, J. K.

  Rees-Davies, W. R.

  Stevens, Geoffrey

  Vickers, Miss J. H.

  Remnant, Hon. P.

  Steward, Harold (Stockport, S.)

  Vosper, D. F.

  Renton, D. L. M.

  Steward, Sir William (Woolwich, W.)

  Wakefield, Edward (Derbyshire, W.)

  Ridsdale, J. E.

  Stewart, Henderson (Fife, E.)

  Wakefield, Sir Wavell (St. M'lebone)

  Rippon, A. G. F.

  Stoddart-Scott, Col. M.

  Walker-Smith, D. C.

  Roberts, Peter (Heeley)

  Storey, S.

  Wall, Major Patrick

  Robertson, Sir David

  Stuart, Rt. Hon. James (Moray)

  Ward, Hon. George (Worcester)

  Robinson, Sir Roland (Blackpool, S.)

  Studholme, H. G.

  Ward, Miss I. (Tynemouth)

  Robson-Brown, W.

  Summers, G. S. (Aylesbury)

  Waterhouse, Capt. Rt. Hon. C.

  Rodgers, John (Sevenoaks)

  Sumner, W. D. M. (Orpington)

  Watkinson, H. A.

  Roper, Sir Harold

  Taylor, Sir Charles (Eastbourne)

  Webbe, Sir H.

  Ropner, Col. Sir Leonard

  Taylor, William (Bradford, N.)

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

  Russell, R. S.

  Teeling, W.

  Williams, Gerald (Tonbridge)

  Sandys, Rt. Hon. D.

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

  Williams, Paul (Sunderland, S.)

  Schofield, Lt.-Col. W.

  Thomas, Leslie (Canterbury)

  Williams, R. Dudley (Exeter)

  Scott-Miller, Cmdr. R.

  Thompson, Kenneth (Walton)

  Wilson, Geoffrey (Truro)

  Sharples, Maj. R. C.

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

  Wood, Hon. R.

  Shepherd, William

  Thorneycroft, Rt. Hon. P.

  Woollam, John Victor

  Smyth, Brig. J. G. (Norwood)

  Thornton-Kemsley, C. N.

  Yates, William (The Wrekin)

  Soames, Capt. C.

  Tiley, A. (Bradford, W.)

  Spearman, A. C. M.

  Tilney, John (Wavertree)

  TELLERS FOR THE AYES:

  Speir, R. M.

  Touche, Sir Gordon

  Mr. Wilts and Mr. Robert Allan.

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

  Turton, Rt. Hon. R. H.

  NOES

  Ainsley, J. W.

  Ede, Rt. Hon. J. C.

  King, Dr. H. M.

  Albu, A. H.

  Edelman, M,

  Lawson, G. M.

  Allaun, F. (Salford, E.)

  Edwards, Rt. Hon. Ness (Caerphilly)

  Ledger, R. J.

  Anderson, Frank

  Edwards, W. J. (Stepney)

  Lee, Frederick (Newton)

  Attlee, Rt. Hon. C. R.

  Evans, Albert (Islington, S.W.)

  Lee, Miss Jennie (Cannock)

  Awbery, S. S.

  Evans, Edward (Lowestoft)

  Legge-Bourke, Maj. E. A. H.

  Bacon, Miss Alice

  Fernyhough, E.

  Lever, Harold (Cheetham)

  Balfour, A.

  Fienburgh, W.

  Lewis, Arthur

  Bartley, P.

  Fletcher, Eric

  Lindgren, G. S.

  Bellenger, Rt. Hon. F. J.

  Forman, J. C.

  Lipton, Lt.-Col. M.

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

  Fraser, Thomas (Hamilton)

  Logan, D. G.

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

  Freeman, Peter

  MacColl, J. E.

  Benson, G.

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

  McGhee, H. G.

  Beswick, F.

  Gibson, C. W.

  McGovern, J.

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

  Gooch, E. G.

  McInnes, J.

  Blackburn, F.

  Gordon Walker, Rt. Hon. P. C.

  McKay, John (Wallsend)

  Blenkinsop, A.

  Greenwood, Anthony

  McLeavy, F.

  Blyton, W. R.

  Grenfell, Rt. Hon. D. R.

  MacMillan, M. K. (Western Isles)

  Boardman, H.

  Crey, C. F.

  MacPherson, Malcolm (Stirling)

  Bottomley, Rt. Hon. A. G.

  Griffiths, David (Rother Valley)

  Mahon, S.

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

  Griffiths, Rt. Hon. James (Llanelly)

  Mallalieu, E. L. (Brigg)

  Bowen, E. R. (Cardigan)

  Griffiths, William (Exchange)

  Mann, Mrs. Jean

  Bowles, F. G.

  Grimond, J.

  Marquand, Rt. Hon. H. A.

  Boyd, T, C.

  Hall, Rt. Hn. Glenvil (Colne Valley)

  Mason, Roy

  Braddock, Mrs. Elizabeth

  Hamilton, W. W.

  Mayhew, C. P.

  Brock way, A, F.

  Hannan, W.

  Mellish, R. J.

  Broughton, Dr. A. D. D.

  Harrison, J. (Nottingham, N.)

  Messer, Sir F.

  Brown, Rt. Hon. George (Belper)

  Hastings, S.

  Mitchison, G. R.

  Brown, Thomas (Ince)

  Hayman, F. H.

  Monslow, W.

  Burke, W. A.

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

  Moody, A. S.

  Butler, Herbert (Hackney, C.)

  Herbison, Miss M.

  Morris, Percy (Swansea, W.)

  Butler, Mrs. Joyce (Wood Green)

  Hewitson, Capt. M.

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

  Carmichael, J.

  Hinchingbrooke, Viscount

  Mort, D. L.

  Castle, Mrs. B. A.

  Hobson, C. R.

  Moss, R.

  Champion, A. J.

  Holman, P.

  Moyle, A.

  Chapman, W. D.

  Holmes, Horace

  Mulley, F. W.

  Clunie, J.

  Holt, A. F.

  Neal, Harold (Bolsover)

  Coldrick, W.

  Houghton, Douglas

  Noel-Baker, Francis (Swindon)

  Collins, V. J.(Shoreditch & Finsbury)

  Hoy, J. H.

  Oram, A. E.

  Cove, W. G.

  Hubbard, T. F.

  Orbach, M.

  Craddock, George (Bradford, S.)

  Hughes, Cledwyn (Anglesey)

  Oswald, T.

  Owen, W. J.

  Cronin, J. D.

  Hughes, Hector (Aberdeen, N.)

  Padley, W. E.

  Crossman, R. H. S.

  Hunter, A. E.

  Paling, Will T. (Dewsbury)

  Cullen, Mrs. A.

  Hynd, H. (Accrington)

  Palmer, A. M. F.

  Daines, P.

  Hynd, J. B. (Attercliffe)

  Pannell, Charles (Leeds, W.)

  Dalton, Rt. Hon. H.

  Irvine, A. J. (Edge Hill)

  Pargiter, G. A.

  Davies,Rt.Hon.Clement(Montgomery)

  Irving, S. (Dartford)

  Parkin, B. T.

  Davies, Ernest (Enfield, E.)

  Isaacs, Rt. Hon. G. A.

  Paton, J.

  Davies, Harold (Leek)

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

  Pearson, A.

  Davies, Stephen (Merthyr)

  Johnson, James (Rugby)

  Peart, T. F.

  Deer, G.

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

  Price, J. T. (Westhoughton)

  de Freitas, Geoffrey

  Jones, Jack (Rotherham)

  Probert, A. R.

  Delargy, H. J.

  Jones, J. Idwal (Wrexham)

  Proctor, W. T.

  Dodds, N. N.

  Jones, T. W. (Merioneth)

  Pryde, D. J.

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

  Kenyon, C.

  Rankin, John

  Dye, S.

  Key, Rt. Hon. C. W.

  Reeves, J.

  234

  235

  Rhodes, H.

  Strachey, Rt. Hon. J.

  Wheeldon, W. E.

  Robens, Rt. Hon. A.

  Strauss, Rt. Hon. George (Vauxhall)

  White, Mrs. Eirene (E. Flint)

  Roberts, Albert (Normanton)

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

  White, Henry (Derbyshire, N.E.)

  Roberts, Goronwy (Caernarvon)

  Summerskill, Rt. Hon. E.

  Wigg, George

  Robinson, Kenneth (St. Pancras, N.)

  Swingler, S. T.

  Wilkins, W. A.

  Ross, William

  Sylvester, G. O.

  Willey, Frederick

  Royle, C.

  Taylor, Bernard (Mansfield)

  Williams, David (Neath)

  Shinwell, Rt. Hon. E.

  Taylor, John (West Lothian)

  Williams, Ronald (Wigan)

  Silverman, Julius (Aston)

  Thornton, E.

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

  Silverman, Sydney (Nelson)

  Timmons, J.

  Williams, W. R. (Openshaw)

  Simmons, C. J. (Brierley Hill)

  Tomney, F.

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

  Skeffington, A. M.

  Turner-Samuels, M.

  Wilson, Rt. Hon. Harold (Huyton)

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

  Usborne, H. C.

  Winterbottom, Richard

  Slater, J. (Sedgefield)

  Viant, S. P.

  Woodburn, Rt. Hon. A.

  Smith, Ellis (Stoke, S.)

  Wade, D. W.

  Yates, V. (Ladywood)

  Snow, J. W.

  Warbey, W. N.

  Zilliacus, K.

  Sparks, J. A.

  Watkins, T. E.

  Steele, T.

  Weitzman, D.

  TELLERS FOR THE NOES:

  Stewart, Michael (Fulham)

  Wells, Percy (Faversham)

  Mr. Arthur Allen and

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

  Wells, William (Walsall, N.)

  Mr. G. H. R. Rogers.

  Stones, W. (Consett)

  West, D. G.

  The CHAIRMAN then proceeded successively to put forthwith the Question on each further Motion made by a Minister of the Crown, save the last Motion.
  2. Increase of profits tax on distributed profits
  Motion made, and Question,
  That, as respects chargeable accounting periods ending after the end of October, nineteen hundred and fifty-five, the profits tax payable on distributed profits (and sums treated as such) shall be increased by—

  (a) substituting twenty-seven and a half per cent. for twenty-two and a half per cent, as the rate of any tax not being a distribution charge; and

  (b) so increasing the rate of any relief for non-distribution that the difference between the rate of any such tax and that of any such relief remains at two and half per cent.; and

  (c) adjusting the rates of distribution charges to take account of reliefs for nondistribution given at the new rate;

  and in connection therewith provision shall be made (whether imposing a further charge to tax or not) for the following matters, that is to say, for dividing, either generally or for particular purposes, chargeable accounting periods falling partly before and partly after the end of that month, for treating wholly or partly as a distribution for a chargeable accounting period ending after the end of that month dividends declared on or after the twenty-sixth day of that month and for adjusting the relief to be given on repayment of loans previously treated as distributions;
  And this Resolution shall authorise the making of any other provisions supplementary to the foregoing changes in the profits tax.—[Mr. R. A. Butler.]
  —put and agreed to.
  3. Amendments of Income Tax Acts
  Motion made, and Question proposed,
  That the Income Tax Acts shall be amended in the following respects—

  (a) provision shall be made with respect to the computation of the profits or gains
  236
  or losses of trades comprising dealings in securities in cases where dividends on shares are received which are to be regarded as paid to any extent out of profits accumulated before the shares were acquired, or out of other past profits, and with respect to the restriction of any right to claim exemption from tax on dividends in cases where the dividends are to be regarded as paid to any extent out of past profits;

  (b) the amounts which Lloyd's and other underwriters may pay into special reserve funds shall be increased;

  And this Resolution shall authorise the making of provisions supplementary to the foregoing amendments and the imposition of any charge to income tax or the profits tax arising out of those amendments, including charges for past years of assessment or past chargeable accounting periods.—[Mr. R. A. Butler.]
  5.15 p.m.
  Mr. C. R. Attlee: In accordance with custom, I shall keep my remarks at this stage very brief. The first thing I say is that if this was the lot which the Chancellor of the Exchequer had in mind, I do not wonder that he did not reveal it to the electors before the Election.
  I must say we have a most temperamental Chancellor of the Exchequer. He was in the depths of gloom in February, he quite brightened up in April and he is down in the dumps again now. I was looking again at his Budget speech of April and there was the sunny side. What was the sunny side? It was that purchasing power kept up so well. There was the bright side of investment, and that was the investment by nationalised industries. The situation had been brought under control-not, of course, by the use of controls, but only by various monetary manipulations. He did not expect personal expenditure and consumption to rise, and so he was able to

  237
  reduce the Income Tax. His last words were that we had climbed back—to the planets? No, but to the high places of prosperity.
  Now he has gone all gloomy again and really it is very difficult to find any clear policy whatever. He tells us that he has worked out certain long-term plans which he announced in February were to come off all right, but now he says that they have been delayed. They were delayed in the last Budget, but now they are so delayed that he has to reinforce them and he has precious little faith in what he did in February or what he did in the last Budget.
  The fact is that there is no planning in the national interest whatsoever in this Budget. We have a vast amount of expenditure—capital expenditure and other expenditure—in this country and decisions have to be taken. What are the desirable objects of expenditure? The first thing that strikes the present Chancellor of the Exchequer is that anything that is spent in the public interest is less desirable than anything spent in the private interest. If people want to build dog-racing tracks, cinemas, or anything of that kind they will be, let off very easily. They will have a nice little sermon from the Chancellor asking them to show restraint, but, if a local authority wants to build hospitals or to pick up the pieces from the lack of extension of the roads, the local authority will not get money for the hospitals—or for the roads either. Anything for the public benefit is to be cut. Yet the Chancellor of the Exchequer—I was going to say had the impudence—had the effrontery to quote Keynes. He has long passed Keynes and is behind the Geddes Axe. There is no rhyme nor reason in what he wants to cut.
  The Post Office and telephones have now become luxuries. A business man who was waiting for his telephone may get it because he has the money, but a poor man who wants a telephone will not get it but will have to go back to the bottom of the list. That is characteristic of Tory policy right the way through.
  What is it all done for? Local authorities will be stopped working, or if they want to provide hospitals, roads, and so on, they must pay more. Where does that increased purchasing power go? It goes into the pockets of the moneylenders. The right hon. Gentleman never
  238
  seems to work that out and see that it is merely a transfer. The whole object is to give more to the people who lend money and to throw back advice to the workers every now and again about restraining wages. That is what it amounts to. There is no control whatever over what these people are spending. We are right back in the days of Mr. Gladstone and those blessed people who made money and were sure to spend it so well, and we have our slums and the rest that we are trying to clear up now as a result.
  Then we come to some most extraordinary things. I thought it was the general view of everybody that one of the most undesirable taxes was the Purchase Tax. We put it on in the war partly as a salutary measure and partly as a fiscal measure. It was not regarded as a desirable tax at all. I was talking last night to a business man of quite considerable experience and he told me that he thought the Purchase Tax was one of the things that would have made for inflation. Now we are to have it extended—and to whom?
  I do not know why this Government have such a hatred of the young married couple. They simply cannot stand them. If they are good young Tories and want a property-owning democracy and start trying to get a bit of property, first of all, they have to pay much more for buying their house; and if they want to furnish it on instalments, they cannot do that.
  Then we have this wonderful picture which the Resolution conveys. The young married couple, who have a certain amount of money, have arranged to lay it out, but now comes along the Chancellor of the Exchequer and he claps on 30 per cent. They have to look around to see what they can do without. They cannot afford a dustbin, but the local authority, perhaps, will make them have it. Baths, washboards, ironing boards, pot scourers, pastry boards, coal and cinder sieves, electric kettles, smoothing irons, kitchen scales, shopping baskets—all these are to go. The young married couple cannot afford the textiles, and they will be left sitting in a room without any furniture, looking sadly at the cut glass and silverware which their economic aunt bought for them on the cheap. It is all really childish in this pettifogging way.
  There is no attempt to consider what is for the benefit of the country. With

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  absolute hypocrisy, the Government talk about restrictions on spending while they have put up the money for an enormous spending campaign to go into every home in the country. I was forgetting that to keep up with the neighbours, one must have a new looking-in set.
  Where is the money going to? Where is the work going to? It is going on to the kind of thing that this Government encourage. There is no suggestion at all that it is specially for the good of the country; it is merely for profit. When we look at the Budget and take it with the statement made by the Chancellor during the year, we come to the conclusion that either he does know where he is going but is being pushed about, or he does not know where he is going at all. He is the most incoherent Chancellor of the Exchequer we have ever had.
  It is no good the right hon. Gentleman thinking he can get away with that with a nice lot of little platitudes pushed in here and there to cover the fact. The net effect of this, as with all the right hon. Gentleman's Budgets, is that it all hits the small man, and particularly the lower and middle class man who supports the Conservative Government. Well, they had their time at the last Election, and I am afraid that those electors who voted for the Tories will realise now that they are in for the morning after the night before.
  5.25 p.m.
  Mr. Eric Johnson: We have listened, as we are accustomed to do, to a very lucid exposition by my right hon. Friend the Chancellor of the Exchequer. It is always difficult to absorb the contents of a speech of that length. This time it was made rather more difficult by the fact that it seemed to occasion a good deal of amusement and merriment on the benches opposite. It is difficult to understand why. I did not have the privilege of being here in 1947, 1949 or 1951 and so I cannot recall whether hon. Members opposite were equally amused on those occasions. We on this side, at any rate, welcome what my right hon. Friend has said about restrictions on expenditure by the nationalised industries, notably the restriction on investment by the National Coal Board, for one thing that investment in the coal industry does not seem to have produced is more coal.
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  We on this side welcome also the restrictions on the spending of more money on Government building. To make one observation on the subject of Government building, I thought that what the Leader of the Opposition said about hospitals came rather strangely from him, because I do not think his Administration were conspicuous for the number of hospitals they started while they were in office.
  It may well be that many of us would be glad to go back to those days when Budgets were merely statements of the means by which the Chancellor of the Exchequer proposed to raise revenue to meet Government expenditure and were not, as they appear to be today, an attempt to arrange the lives of everyone in the country by fiscal means. But be that as it may, it is probably true that those who are most vociferous in denouncing what they would term the Government's interference with their private affairs are equally loud in demanding that the Government should take action about some matter or another. It seems, therefore, quite inevitable that if the Government are to take the action that they are expected to take, the Budget must be used also for framing economic policy, whether we like it or not.
  Last week, hon. Members will have observed that the Press published a statement about the proposals of the West German Finance Minister, Dr. Erhardt, for dealing with inflation in Germany. They were particularly interesting, if only for the fact that they seemed to differ radically from the proposals made by either party in this country. I do not say that what is suitable for Germany is of necessity suitable for us—probably far from it—but those proposals did include measures to prevent a further rise, not so much in Government expenditure, but in Government-controlled prices.
  The West German Finance Minister proposed a reduction of taxes on consumer goods and of excise duties, and the liberalisation of imports to encourage any tendency towards a lowering of prices. He proposed also legislation against unnecessary price rises and he proposed the introduction of foreign labour to remedy existing manpower shortages.
  I do not advocate those measures; I merely point them out because they are so different from what we have done. It

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  seems that Dr. Erhardt's emphasis has been on cutting prices while that of my right hon. Friend—and, indeed, of his predecessors—has been more on cutting consumption.
  The fact that our exports are not increasing quickly enough in relation to our imports is not entirely due to the fact that we are consuming too much at home so that goods are not available for export. We could sell more abroad than we are at present if we offered goods of yet better quality, if we delivered quicker and if our prices were lower, but it is, of course, perfectly natural for business men not to bother very much with trying to break into difficult export markets if they can sell all they want at home. I believe that the difficulty the Chancellor has to face is not so much to restrict imports but to devise methods of encouraging and increasing exports, and I hope that my right hon. Friend is giving very serious consideration to the means of doing that, encouraging exports by incentives rather than compelling exports by reducing consumption at home.
  I suppose that the most effective way of reducing consumption at home is to take steps to see that the consumers at home have less money to spend after they have provided themselves with the necessities of life. This could, of course, be done by sharp increases in taxation, so that there would not be enough money about to absorb what we can produce at home, and then manufacturers would have to try to sell abroad. That is a policy to be avoided if at all possible, and I am glad my right hon. Friend has not been particularly drastic on those lines, because I am perfectly certain that higher taxation can lead only to higher prices. It would, therefore, only make it harder to sell abroad, and manufacturers would be discouraged from doing so.
  Another method that, I think, would be undoubtedly a far better one for the country in the long run, although it might be unpopular in the short term, would be to allow the prices of goods which are artificially kept down by subsidies to rise to their true level, and then to help those whose need is greatest. I have in mind the housing subsidies to which my right hon. Friend has referred, and possibly subsidies on some forms of agricultural products; and, quite possibly,
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  some action in connection with the Rent Restrictions Acts.
  Action of that kind would undoubtedly and very naturally lead to demands for higher wages, and if those measures were put into force and were effective they would have to be accompanied by a new and very vigorous attack on prices so that the level of real wages—and that is what matters—would be maintained. That, I think, can be done only by a searching inquiry into Government expenditure of all kinds. At any rate, that is one of the ways. I heard what my right hon. Friend said on the subject. I dare say that the claims of some as to how much it could be reduced are greatly exaggerated, but if there is a need to spend less at home I believe that my right hon. Friend will also have to bear in mind the fact that he will achieve more by example than by exhortation.
  I am convinced that the real culprits in excessive expenditure and unproductive investment are the nationalised industries. I do not think it is going too far to say—I do not want to be unfair about this—that the high price and the low output of coal is the greatest single factor in high prices at home and in the difficulties in connection with the balance of payments. We have to import all that coal from abroad. Yet I cannot see how the nationalised industries are to reduce their prices when—as is the case with the mines and the railways—they are losing money already. There does not seem to be much margin for reducing prices. I believe that the great weakness of State ownership is that nothing has taken the place of the carrot of profit and the stick of bankruptcy which used to work quite effectively in the case of private enterprise.
  To answer the question whether wage demands are caused by high prices or whether high prices are brought about by increased wages is rather like trying to answer the question whether the chicken or the egg came first; but, whatever the cause, what has simply got to be done is this: somehow or other we have to break the vicious circle of prices perpetually chasing wages, and the other way about.
  Somebody has to take a lead in this matter. I do not believe the Government can take it. I do not think the nationalised industries can cut their prices very easily if they are losing money already.

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  I do not believe the trade unions can restrain the demands of their members for higher wages as things stand at present. What I ask myself is, can private industry do it?
  I believe that private industry must cut prices even if it means a very serious drop in profits and consequently a drastic reduction in the distribution of dividends, and I am sure it would pay industry to do that in the long run. I know some leaders of industry are thinking very seriously on these lines to see whether they cannot reduce their prices. If that could be done it would immensely strengthen the hands of the trade union leaders when advocating moderation in the demands for higher wages. Indeed, in those circumstances claims for higher wages would be quite unnecessary because lower prices would mean the real value of current wages would be increased considerably.
  If that were done it could be followed by a reduction in money wages, followed again by a further reduction in prices. So we should have the circle the right way round, instead of the wrong way round. A policy of that kind, if it could be brought about, would bring widespread benefits. Not only would our prices become competitive all over the world, but a drop in prices at home would bring immeasurable advantages to people like pensioners and others trying to live on fixed incomes.
  I believe that if my right hon. Friend wants the full co-operation of industry in these matters, in the reduction of prices, there are certain things about which he ought to be a little more receptive to their point of view. I have in mind some of his financial measures. I make no criticism of his policy of increasing the Bank Rate, but I wonder a little about this so-called credit squeeze which he has persuaded the banks to operate.
  The banks have been told that their customers must reduce their overdrafts. I do not quarrel with the policy of increasing the Bank Rate, but I do on principle object to directions being given to individual banks by the Chancellor of the Exchequer through the Bank of England.
  I would invite the Committee to consider for one moment the effect of this credit squeeze on industries that have to import large quantities of their raw materials from abroad. I have in mind
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  material like copper. Copper is an extremely expensive commodity to import at present, and the ordinary firm cannot finance its own purchases of copper or other expensive raw materials, but goes to the bank for help. If the bank is to tell a firm that it can have 10 per cent. less credit, that firm will import 10 per cent. less of that raw material and will produce 10 per cent. less of the finished products, and someone will go short.
  That is not what I believe my right hon. Friend wants to achieve. I cannot help thinking of the very serious effect this credit squeeze is having or will have on the small firms, on the farms, on the small shopkeepers and others who are suddenly told that they have to reduce their overdrafts. I make no criticism of the policy of making it expensive to borrow money, but I believe that people ought to be able to use their own judgment as to whether they are going to borrow or not and pay the price to do so.
  I believe that the Government must be much more vigorous than it has been so far in cutting public expenditure and in attempting in some way or other to do something to improve the efficiency of the nationalised industries. I believe that they must take some action to encourage exports and must co-operate in every way with industry, not in reducing consumption but in reducing prices, because that is all that matters. By "industry" I mean not only the employers but also the employees and the shareholders. The contribution of industry should be a determination that the advantages which accrue from modern and improved methods should not be used to share out greater profits, whether it be in wages or dividends, but to do something which no one seems to have thought of doing, and that is to pass on the benefit to the consumer in the form of lower prices.
  Mr. Percy Collick: I am trying to follow the argument of the hon. Member. As I understand him, he is now appealing to the Government to reduce public expenditure. He was here when the Chancellor was speaking and, having said that, the hon. Member should proceed to explain to his own Government exactly what form of Government expenditure he wants cut. He has made it clear that he desires the housing subsidies cut, which, of course, means an increase in rents.
  Mr. Johnson: I alluded to the fact that my right hon. Friend had said that the margin for cutting expenditure was not so great as some people supposed. He mentioned various forms, to which I also referred, and perhaps the hon. Member will be kind enough to read what I said. He will then see what I have been talking about.
  Perhaps the most important thing of all must be a realisation that this is not a job which we can leave to the Government or industry alone. The British people must play their part, because in the long run the prosperity of the British nation depends on the good sense and industry of the British people.
  5.44 p.m.
  Mr. Frank Allaun: We have just heard a poor apology for a wicked and reactionary Budget. The Chancellor has told us that his chief object is to cut inflation. To use his own words, we are overloading the economy, but in his speech he said nothing about the obvious cause of inflation today. I refer to the fantastic expenditure of £1,500 million a year on war.
  The Chancellor says that we are trying to do too much and he proceeds forthwith to cut the social services. He proposes, for instance, to cut the poorest cities the most. I happen to come from the same city as the hon. Member for Blackley (Mr. E. Johnson), and I represent Salford, East, which is part of an adjacent city. These are poor cities and, from what the Chancellor has said, their needs, which are the greatest, are to have the least consideration, whereas towns such as Bournemouth will probably receive preferential treatment.
  There are to be cuts in consumption by the housewives in the poorer families. There are to be cuts in respect of the telephone service and postage stamps and in the capital equipment of our electrical and gas industries, but no cuts in tanks, bombers and battleships. The Government know that we have to increase our production. Yet they keep out of production 300,000 men conscripts, whilst behind each conscript there is a civilian engaged in turning out his uniform, his munitions and his equipment. That is to say, there are 600,000 men who might be building homes and schools, re-equipping our factories, raising our exports and filling the vacancies to which the Chancellor referred, instead of wasting their time.
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  I understand that the cost of maintaining a National Service man is £9 a week, and for that sum we could send a young man to a university or a technical college. I hope that shortly the Chancellor will tell us what is the cost of maintaining 300,000 Service men, the cost of the civilians behind them and the cost of their materials and of the machinery that is involved. My own modest estimate of the cost, purely for wages and pay of Service men, is £300 million. That sum would solve practically all of the Chancellor's problems. We could help to halt inflation overnight. This is the main solution of our problems, and yet there was not a single reference to it in the Chancellor's speech.
  I turn again to the question of the increase in production. My hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) and I have recently been visiting some of the engineering factories. At the premises of one world-famous engineering firm, where we inspected automation development, the works manager told us that his main difficulty was shortage of technicians. When we asked him why, he said, "Because of the two years National Service. It is not only a loss of two years, because we are finding that it may take up to a year for the men to settle down when they return—if they return. Many qualified men who have degrees are appointed officers, and they go to Germany. They soon become involved in the night life in Germany, which may keep them up until three o'clock in the morning. After that kind of life, to return to the humdrum existence in an engineering factory is not the most attractive of futures for them and consequently many of them are lost to us."
  Mr. Ellis Smith: Will my hon. Friend permit me to intervene? I see how his account of what the works manager said is being taken by some hon. Members. The works manager also said that he was concerned about the decrease in the study of mathematics. He said that when the boys return they would not get down to their studies. I wonder whether hon. Members opposite will try to laugh at that.
  Mr. Allaun: I thank my hon. Friend the Member for Stoke-on-Trent, South for his intervention. I was saying that what is required is a real and substantial

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  cut in the period of National Service. In his speech at Bournemouth the Prime Minister proposed a "phoney" cut. I describe it as an Irishman's cut, without wishing to offend my Irish friends in any way, because everybody will have to serve for the full two years, and I am sure that neither the conscripts, nor their parents, teachers and employers will regard that as satisfactory. I believe that on both sides of the House the supreme intention of hon. Members is to avoid a third world war. Surely the way to do that is to lessen the tension between the two great power blocs.
  The Deputy-Chairman (Sir Rhys Hopkin Morris): It is quite in order for the hon. Member to discuss this matter as an economic problem. It is not in order to discuss disarmament as such.
  Mr. Allaun: Very good, Sir Rhys. I wanted only to make that point, because I feel that any reduction in world tension will allow us to cut our Armed Forces and thereby solve the problems with which the Chancellor has been dealing this afternoon.
  We are encouraged by recent world events. There has been a reduction of 640,000 men by the Russian Government and it is up to the American Government and our Government to make some counter-concession which will further improve the situation. Finally, I have wondered why the Government refuse to accede to the nation-wide demand for a reduction in the period of National Service, which would do so much to solve the Government's financial difficulties.
  The Deputy-Chairman: Order. So long as the hon. Member confines himself to the Budget proposals, he will be in order, but to discuss military service, or National Service is out of order.
  Mr. Ellis Smith: Further to that point, Is it not a fact that my hon. Friend the Member for Salford, East (Mr. Allaun) would be in order in asking that this problem should be considered so that the Chancellor could economise on the lines my hon. Friend is suggesting, provided that my hon. Friend does not ask for legislation?
  The Deputy-Chairman: He will be in order provided he confines himself to the economic situation.
  Mr. Allaun: Very good.
  I will conclude by asking those who feel that National Service is necessary, or good for the men concerned, where they think those men are best serving the nation's economy—in industry, or on the barrack square.
  5.54 p.m.
  Captain Richard Pilkington: From what was said by the hon. Member for Salford, East (Mr. Allaun), and even more from what he tried to say, I gather that he spoke as a pacifist. If he did, I respect his views, but the overwhelming answer to the argument he was trying to adduce is that in 1951, when the present Government took office, there was a very real danger of war, and now—
  The Deputy-Chairman: This is the argument I have tried to stop. We are not discussing that issue.
  Captain Pilkington: I apologise, Sir Rhys. May I merely say that my answer would have been found by most people to have been conclusive?
  Mr. Douglas Houghton Mr. Douglas Houghton (Sowerby)rose—
  Captain Pilkington: If the hon. Member for Sowerby (Mr. Houghton) wishes to interrupt later, I will certainly give way; but as I was out of order in answering the hon. Member for Salford, East, perhaps the hon. Member for Sowerby will allow me to continue with my speech.
  Mr. Houghton: On a point of order. I understood that it would be in order for my hon. Friend the Member for Salford, East to speak on the economic position and on the expenditure of very large sums of money. What I want to say to the hon. and gallant Member for Poole (Captain Pilkington) is that it is possible to advocate a reduction of Government expenditure on defence without being accused, as my hon. Friend is accused, of being a pacifist, or anything else.
  The Deputy-Chairman: I intervened in the reply of the hon. and gallant Member for Poole, because he started to deal with Korea. If one is dealing with it as a question of expenditure, that, as I have said, would be in order.
  Captain Pilkington: The hon. Member for Salford, East, in the course of his remarks which were in order, said that

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  what the Chancellor had said in his speech was an attack upon the social services. That has also been said by the right hon. Member for Leeds, South (Mr. Gaitskell) and also by the official newspaper of hon. Gentlemen opposite. I hope that when they have reflected and considered what my right hon. Friend the Chancellor of the Exchequer did say, they will withdraw their accusation and apologise.
  There is no attack whatsoever on the Welfare State in the proposals which my right hon. Friend made. It is very unfortunate that hon. Members opposite—and I think the hon. Member for West Ham, North (Mr. Lewis) intends to repeat the allegation—should use this deceit. If I use that word, I am only using a word which the "Daily Herald" continually uses about this party to besmirch what the Conservative Government are trying to do. It has been said by hon. Members opposite that our policy is, and I quote the Daily Herald:
  "To keep down the standard of living of the mass of the people."
  However, that allegation has been answered directly by the "Daily Herald" itself when in an advertisement which it uses in other newspapers it claims to be
  "The paper of the mass market, the market with money to spend."
  Mr. George Craddock: Send me a copy.
  Captain Pilkington: I will give the hon. Member for Bradford, South (Mr. George Craddock) the date and he can look it up and check it himself.
  How those two statements are to be reconciled I will leave to the consciences of hon. Members opposite. We have been told about this "immediate" crisis—and it has been repeated even by the Leader of the Opposition: it has been said that in this so-called crisis the level of our gold and dollar reserves is lower today than in 1951.
  Mr. Donald Chapman: Certainly.
  Captain Pilkington: The hon. Member for Birmingham, Northfield (Mr. Donald Chapman) says certainly. He ought to know, and certainly other hon. Members in his party do know, that in 1951 there started the torrential outpouring of our gold and dollar reserves in the summer of that year, and that that outpouring went on right up to the summer of 1952
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  before the measures which the new Conservative Government had taken began to have effect; and if hon. Members can claim that telling the public our reserves are lower today than in 1951 is a true picture of events, I beg leave to differ.
  Mr. R. Moss: I agree with the hon. and gallant Member for Poole that the fall in the gold and dollar reserves was rapid then whereas today it is slow. But it is a fact that never at any time under the Tory Government have the gold and dollar reserves been as high as they were under Labour before the Korean war brought about that rapid fall.
  Captain Pilkington: If the hon. Member for Meriden (Mr. Moss) will look at the figures, he will see that the reserves under the Labour Government were at their peak immediately after the £ had been devalued. As a result of that devaluation, there was a rise in the cost of living greater than at any time since the war.
  I have devoted two or three minutes to some of the propaganda which we have been hearing from the other side of the Committee, and now I want to say something about my right hon. Friend's statement this afternoon. [HON. MEMBERS: "What about Tory propaganda?"] Tory propaganda is to enlighten, not besmirch.
  In a free country the Government can do a good deal to guide the economic destiny of the community, but it relies far more than does a dictatorial Government upon the response which is made to that guidance. My right hon. Friend referred to that when he spoke of the response which he hoped would be made to his proposals. I wish to give an example of the way in which we might have this response to an appeal and to the guidance of the Government of the day.
  Hon. Members will remember that it was in 1947 when the then Chancellor of the Exchequer, Sir Stafford Cripps, called for restraint all round, and he used these words:
  "The country cannot now afford any general rise in personal incomes of any sort."
  It will also be remembered that when Sir Stafford Cripps made that appeal to the country, the industrialists and the businessmen reacted by agreeing voluntarily among themselves to limit dividends for a two-year period. During that time dividends were frozen. That was the response

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  to the appeal of the then Chancellor. At the same time—and it is only fair to remember this—there was no such similar freezing of wages, which rose 19 per cent. during those two years. If anyone questions that, they should look at the figures over a longer period, when they will find again that the increase in the level of dividends has been nothing like the increase in the level of wages; and, of course, the volume of wages in the consuming market has been far greater than that of the dividends.
  Mr. Arthur Lewis: Perhaps the hon. and gallant Member will forgive me if I paraphrase the words of his right hon. Friend the Member for Woodford (Sir Winston Churchill). Wages are earned by the blood, tears, toil and sweat of the workers, but dividends are the unearned profit of big vested interests—
  The Deputy-Chairman: Order. Interventions are not intended—
  Mr. Lewis: —who have never done any work for it.
  The Deputy-Chairman: Order. Interventions are not intended to take the form of speeches.
  Captain Pilkington: In many ways I have a great respect for the hon. Member, but when he says a thing like that, I know perfectly well that he knows it is completely untrue.
  Mr. Lewis Mr. Lewis rose—
  Captain Pilkington: No, I cannot give way again. The hon. Member has made his point, and I wish to pass on.
  What is the position today as regards restraint and whether or not there is likely to be a response? During the last month or two I have made a list of those organisations which have asked for further increases in wages. I wanted to put a Question to the Minister concerned, and to ask whether he had made any estimate of the effect which such increases in wages would have on the cost of living if they were granted. However, Ministers are protected by a very formidable bulwark in the shape of the Table and, for whatever reason, I was not able to put down a Question, though I gathered that it would be in order to make my point in a speech. I am going to read a list of organisations which in the last two months have put in for increases in wages.
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  They are the Confederation of Shipbuilding and Engineering Unions; the Associated Society of Locomotive Engineers and Firemen; the National Union of Railwaymen; the National Union of Agricultural Workers; the Amalgamated Union of Operative Bakers; the Electrical Trades Union; the National Association of Theatrical and Cine Employees; the Transport and General Workers' Union; the miners; the distributive workers; the woodworkers; the building trade workers; the civil servants; the dustmen and the Tobacco Workers' Union.
  I submit to the Committee that one has only to read out that list for it to be perfectly clear to everybody, or almost everybody, that were all those demands met, there would at once be a tremendous increase in the cost of living which would at once lead to further and understandable demands for yet further wage increases. If there is to be restraint, surely there should be restraint here, but I want to make this perfectly clear; let it be said by nobody that anybody on this side of the Committee recommends that there should be restraint only on one side—if we have to speak of "sides" in industry. There should, of course, be restraint on dividends as well, as indeed there was when the appeal was made by a Labour Chancellor in 1947.
  Mr. Collick: May I ask the hon. and gallant Gentleman a question?
  Captain Pilkington: I do not want to give way too often.
  Mr. Collick: In 1951 the party of the hon. and gallant Gentleman fought the Election, and were returned, by saying that they were going to "mend the hole in the purse." Does the hon. and gallant Gentleman appreciate that none of the wage claims which he has read out would have been necessary if the Government had stopped up the hole in the purse?
  Captain Pilkington: The hon. Member knows perfectly well that we inherited an extremely difficult position from the party opposite and what we have done in the last four years can legitimately give us a certain amount of satisfaction. When the right hon. Gentleman the Leader of the Opposition referred to our policy as incoherent, I think that we prefer that—if it be so, though I do not accept it—

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  to the rhythm of Socialist crises every other year.
  Mr. Collick: The party opposite made the hole bigger.
  Captain Pilkington: No.
  I have mentioned one kind of response which I think there must be to the lead that the Government have given this afternoon. I wish now to refer to a different sort of response which I also think that there must be, and that is the response in the productivity of our nation as a whole, the output per man-year. The figures which I wish to submit to the Committee are drawn from a study by a large and leading firm in this country. They may err slightly on one side or the other but I believe that, in general, they give a fair though a disturbing picture of what has been happening.
  I take the years 1949–54 because in that period our economy has had time to settle down, and also 1949 is the first year in which figures for Western Germany became available. During those five years the increase in productivity in this country and in some countries which are among our leading competitors has been as follows. America leads, with 48 points. Next comes Western Germany with 37. Here may I just add that anybody who has seen Germany today and the immensely hard work which is being carried out, and who has witnessed the drive and spirit which exists in industry—and all quite legitimately—must realise full well that there we face a most powerful competitor and one who is likely to be soon even more powerful than at the present time.
  If I may now continue with the figures for other nations, the comparative figure for Japan is 27; France, 15; this country, 14. In other words, compared with the other nations which I have mentioned, our increase in productivity over those last five years has been very much less.
  Mr. A. Woodburn: The point which the hon. and gallant Gentleman makes is very interesting, but would he explain how the cutting down on the development of electricity, for which industry is hungering in this country—a cutting down which will result from the Chancellor's proposals—will help the situation?
  Captain Pilkington: The right hon. Gentleman knows full well—and no doubt we shall experience it during the remainder of the debate—that a very strong case can be made against making any single one of the cuts in the programme which my right hon. Friend has put forward. If we accept the strong case which could be made against every single individual item, then nothing at all will be done.
  If something has got to be done, then, in spite of the drawbacks, I believe that the sort of policy brought forward by my right hon. Friend the Chancellor—an ingenious, elaborate and over-all policy—is the right one to meet and remedy the situation with which we are confronted. The present difficulty is by no means a crisis such as that which confronted hon. Members opposite during their term of office. As has been said, it is the result of an excess of success which we have been having in these last few years.
  I have given the figures concerning the increase of productivity, and I now propose to give another set of figures. Thanks to where this country stands today—due to the achievements not so much of this generation as of earlier generations—we still have a lead over the majority of the other nations which I have mentioned. Our volume of productivity today is still in excess of theirs. The following figures of the volume of productivity for last year show how we stand in relation to these other countries: Japan 50, France 95, West Germany 112 and this country 119. I have not given the figure for America as a comparison because that country is in a completely different world, but, as a matter of interest, I would point out that, compared with 119 for this country, the figure for the United States is no less than 311. That shows something of the challenge with which we are confronted at the present time.
  I wish to underline these two responses which must be made to the lead given by the Government this afternoon. As I see it, there are four objectives which this nation must achieve in order to confront the difficulties which lie ahead. The first is wise guidance from whatever Government is in power. The second is a much greater efficiency in industry than there is at the present time. Many firms are very efficient, but some are not, and from the figures which I have given one can see the

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  margin which has to be made up. The third is good relations between employers and employees. The fourth is an understanding and a restraint on the part of the nation as a whole.
  We in this Committee may differ as to the means by which these things can be brought about; we have our party tussles. But if we are to improve the standard of living of both the individual and the nation as a whole in this difficult, dangerous and challenging century—which, irrespective of party, is what we all want to do—then whether we are in politics, industry, agriculture, trade or the Services, we must make these four objectives realities.
  6.14 p.m.
  Mr. David Logan: I have been in this House for nearly twenty-six years, during which period I have never heard so absurd an amended Budget as that which the Chancellor of the Exchequer has brought forward today. I imagine that those outside this House who support the Tory Party will now be singing "Land of Hope and Glory." Let us see how the wonderful brain of the Chancellor has had to go to work. The right hon. Gentleman has not only had to go into decimal fractions; from the way in which he has dealt with the increases of 30 to 60 per cent. in Purchase Tax he would appear to me to be a senior wrangler.
  To put myself in order, before I am told that I am talking rubbish, I had better point out that I am dealing with the Resolutions moved by the Chancellor today. If I understand the rules of the Committee aright, we have no right to make amendments. I should like to be put right about that from the legal point of view.
  Today, we are having a double event. We are having a Budget, the first instalment of which deluded the people of the country because it was introduced under false pretences and was accompanied by the distribution of little tit-bits. We have now reached the sober moment when we must reflect on what the Budget really is. I do not know whether or not it is a good way of budgeting to do it in two parcels, but I can assure the Chancellor and the few hon. Members present on the benches opposite that had this Budget been introduced before the
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  General Election took place, they would have been sitting on this side of the Committee.
  Mr. Lewis: They would not have been sitting in this Chamber at all.
  Mr. Logan: Some would and some would not.
  Mr. Lewis: The hon. and gallant Member for Poole (Captain Pilkington) would not be here.
  Mr. Logan: By this Budget the Government are giving to the moneylenders of the country benefits regarding which this Committee has no power to move Amendments. We can reject the Budget by voting against it, but we cannot move Amendments to it. I think that that is a wrong way of doing it. It is immoral—of course, I am dealing with immorality from the point of view of the Budget and not from any other—because millions of pounds will be made in extra profits through the bringing into operation tomorrow of these increases of 30 per cent. and 60 per cent. in Purchase Tax. Does the Committee think that that is a fair way to treat the British electorate?
  Squadron Leader A. E. Cooper: The hon. Gentleman really must not make misleading statements. There are no increases of 30 to 60 per cent. in the rates of Purchase Tax; they are only from 25 to 30 per cent. and from 50 to 60 per cent.
  Mr. Logan: I am thoroughly able to understand the Queen's English, and the Supplementary Financial Statement says that goods not already specified will bear a rate of tax of 30 or 60 per cent.
  Hon. Members on this side of the Committee have not yet had an opportunity of analysing what this really means. We have had a long speech by the brilliant Chancellor of the Exchequer—I was going to say of the Labour Government. Was it not a beautiful speech and one which sent one into hysterics? Indeed, it was so great a speech that many of those listening to it walked out, leaving only those who wished to criticise it. I wish to criticise the whole of it.
  I should be quite in order if I detained the Committee until 10 o'clock by speaking on every item mentioned in the Budget. However, I do not wish to waste my talents in that way, but merely to draw the attention of hon. Members present on both sides of the Committee

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  to the fact that they will have to face their constituents on the subject of the great triumph of this Budget day.
  It has been a wonderful Budget day. We celebrate the Battle of Waterloo, Nelson's victory, and the Battle of Alamein, and I suppose that the Tory Party, to the strains of the Hallelujah Chorus, will go out into the streets and celebrate the Budget tonight. I would point out to the ratepayers and voters, however—whether they be Tory, Liberal or Labour—that between now and Christmas they will pay out more money than they have paid during the rest of the year, for the simple reason that the beneficent Tory Party has decided to make them a "present" at Christmas time.
  These bonuses for the people have always been good, but what hon. Members on this side of the Committee are grumbling about is not what is in the Budget, but what has been left out. I ask the Government, "What have you done, with your handling of the finances of the nation, to benefit the condition of the workers and bring better prospects of peace and prosperity by fair and honest financial adjustments?" We are familiar with the system that is being pursued today, of the upward spiral leading to yet another catastrophe. The Chancellor is well versed in finance and knows the value of money, but he does not know the minds of the people. Had he been living in Scotland Road, Liverpool, where I live, or in some of the big industrial centres, he would have understood that our people, including business men, were all looking for something of a more tangible character.
  This Budget is an illusion and a sham. It is more fit for an auction room than for a Chancellor of the British Exchequer. Looking back into our history and remembering the wonderful Chancellors that have taken their stand in this Chamber, the mediocrity of today's Chancellor makes us so ashamed that we want to say, "Gentlemen, let us call it closing time and go home."
  6.23 p.m.
  Mr. R. Gresham Cooke: The hon. Member for Liverpool. Scotland (Mr. Logan), has made a remarkable and extraordinary oration, during which he carried out a very vicious attack upon the increases in Purchase Tax—some of which are very minor; only 5 per cent.
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  or 10 per cent. The hon. Member seems to forget that the object of the increases in Purchase Tax is to enable the Chancellor to restrict home demand. He forgets that for many years before the war, the country suffered—indeed, it is suffering at present—from two chronic illnesses, which sometimes flame up into disorder and at other times are quiescent. The illnesses are the adverse balance of payments overseas and inflation. In simple words, we continue to buy more from abroad than we sell overseas, and also to debase our currency.
  We should congratulate the Chancellor very warmly for having kept these two endemic disorders at bay and quiescent for the last four years. It cannot be said too often that everything we eat, consume, use, build or make contains some measure of imported material. The food we eat, the clothes we wear, the houses we build, our manufactured goods, mean imports of feeding stuffs, wool, cotton, timber, iron ore, aluminium, paper, and coal. Therefore, the more we manufacture and consume in this country, the more we import.
  We had some very good export figures in the first few months of the year, and there was then no need for alarm, but the position which started off so favourably has recently become unfavourable. Whereas our exports have risen in value by 6 per cent. in the first nine months of this year—which is an all-time record, and something of which we can be proud—our imports have increased in value by 15 per cent. over last year. Putting it into figures, our exports have risen by £121 million, comparing the first nine months of last year with the first nine months of this, and our imports have risen by £372 million.
  Our share of world trade, which was 21 per cent. a year or two ago, has fallen to 18 per cent. Relatively, our position is not so good, and it is quite obvious that in order to pay for our prosperity at home and have greater consumption we must export more.
  Mr. Lewis: I agree with all that the hon. Member is saying, but can be explain how the Chancellor's proposals, making such things as buckets, brooms, dustbins and mops subject to Purchase Tax, will assist our export trade? Car he say how many dustbins were exported to Timbuctoo during the last month?
  Mr. Gresham Cooke: I certainly cannot answer that specific question, but if

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  our productive capacity in respect of dustbins is one million per annum, and if, at present, 900,000 are used at home and 100,000 exported, if the Chancellor increases the Purchase Tax on dustbins fewer will be sold at home and more exported. That is perfectly simple. That kind of thing has happened in my own experience, and it will probably happen again.
  I want to make one general suggestion to the Chancellor. We have to increase our exports; we must sell more overseas—and I suggest that we might try to increase our trade with Eastern Europe. At present, we have an adverse balance of trade with Russia, Poland and other East European countries, and I think that by modifying the strategic list of goods we could export more to those countries which are on the other side of the so-called Iron Curtain. I have learned that there are certain four-wheeled-drive vehicles which we might be able to sell there if the strategic list were modified.
  Mr. Logan: Will the hon. Member say how much the foreigner will pay—or is it only the British who will pay?
  Mr. Gresham Cooke: I hope that the foreigner will pay for the goods that we export.
  To bring the debate back to a serious level—I think we should all agree that we must increase our exports. One way in which we can do so, as has been mentioned already, is by improving the delivery dates which we are able to give for manufactured goods. Delivery dates overseas are sometimes too long, and they are often too long because one material component holds up the delivery of the final product. One component manufacturer may be too overloaded and unable to keep his promises. If he cannot fulfil his promise, the final product cannot be sent overseas because it lacks one vital component.
  Turning to the other disorder which occurs from time to time—inflation—I think we ought to make it our definite aim that the pound sterling should have the same value twenty years hence—in 1975—as it has today. Many economists contemplate a sort of creeping inflation over the years, but I do not think we should contemplate that. We do not want a kind of perpetual application of Gresham's Law to our currency.
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  One way of halting inflation would be to have a complete halt to any increases of salaries, dividends or wages. That would be one way, but that I think is impossible for any Government to consider, although I see that there are certain discussions going on between the British Employers' Federation and the T.U.C. along those lines for more restraint.
  I was delighted to hear the Chancellor today draw attention to Government borrowing and lending and the capital investment that arises therefrom. Our annual Budget comprises a revenue of about £4,300 million, and on top of that the Government have to borrow about £1,000 million, which is a very substantial amount. If we look at the Financial Memorandum which was issued at the time of the Budget last April, we shall see how this £1,000 million which is borrowed is spent.
  A large amount is spent on the repayment of debt and National Savings. Then come loans to local authorities of £353 million, capital advances to new towns £29 million, Post Office capital expenditure £45 million, advances to the National Coal Board £75 million, war damage payments £30 million, and the repayment of post war credits £23 million, making a total in that short list of £600 million on top of the ordinary Budget, and that does not take account of contributions to the Exchange Equalisation Fund, and so on.
  All this money raised by borrowing comes back straight into the economy by payments for materials, wages and salaries and in the construction of these capital projects, and is, to some extent, inflationary. It is inflationary because, when a new post office is being built, the money that goes to the contractor and the workers who build it releases money for consumer goods; but no consumer goods are represented by that work, only capital goods. I am not against borrowing money for capital projects. It has been done in industry and Government for years and it may be suggested at some time that our own road system should be financed by loans, though I think that in relation to the figures mentioned a few moments ago, which are very large over the years and larger than many people imagine, the time has come for some restraint.
  In wartime, National Savings were completely inflationary. A person saved £50, which went to the making of a parcel of

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  shells, since it was spent in wages for steel makers and machine operators who produced the shells. These shells were sent overseas and they were exploded, and we had only a bang left for our £50. Today, the £50 which a person saves is turned away from consumer expenditure—for instance, he does not buy a television set—and is put back for repayment of debt or goes back into the economy straight away for payments of wages, materials, and so on.
  I would suggest for the consideration of the Government that if the Chancellor is to widen the basis of his savings by increasing the limits—and I think that that is an excellent thing to do—we might mop up some of these savings by floating a Commonwealth Loan, and, instead of spending all these savings at home, float this Commonwealth Loan with the object of spending more of these savings overseas on projects in the Commonwealth and Empire. That money would be taken out of our own economy, but it would be used for the benefit of the Commonwealth as a whole.
  Mr. Ede: Why spend it abroad?
  Mr. Gresham Cooke: The most obvious reason is in order to develop our colonial economy. We should not send it to foreign nations, of course, but only to our own Colonies and Commonwealth, rather than expand our capital production here.
  It is quite obvious that capital expenditure has to be restricted, and that applies to capital expenditure by both the Government and industry. I feel confident that the steps taken today by my right hon. Friend the Chancellor will make it more difficult for local authorities to obtain loans, and so on, will check inflation and lead to an improvement in our balance of payments position, and, therefore, will redound to the success and and credit of the nation.
  6.37 p.m.
  Mrs. Harriet Slater: After today's Budget speech, I think it would be a good idea if every hon. Member sitting on the Government Benches turned up his Election address. I have brought along with me today the Election address of my opponent and other papers which were issued from the Central Office of the Tory Party and
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  sent to all constituencies. I also have the little blue book called "All The Answers" for the people whom our opponents sent to our meetings and which they could use to question us.
  If hon. Members opposite look up their Election addresses, they will find that they contain what is called a "Key to Success." They will find the Chancellor portrayed as a most benevolent gentleman who was out to save the country from ruin. He was going to help the poor people, the old-age pensioners, the women with large families, to recovery after the wicked Socialists had been in power. They will also find that they boasted that they had helped the local authorities to build thousands of houses and new schools, and would help them with the new schools that were to be built, as well as all the new roads. Just before the Election, we had the amazing announcement of new expenditure on hospitals and on road developments, much of which will not now take place because the burden on the local authorities will cause them to be squeezed out.
  We have heard an awful lot talked in the last few speeches from Government Benches about philanthropy. The hon. Member for Blackley (Mr. E. Johnson) said he was quite sure that industrialists would be quite prepared to cut down their dividends. They have had loads of chances to do it, but they have not done so, because profits have gone up. Their expenses on advertising, for instance, which we as consumers have to pay, have also gone up during the last few years.
  Not one hon. Member on the Government benches, and not one word in the Budget speech, has said why wages have had to go up and why working-class people and others have had to put in wage increase demands. The reason is that the cost of essential goods has gone up. If the Tory Party went to the country today and asked for the votes of old-age pensioners and of women with families, who all need bacon, eggs, cheese, butter and bread, I am sure it would get a different answer from what it had in May this year.
  Squadron Leader Cooper: Does the hon. Lady agree that the purchasing power of old-age pensioners is higher today than it was when her party was in power?
  Hon. Members: No.
  Mrs. Slater: That is further evidence of the illusion which Members on Government benches have been trying to persuade the general public to accept. The rise given to old-age pensioners was taken up before they got it by increases in the cost of living. Many old-age pensioners have been forced to apply for National Assistance because of the rise in the cost of living although they did not want to have to do so. They did not get the rise because it was eaten up by the increased cost of essential foods. Wage demands are being made because of the policy of the Tory Government in increasing the cost of living of the poorest people. I notice that tea has been referred to the Monopolies Commission. When the report is received, it will be interesting to notice how far the Government will be prepared to go.
  Mr. Lewis: Perhaps my hon. Friend will explain how many old-age pensioners have been living on the port and pheasant to which the Chancellor of the Exchequer referred.
  Mrs. Slater: One only needs to meet the old folk in their organisations or in the streets to realise that they are complaining of having to cut down on the very things which we ought to ensure that they get.
  Today's Budget affects the same kind of people, those whose need is greatest. They are again being asked to make sacrifices and to pay. Of course, that is what we expected. In my Election address I said that this kind of thing would happen. Let me refer again to the little blue book issued by the Tory Central Office and called "All the Answers." In the part relating to Purchase Tax the Conservative Party boasted about the reductions it had made in the Purchase Tax on articles like fur fabrics, silver, clocks and watches, toys and sports goods, motor cycles, razor blades, and many other commodities. In the list submitted to us today many of the things needed by the woman with the large family are to be burdened with a 30 per cent. Purchase Tax. Couples who want to get married are now not only to have less chance of a corporation house—there will certainly be fewer council houses available—but are to be called upon to pay more for the household commodities which they need.
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  To people living in big houses it may not matter very much about buckets, mops and brushes, because they can use other articles. To the woman who has the large family it is essential to have brushes, brooms, pottery, pastry board and rolling pin. The woman who uses the hand-operated wringer is now to pay 30 per cent. Purchase Tax while the people who can afford electric washers or to pay somebody else to do their washing will still pay the same Purchase Tax. The poor, hard-working working-class woman will have to pay more for her hand-operated wringer.
  While taxation is increased on the pots which the working woman will need in her home, silverware remains at the same level of Purchase Tax. We shall be told that this has been done to preserve a craft industry. Most working-class people receive silver things, or so-called silver things, on their wedding day and, if they are lucky to live long enough, on their silver-wedding day, but silver is not the kind of thing with which they replace the ordinary utensils in their homes. We are to keep silver at its present luxury level in order to put a little bit more on the ordinary crockery which women need.
  I might say in passing that this is a subject on which some of my hon. Friends and myself will have more to say. The Chancellor should remember that the industry which we represent has been a very useful export industry in the economics of this country. We notice that fur fabrics are to carry reduced taxation. That is another evidence of the kind of legislation we can expect from the Tories. The things needed by the few are subsidised at the expense of those needed by the many.
  There has been a great cry for restraint in public expenditure. One of my hon. Friends has already mentioned the effect of the restraints which we are asking the gas and electricity boards to apply. Quite soon we may be discussing a Clean Air Bill. It is important that there shall be an extension of gas and electricity in industry if we are to make sure of cleaner air. In my constituency we have been calling upon the pottery industry to put in gas or electric tunnel ovens, but if there is to be restraint we shall be compelled in Stoke-on-Trent to use the old bottlenecked ovens.

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  In regard to local authority expenditure, once more the poorer areas are to suffer. Old industrial areas like Birmingham, Stoke-on-Trent, Manchester, Birkenhead, Liverpool, the North-Eastern area and Lancashire have suffered all along from the effects of the Industrial Revolution. They are called upon to make the biggest efforts in production. Every member on the Government benches has called for it and the workers have made that effort in the past. It is these very areas which are to be called upon again to suffer.
  In my own area we need a great development of sewers and roads so that houses may be built, but I am reminded that, to use a slang phrase, we shall have "had it." The money will not be available because of the policy of the party opposite. The squeeze will be put on, not in a direct and honest way by saying "We cannot do it," but in an indirect and dishonest way by withholding money, by putting on restraints—by putting up interest rates, as has happened already. In those ways local authorities will be compelled to cut down their expenditure.
  As I say—and perhaps I may be forgiven for mentioning my own area—we need development, and money spent on sewers and roads, not only to replace the slums in which people have lived for too many years but in order to repair the damage done by mining subsidence—a very heavy burden which authorities like ours have to bear.
  Mr. Ellis Smith: And the sewers have collapsed.
  Mrs. Slater: Yes, the sewers have collapsed—and we shall be in a position where we just cannot face the increased expenditure.
  In the White Paper issued today, and in the letter which has now been sent to local authorities, local authorities are asked
  "… to refrain, save in cases of exceptional need, from undertaking new services …"
  I wonder if the Chancellor realises that "exceptional need" exists in almost every industrial area? It is "exceptional need" which makes the houses necessary, which makes the sewers and the roads and the hospitals necessary. It is "exceptional need" which makes school development necessary, because in those same areas there live the people with the black-
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  listed schools which should have been done away with years and years ago.
  Later in his letter the Chancellor asks that care should be taken that expenditure in the year 1956–57 does not exceed the expenditure of 1954–55—but the prices of necessary commodities are still going up, and the monopolies are still operating to the detriment of local authorities. Last week it was reported to the general purposes committee of my own local authority that in the various tenders invited for pipes, cement, slag and all the things needed for house building, road making and so on, there was not one single farthing difference to be found. That is the freedom—that is the private enterprise that the Tory benches have offered to the country. It is a freedom for private enterprise to keep up prices when it suits its purpose. Local authorities now have a pistol held to their head by the Government in these Budget proposals and in the letter which they have issued, and by the monopolies which operate in the people's necessities.
  This Budget is one which we anticipated. I hope that the people will realise that the prosperity Budget issued immediately before the Election was made in an effort to delude the people into a false sense of security. Surely, at long last, they will realise that this is the kind of Budget which can be expected from a Tory Government. It hits hardest at the people whose need is greatest, but at Election time hon. Members opposite, with sobs in their voices, try to deceive the people.
  6.55 p.m.
  Squadron Leader A. E. Cooper: We have just listened to a very interesting speech from the hon. Lady the Member for Stoke-on-Trent, North (Mrs. Slater). If I may say so, it was a somewhat emotional speech, perhaps more suited to the hustings than to the House of Commons. When she refers to election addresses and performance she need not look very much further than her own benches. In 1945, the Labour Party secured a very great victory and governed for five years. In 1950 that majority was cut back to six. In 1951 it was wiped out altogether and the Conservative Party took over. In 1955 we got back with an even greater majority. The simple fact is that for 6½ years the people saw Socialism in operation and did not like it.

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  If one examines the record of the last three years it is fair to say that as a party we have done a good job—a very good job. To hon. Members opposite, and particularly to the hon. Member for West Ham, North (Mr. Lewis) I would say this. We hear so much about the poor people, so much about the hard-working women, but although West Ham, North is a very strong working-class area it is also an exceedingly prosperous one. I should very much like to own a shop in West Ham, North. [HON. MEMBERS: "What is wrong with that?"] Hon. Members cannot have it both ways. They cannot talk about the hard-up working class and in the same breath admit that they are spending a great deal of money. The plain truth is that in many working-class areas today there is far more money going into the homes than is going into the homes of what are called the black-coated workers.
  Mr. Lewis: All I say, and have said, is that the Tory Party got back on false promises. They said they would reduce the cost of living and make the pound worth something. The cost of living is greater than ever before, and the pound is worth less. For the life of me, I cannot see how putting a tax on dustbins, buckets and pails will help to solve our balance of payments problem and so on.
  Squadron Leader Cooper: If he waits, the hon. Member may find that on those particular items I am in agreement with him.
  On the question of the cost of living, I say this as an unchallengeable fact. Today we are eating more per person than ever in our history. We are consuming more of practically everything than we have ever done. Many of the things which we now accept as ordinary should still, perhaps, be in the luxury class. Take, for example, lipsticks, face powders, perfumes and so forth.
  Mrs. Alice Cullen: They are essentials.
  Squadron Leader Cooper: I quite agree, but so great is the demand for those items that at the present time there is not a perfumery house in the country which can cope with the needs of the ladies. My point is that it cannot be said that people cannot afford food when at the same time they are spending so much on that sort of thing.
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  In this country since 1945 we have been subjected to a series of crises of this type—in the two periods of Labour Government and one now—and in each case, whether it was Sir Stafford Cripps, the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) or the present Chancellor of the Exchequer, the medicine which has been offered to the patient has been the same—restriction in home demand in order to encourage the sending of more goods into the export markets.
  I think that the point to which we should address ourselves is that every time this medicine has been offered, it has succeeded temporarily, and I emphasise the word "temporarily," in settling the problem, but after a few months we have found ourselves in difficulties again. It seems to me, therefore, that we must seriously consider whether this policy of restriction at home, coupled with an excessively high level of taxation, is indeed the right method with which to approach our problems.
  I think that it is very bad policy to exhort people to work harder and, in the same breath, to deny them the fruits of their labour. I should have thought that we had three problems to consider at this time—how to arrest the rise in the cost of living, how to stop inflation, and how to encourage exports. The measures which the Chancellor has put forward today must be weighed against these three objectives.
  Mr. F. Blackburn: That is what we have done.
  Squadron Leader Cooper: Our economy as a nation depends entirely upon our ability to export in considerable quantities, and it follows, therefore, that industry must be efficient if it is to compete with its keenest competitors. It must have the funds available to keep itself fully up to date, and it must have encouragement to go out into the world and fight really tough battles against very tough competitors in order to secure business.
  My hon. Friend the Member for Blackley (Mr. E. Johnson) suggested that there should be some tax concessions for export business. I should like to reinforce that plea. I do not think that it is generally realised how difficult it is for British industry at the present time to

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  secure extra business in foreign markets, and I do not think that the enormous amount of work which has to be put in before any sort of reward comes to a particular firm is generally recognised.
  It is perhaps a little invidious to mention the names of firms which are doing a good job. But let me take, for example, a household name in this country, that of the firm of "Aquascutum," which makes a particularly high-quality raincoat. That firm has been trying to develop business in the U.S.A. For five years it has battled in America. It has literally poured money into the development of its business there, with no help from the Treasury whatsoever. But it had faith in its ability to sell a high-quality product in that very competitive market. This year, the fifth year, for the first time, it has broken even, and next year it hopes to be able to make a profit. That kind of effort should be encouraged, and it can be encouraged only by giving the industry some substantial tax concession on its export business.
  Industry has to accept orders in most countries at substantially lower prices and has to put in a much greater effort. I would beg right hon. and hon. Gentlemen opposite not to dismiss this question of incentives to industry as an encouragement in export markets too lightly. This is something that we must consider. All of us, it does not matter in what walk of life we have our being, need an incentive to urge us to greater effort, and I should have thought that the oppressive weight of taxation which afflicts us now acted in the reverse way. I should have thought that it would have been our aim and policy to reduce Government expenditure, and I am quite sure that there are ways and means by which that could be done without seriously affecting any Government policy, as I will endeavour to show later, by marrying that reduction in expenditure with reduced taxes.
  This is the encouragement needed both by individuals and by industry to proceed on progressive and expansive lines. High taxes increase the cost of living and bring about demands for higher wages, which mean increased costs and a weakening of our competitive position. Lower taxes give money to the workers at all levels and reduce the demand for increased wages, resulting in no increase in any
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  cost of production and a much stronger competitive and bargaining position.
  However we react in a crisis of this kind, we are bound to accept risks, and I submit to the Committee that the lesser risk is to accept the risk of lower taxes rather than to go in for a policy of higher taxes. At the present moment, this country—I have said this before in this House, and I know it is a view which is felt by businessmen all over the country—is carrying overheads by virtue of its civil servants far greater than it can afford, and we have to seek means whereby we can make our tax system less complicated than it is at present.
  I will give an example. For many years there have been Amendments on the Order Paper during Budget time for a reduction in the tax on hydro-carbon oils. These have come from both sides of the Committee, whatever the Government, and always the Treasury have come forward with the argument that the money is not available. In the first place, this tax got on to the Statute Book by an accident, as everyone knows. I believe that the revenue it brings in now is about £30 million. If that tax were repealed and that money all went back to industry, the Chancellor would recoup almost at once about £16 million of it in the extra profits which industry would make, and the administrative saving to the country would be considerable.
  In connection with the chemical industry there are concessions by the Treasury whereby, if those products are used in a process and lose their identity in the process, a drawback can be claimed. I should like the Financial Secretary to the Treasury to look into this question. The form which has to be filled in in order to get this rebate takes one person an entire week to complete so that one might get a reduction in tax of 2s. 6d. a gallon. Then, if one wants to put goods into a bonded store in one's own works, the complications which arise are considerable.
  Another thing I wish to ask the Financial Secretary is about the census of production which is completed in industry annually. It is a very complicated document, which takes companies' accountants, top executives and so on a lot of time and effort to complete. I should like to ask my right hon. Friend—

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  quite seriously and without being facetious—what functions the census of production serves in the life of this country. The information it provides must in any event be available to the Treasury, and I seriously question whether the census serves any valuable purpose. There are many similar instances in which large numbers of civil servants are engaged in administrative duties which are valueless to the country's economy.
  I wonder whether we all realise that the level of consumption will continue to rise, not only here, but all over the world. Therefore, the nub of our problem is not how to restrict home consumption but how to increase production. Where can we find the labour? Can it be found by reducing the Civil Service? I believe some savings can be found. Can we find some savings in the Armed Forces?
  Mr. W. R. Williams: Before the hon. and gallant Member leaves the question of the Civil Service, I wonder if I could ask him, as one who knows a little about it, if he could give some ideas of where he thinks we could save substantial numbers of officers and personnel in the Service. The hon. and gallant Member keeps repeating this point, I should be glad to know where he would expect to save in the Civil Service.
  Squadron Leader Cooper: I should expect it in the two very minor matters I have mentioned—they are minor, but all these things add up—and, for example, in the Board of Trade, where at present a very considerable number of officers are engaged in operating controls which affect industry. A considerable number of officials are in the Treasury dealing particularly with Customs and Excise and with Purchase Tax—[HON. MEMBERS: "Oh."] I will develop my case with regard to Purchase Tax. [An HON. MEMBER: "The hon. and gallant Member will get the sack."] An hon. Member says I will get the sack, but I have always spoken my mind in this House and said just what I feel about matters. Sometimes the Government Front Bench like it, sometimes they do not.
  I do not go so far as the hon. Member for Salford, East (Mr. Allaun), who wants to do away with National Service. At
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  this stage I do not believe that is practical politics, but everyone in this Committee receives in his post-bag letters from constituents giving examples of waste which takes place in National Service. With these kind of crises affecting the country every other year, it is high time we saw to it that our manpower was not wasted in that way.
  It seems to me that if we face the fact realistically that we have to continue to export and develop exports, and if at the same time we recognise that consumption at home must inevitably increase and we cannot find all the labour required, we are forced hard up against the reality that we must have more foreign labour in this country.
  Mr. George Craddock Mr. George Craddock rose—
  Squadron Leader Cooper: I have given way frequently and cannot give way again. Whether that foreign labour should be used in the mines or any other part of industry, we can discuss with the Trades Union Congress, and work out the problem as we go along, but we must face these facts realistically. It is useless to suppose that within the limits of our existing manpower we can undertake this great development overseas and also carry out our obligations to an expanding market at home.
  Now I come to a point to which one or two hon. Members have drawn attention. In his speech today the Chancellor made some reference to small savings and the National Savings Movement. He gave an example of how we were to be permitted to buy a greater number of Savings Certificates—up to 1,200. From discussions I have had with constituents I am convinced that one of the reasons people do not save as much as they could and should save today is that the value of money steadily decreases. I want to give an example of how much that value has decreased. I do not draw on anyone's experience but my own.
  In 1939 I had 500 War Savings Certificates. The value was £375. With that £375 in 1939 I could have bought three motor cars and furnished a house. I still have those savings certificates.
  Mr. Arthur Moyle: Second-hand cars?
  Squadron Leader Cooper: The hon. Member should remember that in 1939 one could buy a new car for £100 or £120. With my £375 I could have bought

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  three cars and furnished a house. I still have that money, but what could I buy with it? I could buy half a car, but I should look silly in half a car. It is this inescapable fact which blares out at people every time they are exhorted to save more. They do not know how much their savings will be worth in five or ten years. It must be a prime duty falling on this Government or any subsequent Government to ensure that money retains its value during a long period.
  Mr. Percy Daines: Was not the point which the hon. and gallant Member is making now precisely one of the main planks of his programme when he stood as a candidate in 1950 and 1951?
  Squadron Leader Cooper: The sort of statements I am making now are the sort of statements I have been making for many years. I have not altered my views on this matter at all.
  I now come to the question of Purchase Tax and the changes which are proposed. On the face of it, I agree that some of them look "pretty rough," but I doubt very much if when one considers the D scheme, for example, the effect will be as disastrous as some hon. Members think. Indeed I would suppose that in many cases substantial reductions in prices will result.
  But I do ask my right hon. Friend to give further consideration to the question of household kitchenware. I cannot see the point of this increase. If I could see that the tax on any one of these items would bring about an increased export as a result I could see some justification for it. If it could be shown that raw materials would be made available for diversion to some other industry there would be some justification, but that was not the case the Chancellor made today. In fact, in presenting this item he did not attempt to defend it at all. I think we are entitled to have from the Government a further explanation of why this class of equipment or goods is to be included in the Budget at this time.
  Mr. Glenvil Hall: Did the hon. and gallant Member go into the Lobby with the Government and vote for that particular item?
  Squadron Leader Cooper: The right hon. Gentleman is a little late. I do not know whether he was present, but we had that interjection some time ago. So far as
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  I am concerned, the record is quite clear on the question of Purchase Tax. I have always opposed it and regarded it as the most vicious and stupid tax ever imposed in this country. It may be perfectly justified in time of war but it is not justified in time of peace.
  A very extensive organisation operates in the Treasury to collect all this money. There are so many anachronisms and anomalies in the operation of Purchase Tax that it is almost impossible to secure any Amendment to deal with a particular case. If it is a question of revenue which is holding back the Treasury, I would like to see the Purchase Tax done away with altogether and in its place a sales tax operating, as is done very effectively in the United States.
  The position of any Government in office is extraordinary. In industry they accept no risk and no responsibility, but nevertheless they receive about a 50 per cent. "cut" on all the profits which industry makes. In addition, the Government have a vested interest in the sale of practically every appliance. They receive a commission of 30, 60 or 90 per cent. on practically everything that is sold. I should dearly love to be a salesman who operated on a commission rate such as that.
  What has happened is that we have discovered that a good dose of whisky will help to cure a cold, and as more colds have come along we have taken more and more whisky. We shall succeed in curing our colds temporarily but in the process we shall probably die of hardened arteries.
  7.23 p.m.
  Mrs. Lena Jeger: The Chancellor of the Exchequer has today performed a great public service and I congratulate him on it, for he has at last come clean about the realities of Tory fiscal policy. That is an honest and correct course for him to have taken and I hope that at last the least perspicacious members of the electorate will understand what exactly is involved when a Tory Government are returned to power.
  The Chancellor explained that our dilemma really arises from a demand which is too heavy for the supply with which we can meet it. There are, obviously, two ways of meeting such a situation. We can either have physical

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  controls, the sort of planning in which we Socialists believe, which ensures that limited resources are used where they are most needed, by systems of allocation and licence, or there is the Tory policy of pricing these things out of the reach of those who need them most and, therefore, introducing an artificial system of rationing which, in the long run, is bound to be against the public interest.
  I would especially like to hear more from the Government Front Bench about the question of local authority finance. I thought that the Chancellor took an extraordinarily acidulous view of local authorities when he suggested that they came forward, almost impudent and irresponsible, expecting the Exchequer to help them with loans. The right hon. Gentleman has told us today that he thinks they should not be helped in any way by the umbrella of Exchequer guarantees, but that they should find their own level on the money market. This is a very novel and completely unacceptable point of view and we must have a great deal more explanation of what is behind it.
  Why have the Government suddenly taken the view that local authorities—who are, after all, carrying out statutory duties laid upon them by Parliament—should be treated in just the same way as any twopence-halfpenny commercial enterprise trying to set up business from purely profit motives? The two things are completely incompatible, and in the situation in which the country finds itself today I should have thought that the onus was on the Government Front Bench to try to find some way of making cheaper money available to local authorities for the carrying out of their urgent statutory duties.
  There can be only one result from the policy that is now being followed. Those of us who have served, as, I know, the Financial Secretary has served, for a long time with local authorities are well acquainted with the type of authority whose only ambition is to keep the rates down. We know of the disgraceful schools and bad social services which are to be found in such areas, where the minimum of public expenditure is embarked upon. On the other hand, there are the more socially conscious, public-spirited local authorities who try to use every possible opportunity of enriching
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  the community life of their neighbourhood and of helping to raise the standard of living of the people in it; and, very often, the rates in such districts are higher. There is already a penalty on the socially conscious and progressive local authority. The policy that has been suggested today can have no other effect than to increase this gap.
  We have heard that in housing the Exchequer subsidy is eventually to be abolished altogether. That means that the local authorities who do not care very much what kind of housing accommodation their people have, will leave things as they are. But those particularly in the blitzed and poorer areas with desperately long waiting lists, which they are trying to satisfy out of every consideration of human kindness and justice, will be faced with an enormous bill which will have to be raised locally.
  We have had a great deal of talk, both in this House and outside, on subsidies, but much of it has been misplaced. It has been suggested that it is the tenant who receives the subsidy in the reduced rent that he pays, but I want to put it another way. When a local authority borrows £2,000 to build a house or flat—that is slightly below the average figure—by the time the loan is repaid over a period of 60 years, over £7,000 is paid back. That is an increase of £5,000, which goes into somebody's pocket.
  I submit that subsidies have been used towards the payment of interest on that money, that it is public money which has contributed to the difference of the £5,000 on that one single unit of accommodation, and that it would have been very much in the public interest if the Chancellor could today have suggested some means of housing finance which would eliminate this terrible burden on the local authorities, on the Government and on the tenant. But we have had a completely negative answer. In addition, of course, on other works for which local authorities are responsible there is bound to be a serious cutting back.
  I could not help recalling how proud was the Chancellor of the Exchequer when he came to the House to present the Education Act which bore his name. There was something in it, I recall, about raising the school-leaving age to 16 and something about county colleges, all of which have been deferred year after year

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  and which, apparently, will have to be deferred altogether beyond the range of our present contemplation.
  There are, too, many fields of local authority and public capital expenditure which could reduce current expenditure. Many of the capital schemes on which local authorities wish to embark would serve this purpose. That is particularly true of hospitals. We all know how much fuel, for instance, is wasted because of inefficient boilers, inefficient heating appliances, in our hospitals and institutions.
  The public conscience, too, has been roused on more than one occasion recently by the shameful conditions in our mental hospitals. We know that the shortage of staff and other difficulties in many of our institutions arise partly because of the out-of-date, barrack-like buildings in which nobody can be expected to do his or her best. Capital expenditure there, it seems to me, is very much in the public interest. It is quite indefensible that projects of that nature should be postponed. I hope that later we shall have some more reassuring news about that sort of expenditure.
  Many of the suggestions we have had from the Chancellor today will increase the cost of living. It is unavoidable that they should. We must hear from the Government whether they are contemplating a further increase in old-age pensions, disablement pensions, National Assistance allowances, or whether those who receive those pensions and allowances have had their once-for-all increase in the pre-Election rises.
  What will happen? Are we not creating a demand which must, in justice, be met? When the Chancellor talked about pruning consumer consumption today, I could not help feeling something of the bitterness with which that news will be read by the old-age pensioners. I wonder whether he has ever sat, as I have, in their homes, going through their pitiful budgets with them, not trying to work out how to prune back unnecessary expenditure, but how to make half a pint of milk do when a whole pint was needed.
  That is the sort of question those people are up against, very many of them; and in these days it is bitter and cynical to talk in that glib way about cutting down personal expenditure. For nothing that has been proposed by the
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  Chancellor today will impose a cut on the personal expenditure of those with plenty of money to spend. The women who drift round expensive shops in the West End of London will not cut by a halfpenny any of their dress allowance because of anything that the Chancellor has proposed to us today.
  I think, too, that the cutting down of capital expenditure in the gas and electricity industries is very unfortunate at a time when we are all very concerned about smoke pollution, not only because of the more efficient working there could be with better equipment in those industries but because our scientists have discovered how to deal with, for instance, the problem of emissions from power stations by the putting of smoke washing devices into the flues. These things cost money. Is the money not to be available for works like those, which we all agree are very badly needed?
  Representing here, as I do, Hatton Garden, I feel I should not take an ungenerous view of certain of the concessions which have been made to the trade which has its headquarters in my constituency, but I find it very difficult to commend those reductions in Purchase Tax on that class of goods to my electors in the face of the other list which accompanies them.
  Squadron Leader Cooper: In the case of the cut-glass industry and the other which is to have this help, export business cannot be developed unless there is a home market. These are two industries for which we have first-class opportunities of developing export markets.
  Mrs. Jeger: I shall carry on where I left off.
  We have here a list of goods to be taxed which seems to me to be a most extraordinary attack on the housewives. I do not know what has happened to the Housewives' League, whether it has gone into liquidation, so that the Tory Front Bench feels that it does not need to take any notice of it at all. As a housewife, I have been looking very carefully at this list, and I am very confused and very puzzled by it. Do right hon. Gentlemen opposite think that we housewives go out like wantons for an orgy of self-indulgence and buy armfuls of buckets and batteries of hand-operated wringers and mangles? I bought only one bucket to

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  start with, and I did not buy another bucket until there was a hole in the first one.
  I wish it could be explained to me how the consumption of buckets can be pruned back by making them dearer, when the consumption of buckets depends very largely on their quality and the duration of their lives before they have holes in them. As to hand-operated wringers and mangles, I should like to tell right hon. Gentlemen opposite that there is nothing that a housewife would less rather have in her home than a hand-operated wringer or a mangle. They are the most toilsome and noisy domestic implements, and none of us would have them if we could possibly help it. So why the Chancellor should pick on those implements, and suppose that housewives are dashing out and buying so many of them that something has to be done to stop them, I cannot understand. I cannot follow his logic, but perhaps someone on the Front Bench opposite will be able to explain it to me.
  The list of restrictions is a most sadistic list, because it taxes those things needed for ordinary cleanliness. There is nothing mentioned here which is at all luxurious, but things we need for washing floors, washing clothes, and for washing up. We must not fix our minds entirely on the housewives' reaction to this, because all these things are needed not only in the homes of the people but in our hospitals. We would like to think that they are needed also in our restaurants, and that the campaigns for clean food would have led to an increased demand by the catering trades for these very necessary implements for cleanliness. Here there is a direct discouragement to catering firms to follow the advice they have had on many occasions to take better care about the cleanliness of their premises.
  All sorts of public institutions, railway waiting rooms, and so on, the offices and the shops where people work—all have to be kept clean. This tax is bound to increase seriously the expense of these things, or else it will reduce the amount of money which is spent on them, and that, I submit, cannot be in any way in the public interest.
  I realise that one should try to be constructive in a situation like this, and I
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  should like to make one or two suggestions. I agree with my hon. Friends who have suggested that there is room for heavy cuts in defence expenditure, and I hope that we shall hear more of that when the Service Estimates are brought forward. We are expending money unnecessarily on some of our military commitments abroad. We are spending money unnecessarily to keep 12,000 troops in Cyprus, trying to deal militarily with a situation which is moral and political, which is not a military problem at all, any more than the problems in Kenya and Malaya are military.
  An hon. Member opposite referred to the balance of trade with Eastern Europe and Russia. I would remind the Committee that this country has an adverse trade balance with China. Owing to restrictions on our export trade with China, the Chinese find themselves in the strange position of having sterling balances, at the same time as an unsatisfied demand for goods from this country. I should have thought that a revision of the list of restrictions which would enable trade to flow more freely to the Far East from this country and vice versa would have been very much to the national interest.
  References have been made rather light-heartedly—and I thought that they should have been made seriously—to the impact of I.T.A. on consumer demand. It is not generally realised that as a country we are spending more on advertising than we spend on education. Could not the Chancellor look at the possibility of imposing an advertising tax, a method which has been employed in certain countries? In a Tory free-enterprise society, the danger, of course, would be that any tax of that kind might be passed on to the consumer. Therefore, it would have to be linked with some system of price control. I put forward that suggestion in all seriousness because such a large part of consumer costs today is absorbed by advertising and even more will be absorbed in future as I.T.A. increases its scope.
  We have had today a capitalist prescription for a capitalist crisis and the Chancellor could not expect that those of us who take a different view of society could possibly accept what he had to say. Nothing has been put forward which could ensure any equality in the bearing of the burden. On the contrary, it is those who have least who are to have even less.

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  I hope that the House as a whole will give its fullest consideration to some ways by which we can ensure that a more equitable solution of the problem is found. Fundamentally, we know that there can only be one answer and I can only hope that the people of this country will have an early opportunity of giving that answer.
  7.42 p.m.
  Mr. Robert Crouch: Today has indeed been unique in that we have had a supplementary Budget at a time when we are not engaged in war and not faced with bankruptcy. In the past those have been the only occasions on which we have had supplementary Budgets. Today we enjoy a boom which is shared by every section of the community. That cannot be denied. People are better dressed and better fed today than ever before. I am very pleased about that. As a result, one sees and hears of some most ridiculous things which have been brought about entirely by our prosperity.
  I wonder how many hon. Members opposite saw in the Press last Thursday an account of an incident at Basingstoke. We had heavy rain on Wednesday and Thursday of last week. Apparently the canteen of a bus station at Basingstoke was flooded and the men who came in at lunchtime went on strike because the management had not made arrangements for them to have their lunch in some other place. I consider that that ridiculous behaviour by these misguided people was brought about entirely by the prosperity which we are all enjoying today. How could any man foresee that a storm was going to occur?
  I regret that the right hon. Member for Leeds, South (Mr. Gaitskell) and the right hon. Member for Battersea, North (Mr. Jay) are not now in their places. They think that they are in for a whale of a time while the Budget passes through the House of Commons, but I should like to advise them that if they bait the lion they are likely to have their hands bitten. My right hon. Friend the Chancellor of the Exchequer is quite capable of dealing with whatever they put forward, especially in the light of the fact that the Labour Party Conference at Margate the other day decided to take three years to evolve a policy which the party could put before the country at the next General Election,
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  apparently because they have no policy at all at present.
  I welcome some of my right hon. Friend's statements and particularly his statement that there will be no cut in the expenditure which has already been announced on roads and on education.
  Mr. John Rankin: What about agriculture?
  Mr. Crouch: And agriculture. It is very essential that this expenditure should be carried out. I have made a number of speeches against inflation during the last few years, but I cannot see that today's announcements will bring inflation to a stop. It must be brought to a stop. When direct or indirect taxation is increased, the effect is bound to be to encourage inflation still further. It encourages a further demand for wages. All of us as a nation want relief from this penal taxation which has been inflicted upon us by successive Governments over a number of years. We cannot afford it.
  Penal taxation affects people in all sections of society and discourages them from production. I was very disturbed to see from today's Press that Sir Bernard Docker is considering leaving the country. A man of his ability is considering that step because as a result of this penal taxation he receives a total of only £1,000 a year net from his connection with several companies and only £365 a year net as chairman of B.S.A. Someone has to take responsibility in industry and he has to accept responsibilities which few of us in this Chamber are capable of accepting.
  We have heard about the credit squeeze. That has been affecting the smaller people, the middle-class people who in their various ways have done a great deal to build the prosperity of the country. On the other hand, until very recently, the nationalised industries have been able to borrow whatever money they might have required. The Government must set an example themselves in cutting expenditure and taxation. It should be the target of my right hon. Friend, when he introduces his Budget next year, to cut expenditure by no less than £500 million. [HON. MEMBERS: "How?"] Yes, I know that some people say that this is a very nice kite to fly, but I put forward one suggestion which might lead to saving some of this £500

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  million. I suggest that the Government should immediately make a cut of one-third in the paper that is used in Government offices.
  Mr. John Hynd: Why not one-half?
  Mr. Crouch: I know that hon. Members will say, "How much would that save?" But if Government Departments are deprived of a third of their paper they will not require the manpower which they have at present, and that manpower is urgently required where it would do much more good, because those concerned would then be producers. With all due respect, people employed by Her Majesty's Government do not really produce the goods. There is a shortage of manpower. In the Press yesterday I saw that in the City of Salisbury, a constituency adjoining mine, it was decided that the labour exchange should be kept open until 7 o'clock at night to see if something could be done to help to fill 444 vacancies while there were only 57 people on tile books of the labour exchange.
  We have to face an entirely new situation. The evolution of the method of direct taxation coincided with the introduction of the steam engine. That was about 100 years ago, when the steam engine was the fastest thing on earth. It ran on rails at 25 miles an hour. The steam engine has gone. It has been replaced by the diesel, and in a few years' time we shall have nothing but diesel engines pulling our trains and capable of 100 miles an hour. Today we have quicker transport, diesel-engined ships and jet aircraft carrying people across the world at speeds of anything from 400 to 700 miles an hour.
  To get people to give more—and when I say that I mean to give more of their brains or muscle—we must give them some new incentive, and the best way is to overhaul this out-of-date system of direct taxation. The personal allowance which we all enjoy, or hope we do, should be increased from the present figure of about £240 for a married couple to £400, and the allowance for a single person should be increased to £200. That would give an incentive, because workers are worried about P.A.Y.E. If they were
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  allowed a greater personal allowance, they would give a little more effort.
  Also out of date are the present arrangements for death duties. Before the war no death duties were paid by anyone who left less than £100. That figure has been increased to £3,000. It should be increased to £10,000.
  Mr. E. Fernyhough: Why does not the hon. Member increase it?
  Mr. Crouch: We have increased it by £1,000 since we have been in office, the hon. Member for Jarrow (Mr. Fernyhough) will be interested to hear. But the limit before any death duty is paid should be increased to £10,000 and no estate, however large, should pay more than 50 per cent., instead of the present 80 per cent., with a limit of a million pounds. It is all very well to say that would be encouraging the rich. It would not be encouraging the rich. This penal death duty is breaking up all the estates in the country and making it so easy in the years to come to have nationalisation of property and real estate without the State having to lift a finger.
  If these steps were taken we should find that our people would respond immediately. It would be very much better to remove the pressure on the home market, which is at present worrying the Chancellor, by encouraging greater savings—and, when one has saved, not to have it taken away when one has gone. I know that my right hon. Friend has told us that he is to make a cut of about £7 million by stopping building in Parliament Square, Horseferry Road and at the Washington Embassy. But what is £7 million in our national expenditure? On the other hand, he has told us that the Postmaster-General is to increase his charges by about £26 million in a year. That is slowing down, but slowing down what? I should be the last to suggest that the Postmaster-General should discharge any post office workers because of the slowing down of the supply of telephones; but he will still have the same wages bill and the amount of saving is not very much. I want to see the country's economy still expanding. Today we are enjoying greater prosperity than ever before in our history. There is no nation in the world, not even the United States, with such a high level of employment and

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  with the people enjoying such a high standard of living.
  We can continue that position only by enabling the people to enjoy some of the fruits of their labours. I want to see the people given the opportunities to do that. As an employer of labour I find that if the boss sets an example, the workers will follow and if we want an extra half-hour's work, they will give it. I want my right hon. Friend to see what can be done by the Government to set an example of the way our people should exert themselves in order to continue this prosperity which we are now enjoying.
  I want to say a word to the leaders of industry. I have always held the view that it was wrong for leaders of industry to build up great profits just for the pleasure of paying my right hon. Friend the bulk of those profits. It would be much better for leaders of industry to reduce the prices of some of their goods, rather than let my right hon. Friend have so much, thus allowing other people to enjoy lower prices. The workers are also concerned. There are many workers who could exert themselves more during the hours of labour, and the greatest beneficiaries would be the people about whom we are all concerned and whose ranks we shall one day join—the people with fixed incomes or old-age pensions. If we, big business men and the workers, can do something to hand back a little of the present high rewards in the form of lower prices, the country will be the better for it.
  There is one more illustration to which I should like to draw the attention of my right hon. Friend concerning what can be done if one really sets about it. I have the honour of representing the northern part of the County of Dorset—good agricultural land. In the financial year just ended, in our county, as ratepayers, we spent 6d. in the £ less last year on our roads than was spent in the year 1936–37. That was brought about by better organisation and by making full use of mechanisation. Our roads today are definitely very much better than they were 20 years ago. I conclude by saying that if only my right hon. Friend could persuade some of the people associated with central government to emulate the good example of the Dorset County Council, this nation would not be facing the problem which today it is facing, the real problem being over-prosperity.
  8.0 p.m.
  Mr. Tom Brown: I am one who believes profoundly that if the Government propose to solve the financial and economic problems of this country by inflicting greater hardships on the poorer people then they are bankrupt of ideas. I wish to discuss the effect that this supplementary Budget will have on the poor people and by that I mean those in the lower income groups and the old-age pensioners. The hon. Member for Gillingham (Mr. Burden) may smile, but it is nevertheless true and I wish to reply to the statement made by an hon. and gallant Member opposite—
  Mr. Gerald Nabarro: Not I.
  Mr. Brown: No, not the hon. Member for Kidderminster. I said an hon. and gallant Member.
  I believe this supplementary Budget to be a direct blow against the old-age pensioners and the old people, on low incomes, and those young people who wish to enter into marriage. When advocating some improvement in the economic and social conditions of old folks a great statesman many years ago said:
  "A nation only finds its soul when it cares for its old people and its young."
  I am not suggesting that the Chancellor has lost his soul, but I am seriously suggesting that the right hon. Gentleman is far divorced from the realities now prevailing in the homes of our old-age pensioners and those of our people in the lower income groups. By increasing Purchase Tax he is making it harder for those people to live. While he has dealt with this matter in a very slick way—
  Mr. Lewis: I do not think it is a slick way.
  Mr. Brown: Yes, when one analyses it one sees that a slick process has been originated by the Chancellor and his advisers. But I wonder whether the right hon. Gentleman is fully aware of the situation which has existed in the homes of our old-age pensioners and those people in the lower income groups since February of this year. I recall, as will many right hon. and hon. Members, the policy pursued by the Government in February of this year. What did the Government do? They increased the rates of National Assistance in February. In April they

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  increased the basic pension rates and they took away that which they gave in February. In other words, they gave with one hand and took back with the other.
  Nothing roused the anger of the old folks in this country more than that action. In my judgment it would have been much better for the Government to have been honest with the old folks in February and told them that when the National Assistance scales were increased they would lose by the amount put on the basic pensions. The hon. and gallant Member for Ilford, South (Squadron Leader Cooper) stated that the people were better off today than ever before in the history of this country, and that was emphasised by the hon. Member for Dorset, North (Mr. Crouch). I agree to a large extent; but they failed to draw a line of demarcation between those people who benefited by the increased prosperity and those people who are now worse off in a prosperous period.
  The hon. and gallant Member referred to the number of people who were better off, but he failed to tell the Committee that today there are more people in receipt of National Assistance rates or pensions than at any time since the reign of the first Queen Elizabeth.
  Mr. Crouch: I will agree entirely with the hon. Member, but it is because today we have National Assistance Boards instead of having to go to the relieving officer—[HON. MEMBERS: "No."]—yes, that is why. The smaller number of people who are worse off are the middle-class people on fixed incomes.
  Mr. Brown: I agree that we now have National Assistance Boards instead of the old Poor Law system, but my point is that from March, 1948, to March, 1955, the number of people seeking assistance from the National Assistance Boards has risen by 300,000. Because of economic circumstances those people are forced to go to the National Assistance Boards to eke out their livelihood.
  I have had some experience in dealing with National Assistance Boards and I would pay a tribute to them. In the main, in about 90 per cent. of the cases, they examine humanely, but the fact remains, and it strengthens my original argument, that if the Government expect to solve our economic and financial difficulties by inflicting greater hardships on
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  the poor then the Government are bankrupt of ideas. There are other ways—
  Mr. F. A. Burden Mr. F. A. Burden (Gillingham)rose—
  Mr. Brown: I am sorry, but I cannot give way. I promised not to speak for more than ten minutes, otherwise I would give way to the hon. Gentleman.
  I say that the poor people are worse off now than before this Budget was introduced. They are already pressed by the increased cost of living, and the National Assistance scales are far too low. The basic pension is far too low. I know that there is not much prospect of increasing the basic pension at present, because any increase would have to be secured from the same source as the last increase, and we should have to call on the industrial workers to pay a higher contribution. I hope that the Chancellor will consider the point which I am making, that if he will use his influence and provide money for the National Assistance Boards to increase their scales, that will help the poor and the old-age pensioners. Be it remembered that in this country today we have 4·4 million old people in receipt of pensions who will experience hardship as a result of this Budget.
  A great deal has been said about Purchase Tax. Every Chancellor hates and detests the Purchase Tax and looks forward to the time when it may be rejected altogether. It is an unjust and an unfair tax and one which we do not want. But in a state of emergency it had to be imposed. In his last Budget the Chancellor made some reduction in that tax, but in this Budget he is increasing it again. Surely, the time has come for the Chancellor and his advisers to seek other means of solving the economic and financial problems of the country.
  I would say a word about the effect of this Budget upon local authorities, for it will have a tremendous effect upon the policies and programmes of local authorities whether their majorities be Labour or Conservative. Be it remembered that in the early part of this year various Government Departments, with a flourish of trumpets, indicated that they would spend vast sums of money on new hospitals and on improving accommodation in outpatient departments and X-ray departments. A colossal sum was involved.

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  The country welcomed this because it had the idea that we were going to make progress at a speed greater than ever before. Now we have the curbing of the promise made by the Government earlier this year. Two or three days after the April Budget, a statement was issued from the Ministry of Transport. Millions of pounds were to be spent on improving our highways in order to increase the safety of pedestrians and those who travel on the roads. This project is now to be slowed down.
  Why on earth do the Government keep coming forward with such promises and then, within a few months, saying that they will not be carried out? Any man, whatever his party, who attempts to delude the public at election times is not fit to represent the people. We should be honest with them, and if we cannot do something we should tell the people that it cannot be done. On the other hand, if we promise to do something, we should make every possible attempt to do it. I am always governed by the great Apostle Paul who said that it is better not to promise than to promise and not to pay.
  The Government promised the people that they intended to do certain things which are now not to be done. There are other ways of solving the economic and financial instability of the country than by inflicting hardships on the poorer sections of the community.
  Now a word or two about the effect of this supplementary Budget on local authorities. We were pacified—at least to a degree—when in the course of his speech the Chancellor said that a White Paper would be issued at the conclusion of what he had to say indicating the Government's policy concerning local authorities. What does the White Paper contain? It contains copies of two letters sent to the municipalities of England and Wales and a copy of a letter sent to the municipalities of Scotland. They contain no policy at all, but merely tell local authorities that they must curb their expenditure on development work during the year 1956–57.
  I do not know whether the Financial Secretary to the Treasury remembers that some few months ago a certain Government Department stated what it was going to ask local authorities to do. Since that intimation to the local authorities, the majority of them have considered both short-term and long-term programmes for
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  carrying out the Government's intended policy. But now the Chancellor of the Exchequer comes along and decries what that Department proposed. I am glad to see the Parliamentary Secretary to the Ministry of Housing and Local Government on the Government Front Bench because, in his heart of hearts, he knows that what the Government are now proposing will make it more difficult for his Department to operate and carry out their promises.
  I have the honour to represent a constituency which has been producing deep-mined coal since 1546, and anyone who knows anything about the dereliction and ugliness left by private enterprise in mining areas will realise what the local authorities of those areas are up against. In one town in my constituency attempts are being made to reclaim the dereliction left by private enterprise in years gone by. The local authority concerned has both a long-term and a short-term programme, and the people living in these hideous and vile surroundings have, in view of the programmes enunciated by their local authorities, been looking forward to the time when those surroundings would be removed and when the ground on which pit heaps stood would be reclaimed, thereby making their environment more congenial than it has been their lot to experience hitherto.
  The Government are now saying to these local authorities, "Cut down your expenditure. Do not promote any more schemes, because, if you do, the difficulty will be to find the money." Is there any hope at all for these local authorities situated as they are in the heart of the mining districts? There is none. What little hope there was as a result of the Government's proclamation some few months ago has now been dashed to the ground. The local authorities will now be asking, "When are the Government going to make up their minds where they are going, what they propose to do and how they are going to do it."
  We are now told that local authorities will not be able to carry out the work for which they have prepared themselves. It is disgraceful to lead local authorities up the garden in this way. I know that the Chancellor made reference a few weeks back to pruning the roses. The right hon. Gentleman is pruning his roses at the wrong time if he wants to

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  get any blooms. Therefore, he had better make a further examination before using expressions of that character.
  We have heard a lot about National Savings. Way back when the National Savings Movement was started we, the workers, looked upon it with suspicion, in the way in which we had always been taught to look upon it because of our experience of past Governments. We said that if we were prepared to make sacrifices and save what little we could to help the nation in its dire need, that fact should not be used against us in later days. Government spokesmen and others, including myself, did all we could to intensify the desire in the hearts of the people to save because I, personally, did not believe that it would eventually be used against them. But now it is being used against them by way of a supplementary Budget and the hardships which it proposes to inflict.
  I beg the Government to look again at the hardships which the proposed increases in the Purchase Tax will inflict upon the old-age pensioners and those in the lower income groups, and to see what they can do to help local authorities with the schemes which they have prepared. If the Government fail to grasp the opportunity to do something about the derelict mining areas, the clock of progress will be put back some 50 or 60 years. I beg the Government not to carry out in their entirety the proposals contained in this supplementary Budget, but to remember the promises which they made to the electorate in May this year.
  8.20 p.m.
  Mr. John Hall: I think that everybody in the House always listens to the hon. Member for Ince (Mr. T. Brown) with a great deal of interest—but one of the statements he made towards the end of his speech should not go altogether uncorrected. He referred to the Chancellor's reference to savings and, as I understood him, he was indicating that the increase in National Savings was now being used against those who have saved, as an excuse—
  Mr. T. Brown: The statement was emphasised by the hon. and gallant Member for Ilford, South (Squadron Leader Cooper) who made a special point about the amount of money which the workers,
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  due to increased prosperity, had contributed to the National Savings Movement.
  Mr. Hall: If I remember rightly, that was used as an illustration of the amount of surplus money that was being made available for saving. It would be most unfortunate if the impression were allowed to be given that savings were in any way to be used as an excuse for imposing fresh burdens upon the people. The Chancellor quoted the figures as an example to be followed, in the hope that other people would make their contribution to National Savings.
  The hon. Member also referred to the problems faced by old-age pensioners. I know that he has paid close attention to such problems, and I have been most interested in them for some time. I am fully aware of the difficulties which old-age pensioners face today. The hon. Member must have had some very difficult times during the five years following 1945, when there were constant increases—sometimes very rapid ones—in the cost of living and when, if my memory serves me correctly, nothing was done to increase the old-age pension until just before the Election in 1950. He must have welcomed the fact that, during our term of office, we have twice increased the pension. Nevertheless, I should be the last to assert that the old-age pensioner is in any way well off.
  In one way I welcome the fact that more people seem to have learnt to approach the National Assistance Board. I raised this question once before, and suggested that the name should be changed, because many people did not like to go to the Assistance Board as the name smacked of charity. I remember the right hon. Member for Warrington (Dr. Summerskill)—who then represented a Fulham constituency—opposing the idea, because, she said, people must learn to use this additional service, which was meant to help those most in need. From the increase in the number of people using this service, whatever their economic need, it seems that that lesson has been learned.
  Dr. Horace King: I gather that the hon. Member wants to be fair, from his opening remarks about my hon. Friend. He has suggested that hon. Members on this side of the Committee were not interested in

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  the old-age pensioner in the years following 1945. Does not he remember that we doubled the old-age pension?
  Mr. Hall: I was not suggesting that hon. Members opposite were indifferent. I said that the hon. Member concerned must have sat through some difficult years. All that hon. Members opposite did was to implement the recommendations contained in the Beveridge Report, which had been first instigated by a previous National Government.
  Nobody thought that the Budget which the Chancellor was going to announce was likely to be popular. It is said: "Blessed is he who expecteth nothing, for he shall surely receive it." I do not think that anybody was disappointed in that respect. The Chancellor has been in receipt of a great deal of advice from newspapers and other people about what he should do. He has been urged by many people to take the bull by the horns; grasp the nettle; face the facts; get down to brass tacks and all the other old clichés in the English language. I would not mind betting that in tonight's and tomorrow's newspapers the very people who have been urging a tough course of conduct upon him will be the first to cry to high heavens about the medicine they have received.
  I am no exception. Being a human being, I tend to react violently if something is done which seems to affect the interests of those I represent. Therefore, despite my great admiration for the Chancellor, I must sorrowfully protest against one or two suggestions put forward in the Budget Resolutions.
  Like several other hon. Members, I find it difficult to see what real contribution towards stopping inflation the putting of a tax of 30 per cent. on household goods will make. [An HON. MEMBER: "Did the hon. Gentleman vote against it?"] I did not vote against the Budget proposals as a whole. If I had been able to vote against one it might have been a diffierent story. The real point is that this will make additional difficulties for householders.
  The abolition of the D Scheme and the higher rates of tax upon the better-class furniture, mostly hand-made by craftsmen, means that there will be a considerable relief in respect of that type of furniture. That is to be welcomed, because one of the problems of craft
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  industries of all kinds is the fact that their products have been put beyond the reach of the pockets of the people by reason of the high rate of Purchase Tax. I know that the craftsmen in Wycombe—and we have many—will be helped and encouraged by this proposal.
  We have to bear in mind, however, that the great bulk of furniture consists of the more popular and medium-priced lines, and the imposition of the Purchase Tax, although it is comparatively small, can have no other effect than to increase the cost of things which people must buy. These are not luxuries. If one has a house it must be made a home. To be a home it must be furnished. Furniture must be bought, and this proposal will mean that an additional burden is placed upon people who are trying to furnish their homes. Furniture, in general, is not a luxury product, like some things such as television sets, and people are not throwing money away on unnecessary things in buying furniture.
  The furniture industry, too, is one which is already, to some extent—although fortunately not in my constituency—suffering from the effect of the restrictions placed upon hire purchase. I have no particular quarrel against hire purchase restrictions, because I think that they may be necessary, but this additional tax is another burden which the consumer and especially the industry will have to bear.
  I now turn to the question of the standstill in Government building. The Chancellor mentioned that two projects were not going to be built beyond basement level. Although the sum involved was £7 million, against the background of the national economy that is not much. The arresting of such building will mean a considerably increased cost in the end—because those buildings will presumably be completed at some future date. I suggest that it will cost far more to finish them in the end than if we had completed them now.
  Then there is the question of telephones. From what was said this afternoon I gather that we shall have to wait even longer for telephones than we have had to up to now. Many people who have telephones may not use them for productive purposes, and no doubt a case can be made for making them wait longer—but there are many businesses, especially new ones, which cannot get tele-

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  phones and are necessarily the more inefficient because they lack them. It is a pity that this form of capital expansion has been picked out for attack.
  Mr. Nabarro: Will not my hon. Friend agree that his assessment of the position is wrong? Surely, what the Chancellor said was that telephone subscribers by and large will be called upon to pay an economic charge for the service, and surely no Conservative can object to that?
  Mr. Hall: If that is so, I accept the correction, and I hope it will be confirmed. I am not objecting to the higher price so much as to what I thought was inferred by the Chancellor's remark about a slowing down of capital extension. I may be wrong about that, and I should be delighted to be corrected if I am.
  The effect of the credit squeeze has also been mentioned. It is quite true that the credit squeeze affects first and foremost the small man, and in some respects it is having a somewhat lamentable effect upon the small man. I would make this comment about it. I think it shows a lack of confidence in the weapon of the Bank rate if, in addition to raising it, we have to ask the bankers voluntarily to exercise this credit squeeze and to place upon them the onus of deciding whether credit shall be granted or not.
  Perhaps I can make one constructive contribution. Several hon. Members, mainly on the Opposition Benches, have referred to the one form of Government spending in which we could make some considerable saving, and that is in the realm of defence. In many respects, I would not agree with the reasoning which has led them to suggest cuts, especially cuts in National Service, but I think that there is considerable room for saving in that direction. I believe that for some little time we have been maintaining a defence organisation against the type of war we are not going to have.
  Therefore, we could very rapidly run down and eventually do without National Service, provided that we are able to increase the strength of our Regular Forces by something like 25 per cent. If we are to do that, it would impose additional costs on us at the beginning because we will not get any improvement in recruitment unless we do considerably more than we
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  have done so far to improve pay and conditions of service as a whole to a point above the civilian level. It is true that this is not a short-term answer, because the immediate result of such a policy would be to increase the overall cost and not reduce it. In the end, however, there would be a very considerable overall economy, not only by a saving in money but by an even greater saving of manpower, with all the consequent benefits which would flow from that throughout the whole chain—not only of the defence Forces but the supply organisations as well. It is something that requires a far closer examination than it seems to me to have had so far.
  It has been suggested by my hon. and gallant Friend the Member for Ilford, South that one of our problems—and it has been repeated so many times over so many years—is the problem of exports. My hon. and gallant Friend instanced examples of the difficulties faced by firms opening up and developing markets overseas, possibly for the first time, and I would support those examples by some from my own experience. They show how difficult it is to break into new markets, how much it costs and what a long time it takes before one gets some return. Nevertheless, much as I like it personally, I do not think that this policy of special tax concessions for export industries—which is just another form of subsidy—is a proposal that we should accept at all.
  One of the things from which British export industries suffer is not so much the lack of direct financial incentives but very much more a question of getting down to the study of conditions in foreign markets and of selling the people the things they want in the way they want them. We have a lot to learn in the art of salesmanship abroad, and I do not think that the introduction of artificial subsidies will help us to learn it.
  During the debate, much has been said about wages, salaries, dividends and profits, and I do not want to introduce any party controversy in my own short contribution, although one could go on for quite a little time talking about the relation of one to the other and swopping figures across the Floor of the Chamber. All I would add is that I think that generally we have to get our incomes into

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  some sort of relationship with production. If incomes from wages, salaries or dividends rise faster than the rate of production, that inevitably leads to inflation How are we to get this into balance?
  Not very long ago, I flew a kite which I am quite prepared to fly again now. It may not apply to certain parts of industry. At least, it is an indication of the way in which we might think. Let us suppose that, as suggested by another speaker, we had a freeze of wages, and indeed of dividends, at this time, with some exceptions where wages are obviously too low and ought to be brought up to a reasonable level.
  Let us consider taking the profitability of each industry and negotiating with that industry in the same way as the trade unions negotiate on wages, and then devising a way to allocate fairly and equitably between the workers in that particular industry and the shareholders or risk bearers the proportion of profit they make after allowing agreed fixed interest on the real capital employed in the business and after allowing for an agreed amount to be placed to reserve for future development. If we shared the profitability of an industry between those who put up the risk capital and those who work in the industry we should have a direct relationship between the productivity of the industry and the remuneration given to those concerned with it. Then for the first time we should have a measure which might obviate constant wage-increase demands.
  Demands for increases in wages and salaries are usually related to all sorts of extraneous matters, and very rarely to the productivity of the industry. They certainly cannot be related to the cost of living because wages have risen faster than the cost of living. If we cannot get a direct relationship between the effort put into production and the rewards of industry we shall always be faced with the problem of inflation. It comes down to a moral question. It does not matter about the particular political colour of the Government in office or the form of economic solution applied to the problems which face us; we have to bear in mind that as a nation we have no natural or material reserves of wealth other than our manpower and its skill, ingenuity and brains.
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  If we are to succeed we must, all of us, from the top to the bottom, in Government Departments, and from managing director down to the factory floor-sweeper, be prepared to give value for what we receive. If we are prepared to put into our daily effort a full hour's work for the money we receive for it, we shall have no problem in facing overseas competition, no economic problems, or anything else of that kind. Everything will fall into place, and the problems will solve themselves rapidly.
  My last comment on the Budget is that the Chancellor came to the House today knowing that he had to take certain measures to deal with problems facing us now and that he has faced them with great courage. It would have been much simpler and easier to let things run on, and to deal with them in the next Budget, despite all the harm that would meanwhile be done.
  Some of us do not like every detail of the Budget. It would be a remarkable Budget if we all agreed with every part of it. I do not like the Purchase Tax on furniture and household goods. It is unnecessary taxation, but, in general, the measures are designed to stop inflation and I applaud them, as short-term measures only. They can only be of short-term value, and unless we go a good deal further we shall only face the same problems again very soon.
  8.39 p.m.
  Mr. Arthur Lewis: We have heard a very interesting speech from the hon. Member for Wycombe (Mr. John Hall). I could agree with much of it, except its beginning. I have sat here from the beginning of this debate and have heard every speech. It is strange that I have not heard one hon. Member on either side of the Committee say a good word for the Budget, either in its entirety or about the Purchase Tax increases on day-to-day articles.
  This is the most politically dishonest Budget we have ever had, either in this Chamber or in that which formerly stood in its place. Those of us who were here will remember that it was in February of this year—not last—that the Chancellor told the House of Commons that he intended to initiate his credit squeeze; that we were in grave difficulties and that certain very unpleasant medicines—particularly in connection with the start of the

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  credit squeeze—would have to be applied. Within a couple of months we had the normal April Budget, when the Chancellor gave to the better-off sections of the population—the very well-to-do and the not so well-to-do, but certainly not the poorest—about £150 million, I think, in tax remissions. Most of the big companies and the big vested interests did very well, but those who were not paying any tax at all got no remission.
  That was in April. Strangely enough, the Election came in May. I would not dare to suggest that the Chancellor's reason for giving tax remissions mainly to the middle-class and better-off sections was to get votes for the Tory Party. I would not say that for one moment. It was coincidental, perhaps, that it did happen. We had the May Election, at which we were told by the Tories—as we were told in the October, 1951, Election and subsequently—that the Tory Party wa3 the party that would mend the hole in our purses, the hole in our pocket, would bring down the cost of living and make the pound worth something. We were told that they would not cut the social services. In 1951 the people fell for those false promises.
  What has happened? From 1951 to date we have had the highest cost of living ever recorded in our history either in peace or in war. The pound is now purchasing less than at any time in our history, in peace or in war. There have been substantial cuts in the social services, although the Government promised faithfully that they would not cut them.
  Mr. John Hall: Would not the hon. Member agree that—for the first time probably since the Government of 1945–50—wages have risen faster than the cost of living? From the point of view of the wage earners, is not that improving the value of their earnings?
  Mr. Lewis: No, because when one takes the cost of living as a set figure one must appreciate that there are certain items in day-to-day use which have gone up in price astronomically, while others in only occasional use may have been reduced. In the cost-of-living figures one can balance the one against the other, but the Government, although they promised that they would not, cut the subsidies on eggs, butter, bacon, cheese and the rest. It is no comfort to the
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  housewife with £x from her husband's income to spend on more costly butter, bacon, cheese, and so on, to be told that wages have increased above the cost of living because there have been reductions in wardrobes—of which she probably buys one in a lifetime—or in the price of silver-plated tea services, or things like that.
  It is true that one can quote one figure against another, but what we and the housewife are interested in is the day-to-day commodities which the housewife has to purchase and put on the table for her husband and her children. Those prices have increased not because of any external causes, but because of the deliberate policy of the Chancellor and of the Government of forcing them up. Hence the forcing up of cost of those articles has meant that the workers have inevitably been compelled to come forward for wage increases.
  The hon. and gallant Member for Poole (Captain Pilkington) mentioned a list of some dozen or so trade unions which now have claims pending. I suggest to him that after this Budget that list will be out-of-date. I prophesy that the dozen he mentioned today will, in two months' time, be two dozen, because this Budget is in itself inflationary. It will, in fact, again force up the cost of living, and the trade unions will come forward for further wage increases. That is inevitable.
  Captain Pilkington: Will that not again send up the cost of living?
  Mr. Lewis: Of course it will. That is why I say that this Budget is a politically dishonest Budget. If what the Chancellor did in February to make money dearer was, in fact, responsible, together with his subsidy cuts, for forcing up the cost of living and wage rates and pricing ourselves out of the world market, then what he has done today is a repetition of what he did in February.
  I say that the Chancellor is either politically dishonest in what he did, or dishonest in what he said this afternoon. He said that his credit squeeze, which he started in February, is now having an effect, and that our balance of payments problem is not so serious. If that is the case, why initiate a scheme of restriction which will aggravate the problem, which he says is being put right—because it will aggravate it, make no mistake? I see that

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  the right hon. Gentleman shook his head when I said that the Budget was inflationary. Of course it is inflationary. Incidentally, every hon. Member without exception, including those on the Government benches, has been most outspoken on the question of Purchase Tax on what I term the day-to-day household articles of the housewife.
  I ask the Minister, quite seriously, to explain to me, if the Chancellor is right when he says that he has to initiate this credit squeeze because we are spending too much money on the home market and not exporting enough of our goods to pay for extra imports, and, therefore, have to have credit restriction and Purchase Tax, to what extent putting 30 per cent. Purchase Tax on dustbins will assist our export of dustbins?
  Will the Government tell us how many more dustbins we shall export? I should like to know whether they will go to hard or soft currency areas. I should like to know whether 30 per cent. on buckets and pails will assist our export trade. Will the right hon. Gentleman tell me how many buckets and pails we export, and whether they are exported to hard or soft currency areas? I could go through the whole list. It is ludicrous, nonsensical, to say that 30 per cent. put upon pot scourers, rolling pins and pastry boards will assist the export trade.
  I submit that it is bound to release the workers on that type of job and the material to go into other spheres where it can be used. Now we shall have the metal used for dustbins used on Rolls-Royce cars. The metal that would have been used for making pot scourers and wire wool will now go to making cars and the workers making pot scourers and wire wool will make some other commodity. How ridiculous. How ludicrous. This Budget, as was the case with the last Budget, is an attack on the standard of living of the poorest section of the country, those least able to bear these attacks. That is the only answer that can be given on direct taxation. What about the indirect taxes?
  Mr. John Hall: I have been listening to the hon. Member with great interest because, as he knows, I have made some comments on the Purchase Tax changes. I think I am right in saying that the Chancellor indicated that the effect of these changes would be to increase the
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  cost-of-living index by a little under one point, which does not seem a savage attack on the cost of living.
  Mr. Lewis: The Chancellor and hon. Members of his party have told me, since 1951, not that the cost of living would go up, but that they would stabilise and reduce it. How can I believe the words of the Chancellor when he has had from 1951 in which to stabilise and reduce the cost of living, and yet we see it going up—not by 1 per cent. but higher than it has ever been? I do not say this with disrespect to the Chancellor, but I do not believe the Chancellor's statement. I do not say that he was making it dishonestly, but I suggest that he cannot possibly foresee whether it will be one point or not.
  I will explain why. I was coming to the invidious attacks of indirect taxation and the tax on local authorities and public expenditure. There again, people other than housewives use buckets, brushes, pans and the like. One of the greatest users of such things are local authorities who will find their bills going up. Not only will they find workers demanding extra wages, but they will find the costs of their services and of the articles they have of necessity to use going up.
  I come to what I think is the most awful part of the Budget. That is the cunning and artful way in which the Tory Party and Government are to get local authorities to do the dirtiest of their dirty work. They are to tell local authorities that they cannot do this or that, or, if they do, they will make it physically and financially almost impossible to do it. We are told that there is to be a cut in housing subsidies and, eventually, the complete abolition of housing subsidies. In the next breath, the Chancellor tells us that he is not going to cut the social services. What is housing today but a social service? Is not that a cut in the social services?
  What about the promises and the praises that were given to those great people who remained in the bombed areas of London and other cities and withstood the blitz? We praised them and paid great tribute to them. We said they were great people in the London docks area, who had been bombed not once, but two, three or four times. From 1945 to 1955—for ten years—they have been laboriously trying to rebuild, as in my area of West

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  Ham. In my area we lost more than a third of every type of habitable accommodation—every type of residence completely destroyed—and in the whole of the remaining two-thirds the accommodation was damaged, either seriously or partially. We have had a terrific job to get that accommodation replaced. We have landed ourselves in debt. We could not help that because we had to borrow, even with the housing subsidy.
  Since February the Bank Rate has gone up four times and, without any question of the effects of this Budget, for interest rates alone my local authority has to find a further £30,000 a year by an extra rate of 6d. We have to put 1s. on the rates next year and every five years and we have a rate of 28s. in the £ already. That means a rate of 33s. in the £, and now we are told that the Government will cut the subsidy and eventually abolish it altogether.
  How can a local authority—and this is an example that can be repeated by others of my hon. Friends—expect workers like dockers, engineers, bricklayers, carpenters and manual workers—the salt of the earth—who find that their cost of living goes up because of the effect of the Budget, find that their rates go up by 2s., 3s. and 4s. in the £, not to mention the new Rating and Valuation Act and their rents, and then find that the subsidy is to be cut and abolished, not to demand wage increases? Of course there will be wage increases; of course there will be another inflationary spiral.
  I heard the hon. Member for Dorset, North (Mr. Crouch) make one of the most ludicrous speeches I had ever heard, at least it was so in one part of it. I do not think that you were present at the time, Sir Charles, and so I must repeat it. One of my hon. Friends made a remark about Lady Docker's car. I did not want to mention Lady Docker's Daimler, but the hon. Member for Dorset, North went on to say that things were now so bad, with high taxation, that it was suggested that Sir Bernard Docker might leave the country. What a terrific catastrophe that would be! Surely, there would be not fewer Daimler cars produced if Sir Bernard Docker were to spend six months on the Riviera, as he has done.
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  What I am trying to get over is that the attitude of always looking after the big financier, the big business man and the big vested interests, which the Tory Party is so keen on doing, does not help our problem. It would, in fact, be wise and proper if the Government would now say that the people who have built up the wealth of the country are the ordinary manual, clerical, administrative and technical workers and that people should not sneer, as some hon. Members have done, at the miners. There were sneers this afternoon about miners not doing their work properly.
  Let those who criticise the miners dig the coal. I would not go down, but if those hon. Members are so keen on telling the miners how to do it I would be prepared, subject to seeing my Whips' Office, to get some of my hon. Friends to pair with them so that they can go down the mines and help to solve the problem.
  There is this attitude of blaming the workers, whether the miners or any other section, when we know that big profits are being made, day in, day out, double bonuses and 200 and 300 per cent. dividends. That is what is being carried on the cost of the articles. That is why we are being priced out of world markets.
  I should like to say one last word about something which has been jocularly referred to but which is, in fact, serious. If the Chancellor is honest and sincere—and I accept that he is—having said in February that we were in difficulty, if he saw that there was a possibility of our consuming too much and not sending sufficient to the export markets, why did he and his Government force through, against the big opposition of Members on both sides, the Bill setting up the Independent Television Authority? Why is it that money has been wasted, and is now being wasted, calling upon people to spend their money and buy the very pots, pans and brushes on which the Chancellor is imposing Purchase Tax to prevent their sale?
  I do not have commercial television, but those who see it know of the advertisements imploring people to spend money on articles which should not be on the home market. In fact, the very television sets themselves should not be on the market: they should be exported. According to what we are told, we should try to export everything we can. Yet this encouragement is given to private vested

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  interest. Some hon. Members who are indirectly, if not directly, associated with advertising have been pressing for this. We find that they are to get financial advantage, with no benefit to the country whatever.
  I have sat in this House for more than ten years, and I have listened to every Budget in that time, though I have not before taken part in a Budget debate. After hearing this Budget I hope that the workers and the trade unions will rise in their wrath and try to get rid of this Government, so that we can have an Election, to see just whom the people would elect if they had an opportunity to change the Government.
  9.1 p.m.
  Mr. Gerald Nabarro: I interpret the purposes and objectives of the Budget presented today as being threefold, and I interpret them for a moment in my own words: first, the desire on the part of the United Kingdom to strengthen sterling overseas; secondly, the desire on the part of the Government to endeavour to slow up the inflationary processes which have bedevilled our economy ever since the end of the war—not peculiar to a Conservative Government, for they also bedevilled the Socialist Governments in the six preceding years; and, thirdly, to improve the volume and value of Britain's exports while attempting to hold stable or reduce the volume of Britain's imports. It is against the background of those three objectives that I wish to contribute a short speech to this debate tonight.
  The general tenor of the speeches made from the Opposition benches has been that the Budget is dishonest, and it is, evidently, in the minds of the Opposition Members that the Budget is in contradistinction to what the Conservatives said on the hustings last May. I was, of course, a Conservative candidate, and I am surprised that hon. Gentlemen opposite have not taken the trouble so far, though it may emerge tomorrow, to quote to the Committee exactly what the Conservatives wrote about fiscal and monetary policy last May.
  Mr. Moyle Mr. Moyle rose—
  Mr. Nabarro: I cannot give way now, but when I have finished this passage I shall willingly give way.
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  These words were written in the Conservative Party's manifesto—"United for Peace and Progress." and I quote from the chapter "Trade Not Aid," in page 15:
  "Any country pursuing a policy of economic expansion and full employment faces a constant danger of inflation. The risk is that home demand may take away from the export trade and swell the import bill. Here sound monetary and fiscal policies are powerful weapons. We propose"—
  we Conservatives propose—
  "to continue with their flexible use."
  I submit that the Chancellor of the Exchequer, in his supplemental Budget today, has continued with their flexible use. I submit—
  Mr. Moyle Mr. Moyle rose—
  Mr. Nabarro: I was not going to give way at this stage, but I will give way to avoid having to give way later.
  Mr. Moyle: I am most grateful to the hon. Member. May I recall to his memory the speech which was made by the present Minister of Fuel and Power at Birmingham on the eve of the Election, when he told the people of Birmingham that we were in sight of having each a house of our own plus a car?
  Mr. Nabarro: Perhaps the hon. Gentleman will allow me to continue my speech. I shall deal with all these matters in due course.
  Mr. Cyril Bence: It will be very long.
  Mr. Nabarro: The hon. Gentleman may have observed that I have sat in the Chamber now for several hours, with only one break, and that I have interrupted only once, and that was an interruption in a speech of an hon. Gentleman on my own side. My absence of one hour was to go to the B.B.C. and to broadcast on the Budget, on the Overseas Programme against Mr. Michael Foot, a very worthy opponent, I am sure.
  I claim that the wide range of the Chancellor's proposals today is exactly in accord with the terms of the Conservative Party's manifesto last May. I am the strongest possible supporter, and I hope my hon. Friends are, of the use of the monetary and fiscal weapons, individually or severally, or in conjunction with one another, as in the case of the Budget today, in pursuit of those three desirable objectives I outlined at the outset.

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  The Chancellor this afternoon paused—and I seek no party political capital out of this—to observe that the general increase of United Kingdom production over the first nine months of this year is about 6 per cent. compared with the same period of last year, with one notable exception—the coal industry. In the first nine months of this year coal production has declined by 3,500,000 tons. I had a quarrel with Her Majesty's Government last July on fuel and power policy. I talked of my fuel and power policy in contrast with that of the Government. I said on 21st July that the economic and financial effects of having to import 12 million tons of coal this year, at a cost of £80 million, instead of exporting larger quantities of coal, would have a calamitous effect upon our balance of payments and would have far-reaching economic and financial implications.
  If there is any single cause for the provisions contained in the Budget which was presented this afternoon it is the country's coal position. That is the malignant factor. It is no good the hon. Member for Norfolk, South-West (Mr. Dye), who represents an agricultural constituency, shaking his head.
  Mr. Sidney Dye: Why not?
  Mr. Nabarro: For the reason that the Chancellor said this afternoon that we earned in the first six months of this year an overall surplus on the balance of payments of only £17 million. He said, quite rightly, that the surplus was insufficient for our investment needs overseas, and at home. I wonder whether the Chancellor would have said that if he had had available an additional £60 million, which is the cost of importing coal so far, this year, and if the surplus in the first nine months had been £77 million? I submit that practically none of the proposals made this afternoon would then have become necessary.
  I say to Her Majesty's Government, not in any spirit of "I was right last July and you were wrong," that until and unless they deal dramatically with the whole of the fuel and power problem by a coherent and comprehensive programme to link the individual policies of the nationalised fuel and power industries our coal position will decline, and thus the drain
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  on our balance of payments next year will be even more severe than it has been this year.
  I want to say a few words about the curb on the investment programmes of nationalised industries. It does not go nearly far enough. The mistake that is made so often by hon. and right hon. Members on both sides of the Committee is that they believe that a nationalised industry is necessarily a wholly productive industry. They believe that investment in nationalised industry, and expenditure by it, is essentially productive in character. Nothing is further removed from the truth.
  The Chancellor said this afternoon, I thought a trifle magnanimously, that the gas industry was cutting back its investment programme by £3 million. I do not wish to be derisory, but that is £3 million out of an investment programme on the part of the nationalised fuel and power industries which this year will cost £400 million. It is a reduction of three-quarters of 1 per cent., in the case of the gas industry only.
  But what about the major fuel and power industry, from an investment point of view, State electricity? This year it is taking £200 million of new investment. I have made speech after speech in this House advocating an increased tempo of investment in the provision of industrial power. I do not abate one jot of that. I want the maximum investment in State electricity for the provision of industrial power to redress the balance that exists of 2½ to I between the United States of America and this country, in their favour.
  My quarrel is with the vast sum of money spent out of electricity funds each year on purposes of a non-productive character. For instance, why is it necessary for State electricity to spend vast sums of money annually on promotional advertising? I do not want to go into the whole of the gamut of private enterprise advertising, for the reason that private enterprise advertising is of a competitive character and there are competitors in every industry in which private enterprise participates, and most of us, within reason, support the slogan, "It pays to advertise." But when an industry is nationalised and it is a monopoly and the electricity cannot he bought from anybody else, does it

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  make sense, for example, to take a 12inch treble column in a newspaper showing, against a background of murky gloom, a house brilliantly lit with the caption, "Electricity for lighting?" Pray, what else will one use for lighting? That kind of thing is a complete waste of money.
  Hon. Gentlemen opposite should not quarrel with what I say. The right hon. Member for Blyth (Mr. Robens), in a previous debate on the electricity industry, made a very similar point. It is the economic point upon which I dwell. State electricity recently went to the money market for £200 million of new investment. Had I been the Minister responsible I would have granted that without question, were I satisfied that the whole of that money was required for productive expansion; but it was not. Millions of pounds every year is used by the State boards in the pursuit of purely commercial activities, not of a productive character, such as promotional advertising.
  Is it really reasonable—and here Labour Members opposite agree with me—that one should go to an expensive State-owned showroom in London, or elsewhere, for example, a showroom owned by an area electricity board, and find in the window a radio set, a television set, an electric cooker, an electric washing machine and similar appliances? My claim is that the function of a State electricity board—and I do not quarrel with its nationalisation—it to generate, to distribute and to sell electricity. It is not the function of the State boards to compete with the Co-operatives and private enterprise on what I believe to be an unfair basis, and a subsidised basis, in the sale of electrical appliances; for tens of millions of pounds of capital are absorbed by such ventures. It is inflationary and that money should be devoted to productive expansion in the generation and distribution of electricity.
  The same may be said of the North of Scotland Hydro-Electricity Board. The same may be said of the gas boards and I shall dwell upon this subject in greater detail on a future occasion, when I hope that the Reports and Accounts of these State boards will be debated on the Floor of the House for a full day. For the time being I say to the Economic Secretary to the Treasury that he should examine this
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  point. I drew from a very reluctant Minister for Fuel and Power yesterday and, after all, I have been preaching it to him for the last three years; I felt quite pleased last evening that he was forced to adopt my policy and come along to the House and announce it—
  Mr. James Carmichael: I do not know why the hon. Gentleman is not Prime Minister.
  Mr. Nabarro: That will all come in time, no doubt—the announcement of a reduction of £500,000 this year in the promotional advertising of the State gas and electricity boards. That policy has to be taken much further. Let those boards use their investment money for productive operations. Let them discard all other operations of a commercial character which, in my view, really belong to the field of private enterprise and to the Co-operatives. That is an economic matter of great importance if there is to be a curb on the investment programme of the nationalised industries.
  I wish to say a word about productive labour. The Chancellor used a telling figure when he said that for every person registered as unemployed today there are two vacancies. In the Midlands region of the Ministry of Labour there are about 55,000 vacancies registered at present. There is little or no means of filling them. I am very dissatisfied with the policy in regard to the earnings of old-age pensioners, and I pin-point one factor alone this evening, because I believe it is a critical one and related precisely to what was said by the Chancellor this afternoon.
  When the Socialist Party were in power the old-age pensioner could not earn more than £1 a week before his pension became mulcted. The Conservative Party raised that £1 earning limit to £2 a matter of three-and-a-half years ago. Since then wages have risen a great deal. Since then the whole employment field and position has changed. I shall not go into the detailed arguments for or against an earnings rule. I shall content myself by asking the Economic Secretary this evening where there is any valid reason why that figure of £2 should not be increased to £3 with a view to providing a much more powerful incentive for men and women—men at the age of 65 and women at the age of 60—to continue in productive employment.

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  If there is any single aspect of old-age pensions, about which I receive an increasing number of letters from constituents and others all over the country, it is upon this iniquitous earnings rule. I am not this evening pleading for its abolition. That is a matter involving many technical arguments on both sides. I am merely saying to the Economic Secretary that if he needs increased production urgently why not try to fill the vacancies by giving old-age pensioners a bigger incentive to remain at work, by increasing the £2 earnings limit to £3, or even more if that is possible, before their pension is mulcted?
  Mr. James Griffiths: It so happens that as Minister of National Insurance I introduced this rule in 1946. May I put the dilemma to the hon. Member and ask for his co-operation if we are to reconsider this matter? The difficulty is that private employers and some public employers used to deduct the amount of the old-age pension from wages and, therefore, trade unionists objected—as I do, as a trade unionist—to a State social insurance payment being used by employers, whether public or private, to reduce wages. Would the hon. Member agree that if the amount is increased we should ask the Government, at the same time, to pass a Bill making it illegal for any employer to reduce wages by that amount?
  Mr. Nabarro: I am entirely in agreement with what the right hon. Gentleman has said. As well as being an hon. Member of this House, I am actively engaged in industry and every week I see in the companies in which I am concerned that managements have to employ able-bodied men still in their forties and fifties to do light tasks which could be performed by old-age pensioners of sixty-five years of age; except that many of those old-age pensioners will not consider undertaking the work at present, because of the £2 earnings rule. I believe that the Economic Secretary would do the nation a very great service if he represented to the Chancellor what I have said this evening, all of which I believe commands the support of hon. Members on both sides of the Committee. I agree with what the right hon. Member for Llanelly (Mr. J. Griffiths) has said.
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  A final word about industrial problems. I have often spoken in the House and in Committee in defence of private enterprise profits in industry. I support absolutely what the Chancellor has done today in connection with the Profits Tax, though I do not think that he has gone far enough. Before this afternoon's Budget, the arrangements were that the Profits Tax on distributions was 22½ per cent., and the Profits Tax on retentions or on money ploughed back into a business, was 2½ per cent. As the 2½ per cent. is, in effect, a tax on capital, I would far rather that the Chancellor had eliminated that tax altogether and knocked the 22½ per cent. up to 32½ per cent., or even 35 per cent.
  I believe that if there is to be reasonable restraint in demands for increased wages, and if they are to be allied as far as possible to progressive increases in production in every field, the employers, managements and owners have a moral as well as a social duty to the wage earners, the trade unions and to the nation in that they are capable of setting an example of restraint in the sums of profits distributed. I therefore welcome the increased tax on distributions. I do not think it has gone far enough and I would still like to see the Chancellor increase the weight of the profits tax on distributions and eliminate the 2½ per cent. on retained profits.
  The Economic Secretary to the Treasury (Sir Edward Boyle): May I interrupt my hon. Friend for one moment? I hope he will realise the difficulties which arise here. If we increase the rate too steeply at one time we shall, in fact, be taxing company reserves. Furthermore, there is the point that one has to remember that a very steep rate of tax on distributions would bear very hard on companies which have a high proportion of preference stock.
  Mr. Nabarro: I quite agree with my hon. Friend and I would not think at this stage of the debate—although I will later—of debating with him the gearing of capital structures within different industries, a fascinating study when considering Profits Tax.
  Mr. Lewis: There are not many cheers from those behind the hon. Gentleman.
  Mr. Nabarro: The hon. Gentleman says that there are not many cheers behind me. I am not playing to the gallery, but

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  to hon. Members on both sides of the Committee. I am saying that if there is to be reasonable restraint in demands for increased wages, then there must surely be a moral obligation upon employers, managements and owners to demonstrate a similar restraint in regard to the sums distributed in dividends.
  A last word on National Savings. I am very pleased indeed with what the Chancellor did this afternoon in raising the limit for the current issue of National Savings certificates from £750 to £900. That is important. There is an increasing number of middle-class people who own the maximum number of Savings certificates. Small personal savings in the form of National Savings have reached a record level in the course of the last year or two.
  I suggest to the Economic Secretary that we are going forward by a series of hiccoughs in this field, and that the same measure of encouragement ought to be applied in the case of the Post Office Savings Bank, which the Chancellor has omitted. The rate of interest there is only a niggardly 2½ per cent., with all the inquisitorial arrangements made by the inspectors of taxes concerning small sums of interest credited to the accounts of depositors. If there is to be this impetus in National Savings, the concession should not be restricted only to Saving certificates. It should also include an increased rate of interest upon deposits in the Post Office Savings Bank.
  Generally speaking, the Chancellor's Budget is in accord with Conservative promises on the hustings at the last General Election. It follows almost exactly the quotation from the Conservative Party manifesto which I quoted earlier, and I believe that it will make a substantial contribution towards those three primary objectives with which I am sure neither side of the Committee can quarrel—first, the strengthening of sterling oversea; secondly, the slowing up and eventual halting of inflation; and, thirdly, an increase in exports and an improvement in Britain's balance of payments position.
  9.26 p.m.
  Mr. Cledwyn Hughes: The hon. Member for Kidderminster (Mr. Nabarro) has spoken of Conservative Party promises and has said that he stands firmly by the Conservative Party Election manifesto of 1955. He has conveniently
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  forgotten the Conservative Party promises of 1951, and the Conservative Party manifesto, "Britain Strong and Free," in which it was stated that a Government stands or falls by their ability to stabilise the cost of living.
  Mr. Nabarro: That is the Conservative Party manifesto of 1955, when I was elected by a majority of 8,224. On the previous occasion the majority was only 5,158. The hon. Member is years out of date.
  Mr. Hughes: I know that the hon. Member is anxious to forget 1951, but the fact remains that those promises were made in that year, and that that statement was contained in the relevant Conservative Party manifesto.
  Notwithstanding what the hon. Member has said, we have today had the misfortune to listen to one of the most dismal and haphazard Budget statements of the century. This supplementary Budget is an admission that the Government's policy during the last four years has been an abject failure. It is not without significance that we have listened today to sustained criticism from hon. Members opposite, and have had two hon. Members opposite voting with us in the Division Lobby.
  Two things emerge clearly from today's Budget statement. First, the Chancellor is determined, come what may, to place the heaviest burden upon the poorest section of the community. Secondly, any saving he hopes to effect will hit the public sector of industry and not private enterprise.
  Mr. Burden: It is as well to remember that it was only in 1951 that the right hon. Member for Leeds, South (Mr. Gaitskell), who was then Chancellor of the Exchequer, increased the price of school meals by 1d. He said that in order to introduce savings into the education scheme he had discussed and considered raising the school entry age and lowering the school leaving age, but he raised the price of school meals by 1d. That, indeed, was a tax upon the poor.
  Mr. Hughes: What my right hon. Friend did at that time was quite insignificant compared with what has been done today. In addition, the attitude of this party towards the social services

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  is quite different from that of hon. Members opposite. The Chancellor continues to say to the private sector of industry what he has said in every one of his Budget statements in this House. That is that he hopes they will play the game. He says "I am not going to force you to do very much; I am not going to make you do anything unpleasant," and then he proceeds to prune the public sector. He has said that he has confidence that the private sector will do what is right by the community, but after each one of these Budgets it has been shown clearly that the private sector, with some exceptions, is not prepared to do its duty by the nation.
  The private sector, in the matter of ploughing back of profits, has not done its duty by the community in the last four years, but, in spite of that and in spite of the fact that he is worried about it, the Chancellor refuses in consecutive Budgets to take any constructive action to remedy the defect.
  The hon. Member for Kidderminster mentioned electricity. I disagree entirely with him. Here is a body which has done most excellent work since nationalisation in 1947. In the matter of rural electrification, tremendous progress has been made. For example, in my own part of the country, since 1947 the number of premises connected to the electricity supply has been doubled. The work there is proceeding well, but there is obviously a tremendous amount still remaining to be done, and that work is now to be curtailed.
  What will be the consequences of the Chancellor's action? Agricultural production will suffer, industrial development will be restricted, the incentive to remain on in the countryside and to stop the drift away from it, especially in rural Wales, will be lessened. What niggardly policy is this? We have a very low percentage in parts of rural Wales of farms, smallholdings and houses connected to the electricity supply, but we are now getting on with the job. The Chancellor today is retarding that important work.
  Again, the effect of the Budget on local authorities may well prove to be disastrous. These local authorities are already under great difficulties as a result of the increased interest charges, and even now,
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  without this Budget, the rents of council houses are likely to go up by anything from 4s. to 5s. a week. What will be the effect of the Chancellor's proposals on local councils? I suggest that it will be to retard substantially the essential work upon which they are now engaged, and this, as has already been mentioned by my hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater), will be especially true of the poorer local authorities. The Chancellor has dealt them a very harsh blow, while the reactionary local authorities will be only too ready to take the excuse and do nothing at all.
  This country depends for its economic survival upon the small man in every sphere—upon the productive worker in the quarries and the mines, upon the small farmer and upon the small industrialist. They are the backbone of the community, but what does the Chancellor tell these people today? He says that they must work harder. No matter how high the cost of living may soar, they must practise wage restraint. They are expected to display a saintly restraint. The price of those necessities a young couple needs to start a home will go up as a result of the statement we have heard today and the young people are supposed to grin and bear it.
  The small farmer and small manufacturer depend upon some elasticity of treatment from the banks, but today they are shackled hand and foot. We know what effect the credit "squeeze" is having upon the small farmer who may have an overdraft at the bank. Recently these people have had a letter from their bank managers, as the result of the directive of the Chancellor, telling them to reduce their overdrafts by 10 per cent. although it is essential that they should receive facilities from the bank. How does the Chancellor expect agricultural production to go up in those circumstances?
  The same is true of the small industrialist. Perhaps he obtains a contract, and is given 10 months in which to fulfil it. He needs money in the interim period but he will not get it until he delivers the goods. The policy of the Chancellor prevents him from receiving any credit facilities from the bank. The Chancellor's economic policy, far from assisting, is crippling the country in those very sectors which are vital to the nation's recovery. This policy will ultimately drive the nation to ruin.

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  The Chancellor has no moral right to ask the worker for wage restraint unless he is prepared to ask other sections of the community for equivalent sacrifices. If he had had the courage today to announce a dividend freeze, say, for 12 months he would have had the moral right to say to the workers, "Don't ask for more wages for 12 months. Look how I am treating the wealthier section." In the circumstances he has absolutely no right to expect the workers to do anything other than ask for increased wages, especially in view of the rising cost of living.
  Today the Chancellor baulks at the thought of controls and of a planned economy. The view of my hon. Friends and myself is that that is the only remedy in the present crisis. Let me tell the story of a friend who, during boyhood, fell and broke his leg. The leg was nut into splints. The boy was in pain, so someone slackened the splints. The result is he limps to this day. Without a planned economy this country will in a few years be limping in the eves of the other nations of the world, and the responsibility for it will be that of the present Chancellor of the Exchequer who is the most disappointing Chancellor we have ever had.
  9.40 p.m.
  Vice-Admiral John Hughes Hallett: Despite the criticism which has been levelled from the Opposition benches. I am sure that the country as a whole will welcome the firm action embodied in this supplementary Budget. However painful some of its provisions and however disappointing the deferment of long-cherished hopes may be, every thinking person will applaud the Government's determination to put the nation's finances back on a sound footing.
  It is very easy to accuse the Chancellor of having brought about our present difficulties by too easy a Budget in the spring. To me as a newcomer to politics, the fallacy of that charge is that it has always been Tory policy to trust the people rather than to control them. Had reasonable restraint in spending been exercised all might have been well. Indeed. Tory freedom has worked well in allowing output to expand, but has, proved, perhaps, too heavy a draught for certain sections of the population. That is the quite simple but none the less true explanation
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  of the need for the measures being debated now.
  As I see it, the Chancellor has only two objectives—not three as my hon. Friend the Member for Kidderminster (Mr. Nabarro) suggested. The first is to restore the balance of payments; the second to conserve, and if possible to increase, the value of money—that is to say, to halt, and if possible to reverse, the rise in the cost of living. Of the balance of payments I would only say that we all recognise—and many of us regret—our present need. Personally, I have always rather questioned the theory that to achieve this balance we must have an ever-expanding economy, an ever-increasing tempo in our industrial life. I sometimes have an uneasy feeling that the nation has become rather like the amateur on to tightrope who can only keep his balance by going faster and faster. The great danger is, of course, that one may reach one's maximum speed before getting to the end of the rope.
  It is, however, of the second objective that I wish to speak tonight. Ever since the war the rising cost of living, the falling value of money, the slow inflation—call it what we will—has been explained, and sometimes even justified, by the alleged need to accept it as the price of full employment. Yet if it continues unchecked this creeping inflation will one day prove to be almost as great a social evil as was unemployment itself—and for very much the same reason. Like unemployment, it results in the progressive ruin of a large and deserving minority of our people, and the fact that in this present case those people consist very largely of elderly folk who have served the country well during their active life surely makes it all the worse.
  I cannot help feeling that there must be something wrong with the economy of this country as conducted by both parties ever since the war—an economy which, during this long period of steadily-rising prosperity, has resulted in, and committed at the same time so many of our fellow countrymen to, a steadily-declining standard of life. Let us consider what has happened since 1945. We read that industrial output is up by 27 per cent., and non-economists like myself might be pardoned for supposing that we should all be 27 per cent. better off. Since the cost of living during the same

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  period has risen by something over 50 per cent. that should mean that all our incomes ought to have risen by about 90 per cent. We learn that that is almost exactly the figure by which, on an average, salaries and wages have risen during that period.
  When we turn to the self-employed, we find that their incomes have risen on an average by about half that amount, so they are actually a little worse off than they would have been 10 years ago. Those who depend on incomes from dividends or rents have had on an average, according to an official publication the other day, an increase of about 30 per cent., so they are very appreciably worse off than would have been the case 10 years ago. But countless thousands of people who live on pensions, or who have saved by means of insurance companies and who live on annuities, have not had any increase at all, and it is they who are the real victims of the system that has prevailed ever since the war.
  Of course, I know that there are some people who argue that there is nothing wrong with all this, that there is no reason for anyone who is not actively engaged in productive industry to benefit when it prospers. As for the old people—this is not said in so many words but sometimes implied—"Why do not they die and cease to be a burden on the young?" Of course, I know that no hon. Member advances such an argument in this Committee or believes it, but, none the less, I believe it is important to pause for a moment and ask ourselves what is the basic cause and reason for increased prosperity and output, and who, therefore, is entitled to benefit from the consequences.
  As we all know, it can be due to individual invention, or to brilliant management, or perhaps to very daring and hazardous investments, and it is often due to long hours of hard work and to brilliant and exceptional skill, which results in high individual output. All those several causes are in fact rewarded by various methods and expedients which are well-known to hon. Members, but I suggest that, in the main, the rising prosperity of this nation, or, for that matter, any other nation, does not depend on more arduous work or effort on anybody's part; in fact, it is usually the reverse, with improved mechanisation and so
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  forth. It is due fundamentally to man's increasing knowledge, to the general ad-vane in science and engineering, to our increased ability to exploit the forces of nature and turn them to our own benefit.
  These things cannot be ascribed to any single individual or, for that matter, to any group of individuals. They are really an inheritance in which we all share, and in whose benefits we should all share as well. This means that rising productivity should lead to falling prices rather than to higher salaries or higher wages. I suggest that if the expression which the Opposition have so often used of "Fair shares" means anything, it must mean that. We should aim for lower prices rather than for higher wages.
  It is certainly net for me to suggest how this can be brought about in detail. That is a matter for financial and economic experts. I would content myself with two suggestions. The first is that I believe that the greatest contribution which any Government can make to this is to economise in its own expenditure. It is quite idle to expect the public as a whole to exercise restraint and be thrifty unless the Government sets the example.
  I therefore fully support the measures of economy which my right hon. Friend announced when he opened his Budget this afternoon. Indeed, I regret that they do not go further. Speaking for myself, I still believe that substantial sums could be saved in men and money by the Defence Forces. We hear a great deal about the waste of labour involved in National Service, but we hear very little about the fact that there is an army, which must number several hundred thousands, of civilians directly employed by the Defence Forces. Even if only 100,000, say, of those could be released to productive work in industry that could go a very long way to helping to solve the country's problem today.
  My second suggestion is really in the nature of an insurance against a failure to halt the rising cost of living. It only offers a way of mitigating some of the social dangers and social evils which I believe are inherent in continuous inflation. I suggest that in future whenever wages or salaries are raised in a particular industry or profession a proportionate increase should be granted to the persons who have been superannuated from that industry, notwithstanding the fact that it

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  would mean that an increase at a given time would have to be somewhat less.
  Alternatives to measures such as these are those of a controlled economy—a planned economy as it was called by the hon. Member for Anglesey (Mr. C. Hughes) but I prefer to use the words "controlled economy." Of course a controlled economy can be made to work, but not with the controls which are advocated by the Opposition, not with the controls which l believe 2.nyone in this House would support. Of course, if wages and all other forms of income could be fixed by law and, as a corollary, labour were controlled as well, there is not the slightest doubt that one could achieve full employment and have stable prices at the same time, and pay one's way, but the price would be a wholly unacceptable surrender of individual liberty.
  Not only that, but it would also mean the acceptance of a needlessly low standard of living for all. I think everyone will agree that any rigidly controlled economy is inherently and unavoidably inefficient. Yet, unless we can call a halt to inflation, we shall reduce an increasing number of our fellow countrymen to ever deepening discontent and, indeed, despair, with the result that people may one day turn to these sort of retrograde and totalitarian measures as the lesser evil of the two. If that happens, any success that may attend our efforts to restore the balance of payments, any success we may achieve in increasing the incomes of some of our fellow countrymen, will have been in vain.
  9.54 p.m.
  Mr. T. W. Jones: I want to emphasise the class aspect of the Chancellor's Budget Statement. I contend that the Budget which the right hon. Gentleman presented to us this afternoon is the worst example of sheer class legislation that we have had in this country for the last thirty years. In my opinion it was designed to make the poor poorer and the rich richer. It shows clearly that the Budget which was presented last April was designed for one purpose only: that was, to win the Election which the Government knew would be held the following month.
  I can well imagine the Chancellor of the Exchequer, when meeting the Cabinet on the eve of Budget day last April, saying, "Now, comrades, do not be alarmed at what I am giving out to the country
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  tomorrow. It is true it will not be a real Tory Budget, but it is designed for one purpose. We are having an Election next month, and when we get back with a majority we will wait until the autumn, when I will provide you with a real Tory Budget." This afternoon, we have had that Tory Budget, and we shall suffer for it while the present Government remain in power.
  How much longer are the Tories to rely on deceptions and dishonesty in winning Elections? This has been repeated time and again during the last thirty years. Let me briefly try to prove that this is a class Budget. How many of the working class who have the telephone, having heard the Chancellor's speech this afternoon, will decide to have that service cut, off? They will not be able to afford it. I can visualise thousands of people, even tomorrow morning, telephoning the telephone manager asking to have the service cut as from now on they cannot afford it.
  As a result, it will be much easier for those who can afford the telephone to have it, and that is what will happen. I may be wrong, but I have a suspicion that this is a design and a device to cover the Government's failure with the telephone service in rural development. Time and again, when requests have been made for service, there has been the reply, "We have no poles, we have no wire, we have no staff." Now, the Post Office will have all that, and the wealthy people can more easily have the service as a result of the Chancellor's speech this afternoon.
  That same principle is seen working throughout today's statement. It is true that cut glass, travelling rugs, trolleys and such items are to bear reduced tax, or, perhaps, no Purchase Tax at all, but how many working class people are interested in cut glass, trolleys and travelling rugs? This class aspect of the Budget, therefore, is seen in every part of it, in everything that is proposed.
  I have read with great dismay the joint message addressed by the Chancellor of the Exchequer and the Minister of Housing and Local Government to local' authorities. Let me quote:
  "The aims of your review should be to ensure, first, that your authority's total capital expenditure in the year 1956–57 does not exceed that of 1954–55; and secondly, that no new works, even those already authorised, are undertaken unless your authority is satisfied that those works are urgently necessary to meet the needs of the area."

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  I represent a county where a 1d. rate does not produce £600. In that county there are urban district councils not one of whom, I think, has a 1d. rate which produces more than £80.
  It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.
  Report of Resolutions to be received Tomorrow.
  Committee also report Progress; to sit again Tomorrow.

MINISTRY OF FOOD (TRANSFER OF FUNCTIONS)
10.1 p.m.
Mr. Frederick Willey: I beg to move,
That an humble Address be presented to Her Majesty praying that the Transfer of Functions (Food and Drugs) Order, 1955 (S.I., 1955, No. 959), dated 30th June, 1955, a copy of which was laid before this House on 5th July, be annulled.
After the squalid performance of the Chancellor of the Exchequer we now move on to discuss something of relatively less importance, and it may meet the convenience of the House if I say at once that we have no intention of dividing the House on this Prayer, for we are not opposed to what it sets out to do. However, we believe that the steps being taken are inadequate, and there are some matters upon which we think we are entitled to further and better explanation.
We did oppose, as the House will remember, the transfer of functions from the Minister of Food to the Minister of Agriculture, Fisheries and Food, and one of the grounds upon which we opposed that transfer was that some of the functions being transferred were inappropriate to the Minister of Agriculture. It was during that debate that the Leader of the House, who, I am sorry to say, is not with us tonight, announced that it was the intention of the Government later by subsequent Order to transfer primary responsibility for what one might call the hygiene functions of the Minister of Health.
We are now discussing the Order of which the Leader of the House gave us notice. I said then that I did not know and the House did not know whether this was to be a clean transference of the Food
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Hygiene Division to the Ministry of Health or not. I still do not know, and the House does not know, and I do not think that either of the Ministers know. It appeared to me then and it appears now that there are to be two Food Hygiene Divisions. I think, perhaps I exaggerated a little when I said that this was to be no more than a making of the Minister of Health the office boy to send out directions to the local authorities. Perhaps that was an exaggeration, though on the face of it this Order only means that; but I said then and say again that this is neither a good administrative advantage nor an economy. The position under this Order is that apart from the administration of the welfare foods they are office boy functions that appear to be transferred to the Minister of Health.
There is the usual Explanatory Note to the Order, and its penultimate paragraph says:
"Apart from these particular changes,"
those are the changes to which I have referred—
"Article 2 (4) and the Second Schedule to the Order carry out a general re-allocation of the functions of 'the Minister' under the incorporated sections of the Public Health Act. 1936, corresponding with the distribution of substantive functions under the Food and Drugs Acts themselves. How far this operation consists of a transfer of functions, and how far a mere restatement of the law as it stands, depends upon the construction of the enactments and previous Orders in Council already referred to."
We hope we can be told what this means, and what is the temporary position and whether it is a clean transference to the Minister of Health of this responsibility. Certainly, the Minister himself, when he spoke on the Supplementary Estimates, spoke of joint responsibility.
What I want to know, and feel that we are entitled to know, is what is to happen to the Food Hygiene Division of the Ministry of Food. It was a very effective Division. It did a lot of good work and had the opportunity to do a good deal more under the Food and Drugs (Amendment) Act, which was the clean food Bill.
I emphasise this point because the position today is far from satisfactory. We had an intolerable delay with the clean food Bill itself and then, just a year ago, the Minister announced that we

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could expect the regulations under the Act in the early months of this year. We still have not got those regulations. We are still waiting for them. I suppose that the Joint Parliamentary Secretary will tell us that we can now expect them in the early months of next year. The conclusion to which we are driven is that the Government are very half-hearted in supporting the move to ensure cleaner food.
Let us, at any rate, try to have these two points clarified. Is the Food Hygiene Division to remain an entity, such as it was under the Ministry of Food, and is that Division being transferred to the Minister of Health or are we having a division of the Division and a joint responsibility between the two Ministers, meaning bad administration, overlapping and inefficiency? Quite apart from that, it is quite clear that in any case the food hygiene functions, affecting milk, meat and slaughterhouses, are remaining in the Ministry of Agriculture.
Why is this being done? I think that the House appreciates that there is wide concern throughout the country that the conditions in our slaughterhouses are absolutely deplorable. Nothing is being done about them. If the local authorities had the responsibility for the conditions in these slaughterhouses a good deal would have been heard about them by now.
Is this the reason why this function is not being transferred to the Ministry of Health? Is this a cover for the unsatisfactory conditions that followed the decontrol and the reopening of unsatisfactory premises? This is a disgrace and it will not do if this is to be covered by allowing the responsibility to rest in the producer Department. I hope that apart from receiving an explanation about the division of functions concerning food hygiene we shall have an explanation of the specific exception which is made and of the particular powers which quite clearly are not being transferred to the Minister of Health.
The other major function which is transferred is the administration of welfare foods. This is going over to the local authorities. I do not want to quarrel with that; it is a good function for the local authorities. I think that I am right in saying that Sheffield always carried out these functions very efficiently. It is the
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sort of work which, if it can be arranged, should be carried out by local authorities but, as the Minister of Health knows, and he has expressed concern about it, there has been a fall in the consumption of milk and orange juice. The Minister has said something which is disturbing and which, again, illustrates the attitude of the Government. As I understood him, the Minister of Health said, "We should be really concerned with what the children are having. If they are having proprietary foods instead of welfare foods, what does it matter?"
It matters a great deal, because it illustrates the attitude of the Government. I have feared for some time that there would be pressure to relax emphasising the importance of welfare foods because of the interests of the proprietary firms. I think that that has happened and that there is much less pressure and much less publicity from the Government than before, because the Government are tender towards proprietary firms. It would have been far better if the Government had still insisted on their primary responsibility and continued to do their utmost to increase the consumption of the welfare foods directly, but the Minister of Health was kind enough to say that he was inquiring into the position, particularly of dried milk and orange juice and that he hoped to give a fuller report later.
I hope that he is in that position tonight. If he is not, I hope that as Minister of Health he will stand up to the Government and say that this is primarily a responsibility of the Government and that they should not try to shuffle out of it and console themselves by saying that if there has been a fall in consumption of welfare foods, there will be an increase in the consumption of proprietary foods. We can be quite sure that overall there has been a fall in the consumption of these essential welfare foods. As I have indicated, in view of the amalgamation of the Ministries, which we opposed, we shall not challenge the transference of these functions to the Ministry of Health.
In fact, the case I have tried to emphasise so far is that we would prefer a much more clear and direct responsibility upon the Minister of Health and we would like local authorities to be in a position to keep him up to scratch. We do not want a blurring of responsibility.

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Apart from some functions being specifically transferred—and those are largely of an office boy character—there remains a joint responsibility. It will be difficult to attach specific responsibility to either Minister. There are certain functions which are exempted from the effect of the Order and whichever Minister is responsible for food hygiene generally ought to be responsible for those functions, too.
I hope that by raising these matters tonight—not because we are opposed to the Order, but to call attention to them—we will call the attention of local authorities to the subject, and that now that they have some responsibility for food hygiene they will exercise powerful pressure upon the Minister of Health who kindly sat throughout the debates on the Food and Drugs (Amendment) Act, 1954. He can rest assured that in his endeavours to get a greater personal responsibility for the administration of food hygiene he will have support from these benches.
Sir Leslie Plummer: I beg formally to second the Motion.
10.14 p.m.
The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Harmar Nicholls): It was quite pleasant at the beginning of the term to find the hon. Member for Sunderland, North (Mr. Willey) in such a benign mood. It was a very delightful experience and I hope that it is an experience which we shall have time and time again during the winter months.
I thought that the hon. Member showed great consideration to both his Icon. Friends and my hon. Friends in making it quite clear that hon. Gentlemen opposite did not intend to divide upon this Order, but that his speech was more in the nature of a request for a further explanation. He rather confused the Order with the debate on the merger which took place last March, but that is understandable. We have had a Recess and the continuity of events has been rather delightfully disturbed by it.
I think it will be helpful if, at this early stage, I try to give an explanation of what is actually represented by this Order. Broadly speaking, it comes under two headings. First, to make certain legal changes which flow consequentially from
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the previous decision which brought about the merger, and secondly, to transfer to the Minister of Health the responsibility for welfare foods. The Government waited a considerable time before laying this Order because, very properly, they wished to ensure that there would be adequate opportunity for a debate such as we are now having. It may be remembered by hon. Members that the Prime Minister informed the House in May that he was deliberately delaying laying the Order in the last Parliament, because he wanted the full forty days to run in order to give hon. Members the chance they are taking tonight.
I agree with the hon. Gentleman that, like most Orders, this one runs true to form and looks very complicated. I think I can understand why hon. Members may think that the Explanatory Note itself needs a little bit of explaining. But there is nothing unusual about that. I find that in all these Orders the Explanatory Notes usually are just like that. I can also understand the hon. Gentleman being puzzled by what the Order appears to omit rather than by what it contains. I agree with him that there is no reference at all to the transfer of primary responsibility for the main food hygiene functions. It is not because it has been overlooked, it is because no formal transfer under the Ministers of the Crown (Transfer of Functions) Act, 1946, was needed to give effect to this decision.
The Order did not need to cover that ground at all. It was all satisfactorily covered from the legal point of view under existing food and drugs legislation by which the two Ministers are already jointly responsible for making almost all the regulations and Orders relating to the functions in question.
If, later, I refer to the Ministry of Agriculture, Fisheries and Food as "my Department" it will not be from any sense of pomposity, but because it is a shorter way of describing it.
If I may put this matter in a non-technical way, the present Order, as regards the hygiene functions, is concerned largely with completing and tidying up arrangements as to responsibility. There are examples which could be given but which I think are well known to hon. Members.
Turning from the technicalities of the Order and the 1946 Act, and coming to

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more general terms, I think one can say that our arrangement of functions is fairly clear. The hon. Gentleman set out what were the new functions and those left with my Department, so I think that they are clear. The division of responsibility between the Minister of Health and my Department is that the Minister of Health continues, as he always has done because this is not a new point, to have primary responsibility for all medical advice over the whole range of functions that he is now taking on as well as those left with my Department.
In addition, my right hon. Friend now has primary responsibility for regulations under the Food and Drugs Act dealing with hygienic conditions on food premises and the handling and distribution of food except, as the hon. Gentleman said, for milk and meat. In most respects both of them stay with my Department. I say in most respects, because once meat is out of the slaughterhouse or the pipeline of importation it comes under the central authority of the Minister of Health. If meat is on the butcher's slab it is a matter for the Minister of Health acting through the local sanitary inspector. But apart from that, in most respects responsibility stays with my Department.
The Minister of Health also has primary responsibility for Orders extending the registration of food premises and regulations dealing with street and open-air food traders, and with vehicles which are used for the sale of food. Finally, in this section, he takes under his wing the Food Hygiene Advisory Council, which was set up under the recent Act to advise the two Ministers, for example, on food hygiene and certain other regulations proposed under the Act. On the other hand, my Department retains the primary responsibility for regulations dealing with the composition, labelling and advertising of food, and it also retains primary responsibility for the hygiene of milk produced, the distribution of milk and also of meat and meat products, mainly, as I have said, while they are in the slaughterhouse or in course of importation.
Having again set out the division of functions, I should like to make it clear that the division which I have just described relates only to the primary administrative responsibility for these functions. It says which Minister will speak in this House or will explain things to the country, but this division in no way
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creates a departure from what has gone on in the past. The two Departments will continue to work closely together, just as the Ministry of Health used to work with the Ministry of Food when the hon. Member for Sunderland, North was connected with it. There is no question of the Ministry acting as the postman as suggested by the hon. Gentleman in the derisory comments which he made, although in a friendly way. It is a partnership which has worked in the past and which will continue to work in the future.
In each case the Department which has what I call the primary responsibility will bring the other into full consultation, and the two Ministers will, as before, be joined in the regulations and orders made. This being so, and since we are merely carrying on what has happened in the past, I can understand the question which the hon. Gentleman did not ask, but rather implied—why make these changes at all? The short answer to that is that in disposing of the remaining functions of the Ministry of Food, we have, with the exceptions I have mentioned, taken the opportunity of placing with the Ministry of Health the responsibility for those functions predominantly concerned with public health.
I am saying that these functions are returning to their original homes, because, as is well known, it was from the Ministry of Health, in 1948, that the Ministry of Food took over its functions under the Food and Drugs Act. The strengthening in the 1954 Act of the law relating to food hygiene as a preventive measure of public health makes this a particularly suitable moment for the Minister of Health once again to take over the primary responsibility for these matters which was originally with his Department.
What are the considerations for my Department retaining primary responsibility in the functions that it keeps? While the public health and the hygiene factor is an outstandingly important one, there are other factors, too. In redistributing this responsibility, we have to take into account many practical considerations and it is after we had taken these practical considerations into account and have put them on the scale that we came to the decision which I have mentioned, that responsibility for the hygiene of milk

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and meat should, in most respects, remain with my Department.
My Department has been concerned since 1949 with the hygiene of milk on farms. It is also responsible for the questions of milk production and the improvement of quality of milk. The expert advisers that we need for work in both these fields—which is still going on—are also equipped to advise upon matters of hygiene and to draw upon the Minister of Health where necessary for medical advice. They already do all that, so that both tasks can be operated just as efficiently and more economically with the same personnel. They have to do one part of the job; they have the qualifications and the ability to do the other part, and it is a matter of economics and common sense that they should maintain full control over that field.
It would not be good administration to divide between two Departments a primary responsibility for different aspects of milk production when the Department which has to carry on part of the job is capable of doing it all. That also applies in the case of meat and meat products. Since my Department has responsibility for slaughterhouse policy—for siting, concentration and the avoidance of cruelty—I do not think that it would be good administration to place elsewhere the responsibility for the policy relating to the inspection of meat at the slaughterhouse. The same is true of the inspection of meat products in the course of importation. Our people have to be responsible for other aspects of this question and they are capable of carrying through the whole process.
The same thing applies to food labelling and the composition of food. I know that quite a number of hon. Members opposite think that this matter should be made the responsibility of the Minister of Health. It should be remembered however, that whilst the safeguarding of public health is an outstandingly important consideration, it is not the only one involved. Our aim is also to maintain good commercial practice, and to avoid fraud, and this point has been raised by hon. Members on both sides whenever we have had debates upon the need for correct labelling and for seeing that the right ingredients are put into the food.
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The commercial aspect has to be taken into account. Whether the object in view is to protect the consumer's health or his pocket, technical questions of real complexity arise in connection with the raw materials used, or the complicated techniques of food manufacture. Such questions make it essential that the administrative Department with the primary responsibility should be one which has close relations with food traders and manufacturers.
Mr. Willey: The hon. Member is on a very dangerous argument now. If he is right, what reason is there for any incentive at all? Why should not this have been left to the private trade before the war?
Mr. Nicholls: The hon. Member is overlooking the fact that this is a partnership. There is no question of the Minister of Health and his advisers not being concerned. They will have their share in considering all these problems. I do not think it is at all dangerous to remind the hon. Member that, while we place public health very high, we have also to protect business probity—and nobody knows that better than the hon. Member, because I have heard him expound with great eloquence upon the need to see that the public are not misled by the labels on the tins, and to ensure that the right quality product goes into them.
To do that we want not only the force of legislation but also the co-operation of the manufacturers and other people concerned with these products, working along with the various Departments. I am not suggesting that they could not have done just the same with my right hon. Friend the Minister of Health, but it so happens that because of the functions of the Ministry of Food in past years, and the functions which the hon. Member himself has carried out for so long, we have the contacts and the necessary understanding with the traders, and it is possible to come to the end that we all want, which is good quality together with hygienic packing. It is possible to do that without always having to use the blunt force of legislation.
Mr. Willey: I still think that the hon. Member is upon very dangerous ground. He will have heard his predecessor saying, time after time, "We are out of the

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meat business," "We are out of the banana business," and so on. Now, if I understand the hon. Gentleman aright, he is arguing, in a way that I have not yet fully understood, that it would interfere with business probity if his right hon. Friend at the Ministry of Health had any responsibility for our slaughterhouses.
Mr. Nicholls: No, no; I did not say that at all. The hon. Gentleman said we had boasted that we were out of trade in many respects. That is perfectly true, and good results have flowed from it, as we see from the good breakfast table we enjoy. In many fields we are still responsible for meat products and for the labelling and composition of various foods; we still have that responsibility, and I repeat that, while we are primarily responsible for this the Minister of Health is still responsible for all medical advice that flows from it. That is safeguarded, and I do not think it is treading on dangerous ground at all to be practical about this and to say that, however sordid it may sound, we must maintain good commercial practice.
It is the considered view of the Government that, while the Ministry of Health or other Departments may have been able to maintain the contact quite well, with the past experience we from the Ministry of Agriculture, Fisheries and Food have had with these various firms, we are more likely to do it with greater ease and less trouble than other Departments. Because it is important, I reiterate that it is the Ministry of Health who will continue to be responsible for medical advice on these matters, and I can assure the hon. Gentleman that they will always be brought into full consultation. Indeed, it is not a question of bringing them in: they will be there and we shall have their continuous advice upon these points.
The hon. Gentleman also referred to local authorities, and asked whether the new division of responsibility between the two Departments will cause some confusion in the minds of local authorities charged with the enforcement of the Food and Drugs Acts. We have given a lot of thought to this possibility and have tried to overcome any risk there may be. We have circularised local authorities to try to reduce any risk to an absolute minimum. We sent them a circular, which I have no doubt is well known to
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the hon. Gentleman, on 5th July, and we do not think that this leaves any real risk of misunderstanding on this point, once the people concerned in the local authorities have got used to the new arrangement.
I believe that the line of demarcation will be quite clear, and local authorities will know that the general field of hygiene, including unsound food, is a matter for the Ministry of Health, except for those aspects which we at the Ministry of Agriculture, Fisheries and Food have retained, and which can be very clearly identified. If I might say so, the hon. Gentleman himself identified them very clearly in his speech. The hon. Gentleman also mentioned welfare foods, and my right hon. Friend the Minister of Health will have some points to make upon that.
I really do not think that this Order contains anything which can call for any real censure from hon. Gentlemen opposite—and, in fairness to the hon. Gentleman, he did not attempt to censure us in severe fashion. It is true that the line of demarcation of responsibility for various sections could have been drawn at another point; some functions that have gone to my right hon. Friend the Minister of Health could have been retained in our Department. An honest endeavour has been made to set the line of demarcation at the most common sense point, where public health and commercial practices will be met with the greatest possible ease. I am delighted to think that, the hon. Gentleman having examined this Order, he has shown by his speech that he does not really think there is a great deal wrong with it.
10.35 p.m.
Colonel Alan Gomme-Duncan: My hon. Friend the Joint Parliamentary Secretary did not, I think, see me rise, otherwise he could have answered my question at the same time as the others. I understand that this Order applies only to England, Wales and Northern Ireland, but Article 2 (3) says:
"The functions of the Secretary of State and the Minister of Agriculture, Fisheries and Food, acting jointly …"
Who is the Secretary of State? I assume that it must be the Secretary of State for Scotland—
"under the enactments described in paragraph I of the Second Schedule to the Food and

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Drugs Amendment Act, 1954 (which provides for the application of those enactments to Northern Ireland) are hereby transferred to the Secretary of State …"
presumably the Secretary of State for Scotland—
"the Minister of Agriculture, Fisheries and Food and the Minister of Health acting jointly."
The Parliamentary Secretary has talked about the line of demarcation being carefully drawn to get the best possible results, but how is this line of demarcation drawn between the Secretary of State for Scotland and the person responsible in Northern Ireland? If the functions are to be transferred to the Minister of Health it does not seem to me that the Secretary of State for Scotland ought to come into it at all. Perhaps the Minister will say how far the Secretary of State for Scotland is now, under the arrangements proposed in this Order, responsible for the application of the enactments to Northern Ireland. Under Article 2 (3) he seems still to be responsible, and that does not seem to be common sense.
10.37 p.m.
Mr. A. Blenkinsop: I want to say a word or two about this Order from the health aspect. In spite of what the Parliamentary Secretary to the Ministry of Agriculture which is my short title for the Ministry which he adorns—has said, it is clear that commercial interests seems to have overwhelmed health interests in the division of the functions that has taken place.
I am very greatly surprised that the Minister of Health—to whom I am very grateful for coming here this evening to deal with some of these points—has allowed this Order to be made in its present form. Sometimes I wonder whether some of the rumours we have seen in the Press about his translation to other offices of the Crown may not, in fact, be correct and his interest in the Ministry of Health thereby be waning.
I do not know that I can feel so cheerful about this Order as, perhaps, my hon. Friend the Member for Sunderland, North (Mr. Willey) appeared to be. From the evidence and the representations one has had, it seems that this Order will, on the whole, make the administration of a very important health field much more difficult rather than easier.
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Many of the points referred to by the Parliamentary Secretary were rather misleading. I do not suggest for one moment that he meant to mislead the House but, in effect, I thought many of his comments misleading. For example, he referred to the fact that we are merely carrying on with existing practice, but that is not the case. From every public point of view the Ministry of Food has gone out of existence; it has been wound up—gobbled up by the Ministry of Agriculture, the producer Ministry.
It is not at all the case that we have still the Ministry of Food as a separate Ministry that accepted certain responsibilities for the quality of food supplies and their quantity. We have the producer Department—the Ministry of Agriculture—now being put in a position of responsibilty for quite important matters of hygiene and health. I should have thought that that was the view, too, of the Minister of Health. I can imagine various arguments and discussions going on between Ministers about the division of functions. It is obviously a difficult matter to settle, but I am amazed that the decision should have been arrived at to reach this unhappy compromise.
Mr. Nicholls: It is dangerous to let pass the hon. Member's suggestion about the Ministry of Agriculture, Fisheries and Food being only a producer Department. He and the record ought to be reminded of what my right hon. Friend the Minister said on 28th March:
"I do not regard the Ministry of Agriculture as solely a producers' Department. The Ministry of Agriculture, as I have said, has been and always is very much concerned with the interests of the consumers."—[OFFICIAL REPORT, 28th March, 1955; Vol. 539, c. 154.]
There is no question whatever of one interest being gobbled up by the other, and I am certain that on reflection the hon. Member will agree that it would serve no useful purpose if that were allowed to go out from this House unchallenged.
Mr. Blenkinsop: We can just say that we have very different views on the matter. But the view, not merely of an individual Member of the Opposition in this House, but of local authorities and the very responsible local authority associations and many of the bodies immediately concerned with carrying out the work in the areas up and down the

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country, is certainly that responsibility has been taken by a producer Department, and they are protesting about it.
I have expressions of view from very many bodies—for example, the local authority associations, the urban district councils, the municipal authorities and medical officers of health. Many of them quite clearly take a very strong view about this. Sanitary inspectors and their association, a very responsible body of people who are doing this work day by day, carrying out an important function, feel very strongly and have made representations, as I know all of them have, to the respective Ministers to try to secure a different division of function than that provided for in the Order.
The view of all of them is that the Ministry of Agriculture, to use the abbreviated title, is in effect the producer Department. They feel, and I feel, that it is wrong in principle that that producer Department should be responsible still for a great number of functions that are essentially hygiene and public health functions. It is a great difficulty in administration for sanitary inspectors and others that they do not have the freedom of operation that they had in the earlier days.
The Parliamentary Secretary seemed to be giving the impression that what we are doing is to revert to the position before the Ministry of Food was created; but, of course, that is not so. Some of the functions have gone back to the Minister of Health but others are retained in the hands of the Ministry of Agriculture. Some of the hon. Gentleman's comments were quite amazing. He referred to the Order as tidying up responsibilities. Really! Look at some of the anomalies that the Order is establishing.
The matter is raised with me by the Sanitary Inspectors' Association. They have an interest in all this. We rely upon them, very often far more than we recognise, for the whole state of public health. They point out that there are some very curious anomalies. Indeed, I understand that so far as food generally is concerned, the inspection for general hygiene and health purposes is the responsibility of the Ministry of Health at unloading or shipments coming in from abroad and any further stages in food as a whole, except meat.
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In the case of meat in the process of unloading, that is not the responsibility of the Ministry of Health: it is the responsibility of the Ministry of Agriculture, and one can envisage all sorts of hypothetical cases of problems arising about, for example, tins of pork and beans; that is, problems about whose responsibility it is to examine the condition of tins of pork and beans when that food is being unloaded; whether one is to open each tin and have one bit looked at from the point of view of the Ministry of Health, and the other bit from the point of view of the Ministry of Agriculture.
There are very real and practical matters to be solved on this subject, and although I do not suggest that anything so stupid as the example I have just given would arise, the Parliamentary Secretary has come here and said that this "tidies up the position." It does nothing of the sort. It creates new anomalies which are felt very much indeed by the people actually doing the job; they say that the decision which has been taken is quite wrong. They consistently felt—and their views ought to be heard—that the responsibility of the sanitary inspector and the Ministry of Health for slaughterhouse hygiene ought to be clear. It ought to be, in their view, clear as regards meat production as a whole. The hygiene side should be the responsibility of the sanitary inspector and the Ministry of Health.
I should like the Minister of Health to reply on this point because the anxiety of sanitary inspectors is that, just as the responsibility for hygiene in the production of meat has been taken from the hands of local authorities, they are afraid that the responsibility for slaughterhouse hygiene will be taken from local authority hands entirely. They have a strong fear that there is being built up a demand for the pushing out of the Ministry of Health and the sanitary inspector from this vital field and that the Ministry of Agriculture will gobble up some more functions as the producer Ministry; and whatever has been said, I repeat "producer Ministry." That would be to the great detriment of the proper functioning of our health inspection in the country as a whole.
It is sometimes said that we have too few sanitary inspectors; that we are short

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of them even for existing functions, and that that is all the more serious because of many new responsibilities put on their shoulders. I would ask whether this shortage has had anything to do with the action of the Ministry of Health in this matter; in other words, that we have to accept this shortage and the fact that a great deal of the work which the sanitary inspector ought to do is to be handed to somebody else. I hope that this decision has not been accepted for that reason. It is our responsibility, on all sides, to help recruit more sanitary inspectors in order to maintain a high standard of service.
I hope very much that the right hon. Gentleman is not diminishing in importance in any way the work of the sanitary inspectors at this, in my view, rather critical time. I have in my hands the severe criticisms of the Association of Municipal Corporations and the organisations of district councils, medical officers of health and sanitary inspectors, all of whom take exactly the same view, that it is, on grounds of principle, wrong that functions should be concentrated as they are now being concentrated in the hands of the Minister of Agriculture. Secondly, they take the view that the actual division being applied by this Order will lead to greater difficulty in the administration of their work.
I am very glad indeed that the Minister of Health is here. I am grateful to him for sparing the time to come here for a debate on an Order of this sort. I think it is right that he should, because this is a matter which, although many people may not attribute very much importance to it, is of very real concern to public health and the maintenance of proper standards.
I refer to the point my hon. Friend made about the transfer of welfare foods. If the right hon. Gentleman can give any further information about the developments, about the inquiries in the country as a whole, as to the effect of the changeover respecting the welfare foods, we should be most interested. I hope, above all, that he is able to say he is himself fully satisfied that from the point of view of health this scheme is reasonable and proper, will not result in any weakening or lowering of health standards, which is the fear of many people, and that, in his view, it is a practical scheme that can
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be operated, and that the duties of those for whom he is, after all, responsible, sanitary inspectors and others, can be carried out in an efficient and reasonable way, without an unreasonable burden being placed upon them.
10.53 p.m.
The Minister of Health (Mr. Iain Macleod): Perhaps I may take a few minutes to reply to the questions on health matters. I do not know whether I can satisfy Newcastle and Sunderland, but I think I can at least send Perth home happy, because the reference, to which my hon. and Gallant Friend the Member for Perth and East Perthshire (Colonel Gomme-Duncan) referred, to the Secretary of State in Article 2 (3) is not a reference to the Secretary of State for Scotland. It is the Home Secretary, who has responsibilities in regard to the importation of food into Northern Ireland.
Colonel Gomme-Duncan: Ought not that to appear in the Order?
Mr. Macleod: "Secretary of State" is an all-embracing term which, I believe, is defined in the Interpretation Act, 1889, which I have not handy at the present. I think that that is so, but I can assure my hon. and gallant Friend it is not the Secretary of State for Scotland.
The hon. Member for Sunderland, North (Mr. Willey) is always rather unhappy in a non-controversial debate. He did his best to get some controversy into it and into proprietary milk and orange juice by some hubble-bubble about the Government being anxious to push the sale of proprietary milk.
I will tell the House, for I think they should be on the record, some of the results of the inquiries we have made into the distribution of the welfare foods. Although one cannot give figures for percentage intake—I think "uptake" is the right word—for national dried milk, because that is an alternative to liquid milk, every year since 1948 the figures for cod liver oil and vitamin tablets have been steadily declining. There was a jump in the graph, but there has been a steady decline since 1948 and not since 1954. Until October, 1954, different coupons were used for liquid milk and for national dried milk.
As from November, 1954, the coupons became interchangeable. That is an obvious convenience to mothers. It is quite

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clear from our reports from the local authorities that what is happening to a large extent is that the mother continues to use her coupons for cheap liquid milk consumed by the family, and the baby is often fed on a proprietary brand of dried milk. I believe that strictly that would be an offence against the Order, because someone other than the beneficiary is consuming the cheap milk, but that, of course, would be a pure technicality.
The point that I am making is that there is a good deal of evidence, especially from Scotland where monthly figures are available, to show there has been a substantial drop in dried milk consumption, not from July, 1954, but from November, 1954. I think, therefore, that that is clearly related not to the change from the Ministry of Food to the local authorities but to the change in the method that is being used in connection with the coupons. The only thing that I would say about national dried milk is that there may be some suggestions—and there is some evidence of this in our reports from local authorities—that some mothers believe that because a tin of milk is sold for 10½d. it cannot be as good as a brand sold for 3s. 6d., 4s. or 5s. It is no part of my business to draw comparisons between one form of milk and another, but it should be stated that the national dried milk is a first-rate product and no mother need have any fears about using it on that account.
There is also some doubt whether the centres that are now provided by local authorities are, in all cases, quite as convenient as they were before. I have not gone into the detailed figures, but if hon. Members would like to have them and would like to table a Question I can give them. The hon. Member for Sunderland, North mentioned Sheffield. There, the local health authorities have distributed all welfare foods for a considerable time. The arrangements there have continued entirely unaltered by this new scheme and the decline in Sheffield in the amount distributed has been the same as elsewhere. I think that that shows that there is nothing seriously wrong.
The other point which the hon. Member for Sunderland, North raised was about the future of the Food Hygiene Division of the Ministry. The answer is that that part of the Division which
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deals with general hygiene, not milk, meat and slaughterhouses, and so on, has been transferred to my own Foods Division.
On the main question which the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) raised, I do not want to go much beyond what my hon. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food said. I do not pretend that there is any way by which we can reach a precise answer on the question of division of functions. All I can say is that I looked very carefully at the question which the hon. Member raised and I was very glad to hear him put forward the views of the sanitary inspectors on this matter.
I looked, of course, at the question whether more functions than are provided for in this Order ought to come to my Ministry. I looked at it, as I suppose any Minister would, with a bias towards their coming under my control. That, no doubt, is a very natural attitude for any Minister to have, but I was quite satisfied after very long and detailed discussions, mainly with my right hon. Friend the Minister of Agriculture, Fisheries and Food but also with other Ministers, that the suggestions which we have enshrined in this Order are, on the whole, the best ones. I say quite specifically that we did not reach that conclusion in any way because of the difficulties that there may be, which we hope are temporary, with regard to a shortage of sanitary inspectors but purely and simply on the merits of the case.
Finally, I am glad to take the opportunity of underlining, as the hon. Member did well, the infinite importance of food hygiene and food standards and the work of the sanitary inspectors for which, perhaps, we are not sufficiently grateful. Those are the main points which I think have emerged in the discussion we have had. The Government believe that the solution which they have put before the House, while it is not one which can be proved to be right, will, in the run of events, be shown to be right. I believe the peoples' well-being and interests are fully safeguarded.
Mr. Blenkinsop: May I ask the Minister whether he will keep in close touch with this whole question of the division of functions and how it works out on the spot, which is what matters

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most, and be prepared to receive representations from bodies representing sanitary inspectors and others who may have points to raise?
Mr. Macleod: I believe that we should give these methods a run. If, in the light of experience, bodies of the importance of the sanitary inspectors would like to make representations to me, I should be very glad to receive them.
Mr. Willey: The melancholy demeanour of the right hon. Gentleman betrays the fact that he is not altogether satisfied, and
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neither are we. But because a thing which ought to be done is done badly, that is no reason for resisting it. For that reason, and because this is an improvement on the previous position, I beg to ask leave to withdraw the Motion.
Motion, by leave, withdrawn.

ADJOURNMENT
Resolved, That this House do now adjourn.—[Mr. R. Thompson.]
Adjourned accordingly at two minutes past Eleven o'clock.