HC Deb 26 October 1955 vol 545 cc228-323

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.: 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 (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—

  1. (a) solid fuel burning or oil burning space or water heaters or oil burners of a kind used for space or water heaters, or
  2. (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
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.
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.
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—

  1. (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
  2. (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
  3. (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—

  1. (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;
  2. (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 (Walthamstow, West)

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 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 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 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 (Manchester, Blackley)

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.

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 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, 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. 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 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 (Birkenhead)

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 (Salford, East)

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.

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 (Stoke-on-Trent, South)

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 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 (Poole)

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 (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 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 (Bradford, South)

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 (Birmingham, Northfield)


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 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 (Meriden)

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 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 (West Ham, North)

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. Lewisrose

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.

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— to the rhythm of Socialist crises every other year.

Mr. Collick

The party opposite made the hole bigger.

Captain Pilkington


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 (Clackmannan and East Stirlingshire)

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 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 (Liverpool, Scotland Division)

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 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 (Ilford, South)

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 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 (Twickenham)

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.

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 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.

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 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 (South Shields)

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 (Stoke-on-Trent, North)

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 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


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.

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.

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- 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 (Ilford, South)

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.

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 (Glasgow, Gorbals)

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.

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 (Stalybridge and Hyde)

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 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 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— 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 (Manchester, Openshaw)

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 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 Craddockrose

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 (Oldbury and Halesowen)

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 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 (East Ham, North)

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 (Colne Valley)

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 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 (Holborn and St. Pancras, South)

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 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 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 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 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 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 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. 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 (Dorset, North)

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, 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 (Glasgow, Govan)

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 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 (Sheffield, Attercliffe)

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 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 (Jarrow)

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 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 (Ince)

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 (Kidderminster)

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 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 the poor then the Government are bankrupt of ideas. There are other ways—

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.

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 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 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 (Wycombe)

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, 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 (Southampton, Itchen)

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 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 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- 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 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 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.

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 (West Ham, North)

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 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 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 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 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 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.

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 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 (Kidderminster)

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. Moylerose

Mr. Nabarro

I cannot give way now, but when I have finished this passage I shall willingly give way.

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. Moylerose

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 (Dunbartonshire, East)

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.

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 (Norfolk, South-West)

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 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 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 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 (Glasgow, Bridgeton)

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.

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 (Llanelly)

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.

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 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 (Anglesey)

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 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 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, 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.

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 (Croydon. North-East)

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 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 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 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 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 (Merioneth)

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 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. 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.