ECONOMIC AND FINANCIAL POLICY

HC Deb 31 October 1955 vol 545 cc683-802

3.46 p.m.

Mr. Herbert Morrison (Lewisham, South)

I beg to move, That, in the opinion of this House, Her Majesty's Government have been guilty of incompetence and neglect in their economic and financial policy; that in framing the Budget of last April their action was contrary to the interests of the nation, calculated to deceive the electorate and was designed for party political ends; and that the supplementary Budget and other proposals of the Chancellor of the Exchequer, whilst not providing a solution to the problems now facing Great Britain, are unjust in that they impose heavy burdens on persons of limited means and discriminate against local and other public authorities. This is a Motion of censure upon Her Majesty's Government which has been put down in the names of certain leaders of the official Opposition. [Laughter.] If there are only six names upon the Order Paper that is bound to be so. I am glad that the idea has suddenly dawned upon hon. Members opposite. This is a good Motion, so good that I think it is worth while reading it. It will provide an excellent text for the debate, which, of course, it is. The Motion is in the following terms: That in the opinion of this House, Her Majesty's Government have been guilty of incompetence and neglect in their economic and financial policy; that in framing the Budget of last April their action was contrary to the interests of the nation, calculated to deceive the electorate and was designed for party political ends; and that the supplementary Budget and other proposals of the Chancellor of the Exchequer, whilst not providing a solution to the problems now facing Great Britain, are unjust in that they impose heavy burdens on persons of limited means and discriminate against local and other public authorities. It is my task to show the House that the terms of the Motion—which are quite emphatic terms, and were meant to be so—are, in all the circumstances, justified. In the course of the debate last week upon the Budget itself, which closed on Friday, the Chancellor of the Exchequer had a rough time, as we all agree. He had a rough time from my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and from hon. Members sitting upon the Opposition back benches. The Chancellor and the President of the Board of Trade also had a rough time from my right hon. Friend the Member for Huyton (Mr. H. Wilson). It was clear from the repeated interventions of the Chancellor of the Exchequer during some of the speeches that he was manifesting a fair amount of irritation and indignation about his personal honour.

The right hon. Gentleman's honesty as a politician and his honesty in relation to the country and the electorate were undoubtedly involved, and I must say, not with any pleasure but with some regret, that I fear that his personal reputation as a Minister is involved, in this matter of the Budget last week, the Budget of April and the debate today. The charges against him are, of course, also charges against the Government as a whole, including the Prime Minister. I never feel that it is fair to shove all the blame on one particular Minister, and although in this case the Chancellor must take the leading burden the Prime Minister and other Ministers have a great responsibility, too. Our charge against the Chancellor is, first, that he has not proved to be competent in the discharge of his duty and, secondly, that he deceived the country in the course of the General Election this year. My submission is that, in the course of the debate on the supplementary Budget last week, these allegations were proved to be true.

This is not the only case in which the Chancellor has deceived the electorate. In the Election of 1951 he gave a categorical undertaking that if the Conservatives were returned they would not touch the food subsidies. He was associated in that undertaking with the present Chancellor of the Duchy of Lancaster. Yes, I think I have got him right this time. [Interruption.] Has he resigned? I do not think so. I do not think that the Prime Minister has grasped that nettle yet. These undertakings were given, and the Chancellor of the Exchequer was categorical at Berwick upon the point. He did not wait for years or for a long period to break that promise. In his very first Budget after his party won the Election, and he had become Chancellor of the Exchequer, he slashed the food subsidies. That takes a bit of explaining.

I challenged the right hon. Gentleman with this in the last General Election time after time. [An HON. MEMBER: "That is why you lost."] If hon. Members are being cynical about solemn undertakings like these I am not a bit surprised. The Tories think that cheating the electorate is one of the larks. The electors bad a right to know in the succeeding Election why the Chancellor had broken the promise he gave in 1951, and they got no answer. They still get no answer. Therefore, if the Chancellor is "under the weather," so far as his personal reputation is concerned—[HON. MEMBERS: "He is not."] Hon. Members on the Government benches think that the Chancellor is not in that position; we think he is. There is a difference of opinion about it. I adhere to my opinion. That being so, the Chancellor really cannot complain. These things are bound to be so. If this sort of thing happens it is a great pity.

Moreover, we know the Chancellor to be skilled in the arts of stone-walling and evasion over many years. I remember when he was Under-Secretary of State for Foreign Affairs, the Foreign Secretary being in another place. The right hon. Gentleman was expert and highly-skilled in not answering Parliamentary Questions. He was really brilliant, and if it is a high standard of Parliamentary ability persistently to evade Parliamentary Questions, then the Chancellor deserved at that time all the praise that he no doubt received from his noble Friend. This business of evasion, of promise breaking, of misleading the House and of misleading the country is not right. It is bad and it is to be deprecated. Not only the personal reputation of the Chancellor but, as I shall show in the course of my speech, the personal reputation of the Prime Minister, is involved too, because he has given promises and undertakings which are now being broken by Her Majesty's Government.

On these grounds we think that there is a strong case against the Government and for the carrying of this Motion, because of what we believe to be deliberate and malice-aforethought deception of the country at the General Election and just before it in the floating of the General Election, which is an exceedingly serious thing.

Take the timing of the General Election. The Prime Minister, in his announcement and in the personal statement which is a preface to the Conservative Election manifesto and which makes him responsible for everything that is said in that manifesto—[HON. MEMBERS: "Hear, hear."]—then that is agreed—said: This Parliament is already in its fourth year, and it is inevitable that, with change of Prime Minister, there should he expectation of a General Election. That was said both in this document and in the official statement which was issued when the announcement of the General Election was made giving the Prime Minister's case for holding at that time a General Election which was not constitutionally necessary. [HON. MEMBERS: "That was in 1951."] We are talking about the Prime Minister's case and the argument which he advanced. The Prime Minister's case was that there was a new Prime Minister and, therefore, there had to be a General Election.

I have never heard such constitutional nonsense in all my life. When Mr. Balfour succeeded Lord Salisbury, when Mr. Asquith succeeded Sir Henry Campbell-Bannerman, when Mr. Baldwin succeeded Mr. Bonar Law, when Mr. Baldwin succeeded Mr. Ramsay MacDonald and when Mr. Neville Chamberlain succeeded Mr. Baldwin, there were no General Elections. Is it not extraordinary that a right hon. Gentleman, holding the high office of Prime Minister, should issue such a silly, unhistorical announcement and seek to put the cause of the General Election on the change of Prime Minister? The fact is that that was not the cause of the General Election. It did not influence the date of the General Election, and the right hon. Gentleman knows perfectly well—and knew at the time—that it did not influence the date of the General Election.

Our belief, which is now substantiated by the very fact of this Budget, was that the Government saw at that time the disastrous shape of things to come and decided to go to the hustings while they thought the going was good. That was why they had the Election and, in the course of it, they made promises and they brought in the Budget—if it could be called a Budget—with which I shall deal in a moment.

But the serious aspect of all this is that there was a premature Election at a date that was earlier than necessary. The reason given for it was unfounded, untrue, and historically silly and nonsensical. That being so, and in view of the promises made at that Election, the assumptions of the economic situation which were persistently spread around, and the nature of the situation with which, in the light of the supplementary Budget, we are faced today, one is driven to the conclusion that the Government knew what was going to happen and decided, by deliberate thought, to cheat the British electorate by having the Election in such circumstances.

I am a great admirer of British Parliamentary democracy—that, I think, the House on both sides will accept. I think that it is the greatest prize and possession of democracy to be found anywhere in the civilised world. I admire the capacity of the British people to settle their political problems and controversy without violence—we can have changes of Government without violence, too—but if we are to play ducks and drakes with the electorate, if we are to make promises and to give impressions which we know to be unreliable and untrue we shall undermine the faith of the British people in our democratic institutions. That is to the bad, and that is exactly what the Government have done—as I shall show in due course.

The question is whether the spring Budget was a Budget at all. Personally, I do not think that it was. It was a very, very limited affair, confined, almost, to the reduction in Income Tax. It was rushed. The Financial Resolution was so framed that there was hardly any elbow room for debate on the Budget—and through it went. It was not really a Budget at all. It had no relationship to the economic situation at the time. Indeed, it did positive harm to the country's economic interests. In our judgment, that Budget was bad finance, bad economics and inflationary. The very evil of which the Chancellor complained at the time, and of which he has complained since, he nevertheless encouraged in a Budget which was inflationary.

Something written by the Financial Editor of the "Manchester Guardian," at the time of the Budget—on April 20th—reads, I think, very well on this occasion. He wrote: The Chancellor's optimism took the City by surprise. The general reaction was that it should help to support the Stock Exchange prices, partly because a Conservative victory in the General Election next month seems more likely, and also because the reduction in the standard rate of Income Tax may lead to bigger dividends. On the other hand, doubts were cast on the Chancellor's forecast that consumption would increase less this year than last. … Some of the more thoughtful stockbrokers and others are not sure that the tax reliefs are entirely justified. As one man put it 'We don't see what it's based on.' He was thinking particularly of the forecast that consumption would increase less this year than last. If this should be proved wrong, he suggested there might be a sterling crisis towards the end of the summer … The inflationary possibilities of the Budget will not be lost on the industrial share market and they cannot be ignored for long by the gilt-edged market, for if consumption should get out of hand (or rather increases to the detriment of the export trade) either another Budget may be needed or a higher Bank Rate. It is always difficult for a journalist to be absolutely sure that his prophecies will come true, but I must say that the Financial Editor of the "Manchester Guardian" is entitled to pat himself on the back. Both things have come true—the increase in the Bank Rate and the supplementary Budget—so it was not a bad prophecy.

The very fact that the supplementary Budget has been introduced really proves the case which is submitted in this Motion. And what a supplementary Budget it is. It is a squalid budget, which seeks to take pennies and shillings from the housewife's shopping basket on behalf of the Conservatives in order to save them getting the money elsewhere. I do not know what has become of the Housewives' League. I really think that the Lord Chancellor ought to call it into action to see what it thinks about this Budget.

The spring budget had no serious economic purpose. It was placing politics before the country's interests. Its main purpose was to stimulate Conservative supporters to work in the Election and to help in the return of the Government. What was the general line of the Government, economically, at the General Election? With all of them, Conservative candidates as well, it was the line "Things are well—things are going all right." It is true that now and again they said, "We are not out of the wood, but we are on the right road." [Interruption.] In view of this supplementary Budget, if anyone thinks that we were on the right road it is an extraordinary thing.

A deliberate line was taken—"Things are well—do not worry. It is all right—we have taken the action that is necessary." The Conservatives said that the country had nothing to worry about. They succeeded in their effort—in their intention. They succeeded in deceiving the country. Although they themselves knew quite differently about the shape of economic things to come, they deceived the electorate by spreading the impression that we were substantially out of trouble.

The Chancellor of the Exchequer was quoted many times last week and I shall not refer to more than one three-line quotation. He was speaking in his own constituency of Saffron Walden on 16th May of this year. The quotation is very brief and to the point. He said: The last Budget was short and pure"— [HON. MEMBERS: "Read it again."] I am watching the face of the Chancellor to see whether it is pure. The right hon. Gentleman said: The last Budget was short and pure. The next one may be long and complicated. When it will be I cannot tell you. Well, here it is. To describe that last Budget as "short and pure" is, I think, a mastery of misdescription.

But there was not only the Chancellor. There was the Prime Minister, giving the impression that there was nothing to worry about and that because we had a Conservative Government all was well. In his Election broadcast on 7th May he said: … we have made a start in reducing taxes, and mean to go still further. I wonder what the victims of the Purchase Tax are going to say about that. That was a promise of further reductions in taxation. I wonder what the Purchase Tax people are going to say about that. I even wonder what the company people are going to say about it, in view of the increased taxation on them, which we welcome.

The Prime Minister went on to say: Disagreeable medicine. At least we had the courage to prescribe it and take it. It has worked. Last month the reserves began to rise again. We are not through these particular difficulties yet. All that was pianissimo. He added: But we acted at once and in time. If Her Majesty's Government acted at once and in time, what are we doing with this supplementary Budget? What are we doing with this attack upon the social services over a wide front? What are we doing with this wholesale attack upon local government? But that is what the Prime Minister said— … we acted at once and in time. This will not do. If that was so, then this situation with which we are dealing today would not have arisen.

I come now to the local government finance provisions announced partly by the Chancellor of the Exchequer and partly by the Minister of Housing and Local Government. I must say that I thought the Minister of Housing and Local Government, when he was announcing this slaughtering policy, had every appearance of thoroughly enjoying himself. I wish the local authorities could have seen the manly and cheerful way in which he stood up to his miserable task when he made this announcement last week.

I speak as one with some experience in local government over a good many years. It would be unwise for the House of Commons to assume that interest rates on loans to local authorities are a matter of no very great importance. They are of very great importance in the budgets of local authorities and in the conduct of their finances, and, therefore, we have to take the matter very seriously indeed.

The Chancellor dealt with borrowing and the rates of interest. Let us make no mistake about it—the questions here involved relate not only to housing. Reading the message to the local authorities and the speech of the Chancellor, it is perfectly clear that the assault upon local government services, at any rate in future programmes, spreads over the whole of the field of local government. It includes not only housing but education. Every teacher in the country, man and woman, had better take note of the fact that additional difficulties will face them in the schools in future years.

The message concerns drainage, maternity and child welfare, public health, highways and bridges, water schemes and many other things which are the concern of local government. [An HON. MEMBER: "Not hospitals."] I will come to hospitals. I have had a message which indicates that the local education authorities are already very concerned about what the Government mean. I am told that the local education authorities are very disturbed by the Chancellor's statement last week. The circular sent out by the Ministry of Education, which I have not yet seen—I do not know that it has been published—since last week's statement implies cuts in school building programmes. I want to ask the Government—and I should like an answer to this question—whether they will state that there is to be no cut in school building programmes, that Circular 283 is to be adhered to, and that a statement will be issued to that effect. I think that the local education authorities are entitled to know.

What generally is in the background of the Government's attitude to local authority borrowing is, as I understand,—I hope the Chancellor will correct me if I am wrong—that existing programmes can go on, and that work in the physical course of completion can go on, but that in the case of projected programmes not at the physical stage the policy of the Government is that they should be abandoned except in cases of real and urgent necessity. I think that that is broadly true. It means, therefore, that local authorities, in shaping their immediate prospective programmes, are expected to cut down to the bone. The Government need not only expect them to do it; they can make them do it. Indeed, that is one of the curious things about the roundabout way that they have gone to put the local authorities into difficulties.

The Government Departments themselves are the loan sanctioning authorities. The Ministry of Education, by administrative action, can approve education programmes or can disapprove them or modify them. The Ministry of Transport can cut down borrowing for loans for highways. The Ministry of Housing and Local Government can control money borrowed for housing and, indeed, I think the Ministry is the loan sanctioning authority generally for local authorities, apart from these specialised departments.

If the Government go that way, however, it means that every decisive action of a Minister in cutting down local authority projects has to be answered for specifically in this House; and so, true to their character, they have gone another way round and have invented this business of putting the local authorities on the market and letting them argue with the Public Works Loan Board, I believe to get the maximum evasion of Parliamentary responsibility on a question which is of very great importance.

Already the Government have hit at housing by a series of decisions with the most serious consequences on the rents which will have to be charged. It can be said, of course, that if the Government interfere with subsidy rates and do other things the local authorities need not put the rents up but can put the increase on the rates. But the local authorities are about on the limits of what they can stand on the rates for this service. So they are bound to put it on the rents. Indeed, it is contemplated by the Government that they should put it on the rents.

I will now tell the House what has happened this year alone, according to the advice which I have received. On 1st March, the interest rate of the Public Works Loan Board was raised from 3¼ to 4 per cent., and on a flat of a type which I will describe that represents 1s. 7d. per week. On 1st April, there was a reduction in the housing subsidy, representing 3s. 6d. On 9th July, the borrowing rate was raised from 4 to 4¼ per cent.—another 1s. 7d. On 13th August, there was another rise in the rate charged by the Board from 4¼ to 4¼ per cent.—another 1s. 7d. On 7th September, yet another rise in the Board's rate increased it from 4¼ to 5 per cent., representing 3s. 4d. It is estimated that the statement of the Minister of Housing and Local Government last week on the reduction of the housing subsidies will cost 4s. 8d. That is a total in this year alone of 16s. 3d.

How can the Government expect to keep a stable economic situation if they go on like this? The example I have taken is a flat in a large urban area, in a building of four storeys without lifts, built on land costing between £1,500 and £4,000 per acre, with a total cost per flat of £2,000. There are a number of areas where land will cost more than that, and, of course, there are other costs as well, and costs are tending to increase. That is a most serious state of affairs. It is deliberately done, and it will represent a most embarrassing situation for the local authorities and a serious situation for the tenants.

Now, with a view to discouraging further housing—because that is what they want to do—discourage further housing—

Mr. Cyril Osborne (Louth)

We did build them, anyhow.

Mr. Morrison

They intend to see that local authorities are, as far as possible, to be denied all loans from the Public Works Loan Board, are to be denied these facilities and are to be handed over to the bankers and the money markets. That is what is to be done.

It is an interesting historical fact to recall, of which I am reminded by my hon. and learned Friend the Member for Kettering (Mr. Mitchison), that the practice of local authorities borrowing for housing from the Public Works Loan Board dates right back to the Labouring Classes Dwelling Houses Act, 1866. I should have thought that that would have appealed to Conservatives' imagination, because it has been going on for so long, but that is the case.

What are the consequences which this will have when local authorities can no longer go to the Public Works Loan Board? The authority cannot get the loan in the first instance if there is evidence that it could raise the money on the market, as the larger authorities probably could. I hope that, in the case of these authorities borrowing, if they have Labour majorities on their councils, they will get fair treatment on the market and fair conditions for their borrowing. They may be able to do it, but the not so large local authorities will have great difficulties. If they assume that they will have difficulties, they can then apply to the Public Works Loan Board. Then, they are to be put on question; that is to say, they are to be put on the spot, to be put through the third degree and be made to prove that there is reasonable cause to believe, to use an old Home Office phrase, that they will not be successful in raising the money on the market. Then it may be that the Public Works Loan Board will lend it to them.

Of course, the consequences of that mean uncertainty and delay for the local authorities, but there is something else. When they go to the market, if anybody thinks that that is a five minutes' operation, they are wrong. I have been through this business, agreeing with a very limited number of colleagues on a highly confidential subject whether we should go on the market or not, and it is not always by any means certain that the moment is ripe at which to go on the market, as is the experience of everybody, including even the Government themselves, when to go on the market.

Moreover, there could be some rather unpleasant difficulties about it. That has to be worked out, and it means delay and uncertainty, and, when they have done it, the cost of floating a loan on the market is inevitably more expensive than that of getting a loan from the Public Works Loan Board. It is not only the subsidy business, therefore, that will hit the local authorities. This procedure will hit them as well.

There is another point. There is to be competition between local authorities in going on the market. Will there be any means whereby the Government can programme them, so that, if they do so, they do not fall over each other? Have the Government thought of that? One of the advantages of the Public Works Loan Board was that we had a rationalisation of public authority borrowing, although a local authority was not prohibited from going on the market if it wanted to. This will be bad enough for the big local authorities, but it will be most serious, not only for the small local authorities in the case of county district authorities, but for some of the smaller county borough authorities as well. As my right hon. Friend the Member for Llanelly (Mr. J. Griffiths) reminds me, it may be particularly difficult for the rural authorities, which, I should have thought, have a prima facie case in general.

The rate of interest is likely to rise still higher than 5 per cent. where it stands now, and, goodness knows, that 5 per cent. is bad enough. It is very, very serious. After the First World War, I think that the peak of public borrowing was 7 per cent. Are we going back to that? Are the Government hoping that the rate of interest will go up so that it will force the local authorities to abandon their programmes? We really have a right to know.

Another point to remember about this is the effect upon rents of housing and upon the cost of other local government services, one way and the other. Let it be remembered that the Government have not only urged local authorities to cut down all capital expenditure, but to keep all expenditure to the lowest minimum that is possible. I am all in favour of economical local government administration, and in favour of economical administration everywhere in public authorities. Once we get the spirit abroad that we have to cut for the sake of cutting, irrespective of the merits of the service, we shall be on the way back to the "Geddes Axe," and even worse things can be done. We should remember that the administrative power is largely in the hands of the right hon. Gentlemen who sit upon the Treasury Bench; and the outlook there is very bad indeed.

There was a speech at the Conservative Party Conference which did not accord with the general outlook of the Government on the matter of housing rents. It was a very good speech by a gentleman who came, I think, from Shipley. He had a bit of a rough time, I gather, but he got through with it. Whatever the merits of differential rents—rather a controversial subject, with something to be said for both sides—the Ministers are wrong in assuming that this is one-way traffic. The financial problem is not necessarily solved by differential rents. What is the doctrine of the differential rent? Fundamentally, it is the doctrine of from each according to his ability and to each according to his needs. Hon. Members may agree with that or not, according to the way they put it and the way they accept it, but that is the doctrine.

I recall a very great man in the City of Leeds, the Rev. Jenkinson, who floated a scheme of this sort in that city. I went to speak for him on the eve of the poll in a municipal election. He was very much like my friend Dr. Salter, in London—that is to say, he had no great respect for public opinion. I recall him saying, "They say public opinion does not agree with me. What do I care about public opinion?" I forget whether they won the election or not. [HON. MEMBERS: "They lost the election."] I must say that I respected him enormously but I shivered a little about his attitude towards public opinion, because I like studying public opinion and I think it is always worth while taking some notice of it.

What has been the argument of the champions of the differential rent, who have now been recruited? Believe it or not, the Minister of Housing and Local Government presumably believes in "from each according to his ability and to each according to his needs." I wonder! I wonder whether they would carry that all round. The Minister is assuming that the whole purpose of the differential rent system is to put up some rents and to increase the revenue, but I warn him that there is another side to the doctrine and it is a very real side in existing circumstances. There are some local authority rents, and there will be more as a consequence of Government policy, which working-class people of moderate means cannot afford; some cannot afford the rents which now have to be charged. I am glad to see that the Minister agrees with that. It is a well-known fact.

Consequently, in a differential rent system we have to face an increase in the case of households with substantial incomes and, logically, a decrease in the rent where people cannot afford to pay the standard rent which is charged. We shall see whether that is carried out in practice. If it is, where is the saving at the end of the day? Where is all the money which is to be saved as a result of the differential rent system? To reduce the subsidy because of the possibility of the introduction of differential rents is unfair and, at any rate, premature.

We therefore have these increases in interest rates, modifications to subsidies and the projected abolition of subsidies. These will affect not only local government housing. The Government are forgetting their middle-class supporters, the people who own their own houses. The Prime Minister has said that he believes in a property-owning democracy. The Conservatives have boasted in their manifesto about their determination to help people to own their own homes. But already, as a consequence of the increase in the rate of interest, the rate for borrowing under the Small Dwellings Acquisition Act and the rate for borrowing from the building societies have gone up, so these people are being hit as well.

The conclusion to be drawn, therefore, is that the Government's policy is damaging to housing for people of limited means of the working and middle classes, but the rich will still be able to build or to buy. I cannot see that the use of Government credit for communal enterprises is so shocking as the Chancellor of the Exchequer made out. We are a nation. Why should not the credit of the nation as a whole be available to assist local and other authorities in their business?

The Conservative manifesto is full of points which are in complete conflict with the Government's policy. In his preface the Prime Minister writes: We have seen the social services extended and improved. We have seen new houses and new schools and new factories built and building, and soon we shall see new hospitals, too. I forget how many hospitals have been promised, but I think it is one. Certainly, it is not many more.

Mr. Osborne

That is more than the Labour Government built.

Mr. Morrison

That is nothing much to boast of.

Mr. Thomas Steele (Dunbartonshire, West)

Is my right hon. Friend aware that the only hospital which has been built has been built in my constituency and that we got the money to open it only after a great struggle? It was lying idle, with staff and everything else ready, but we had no money with which to open it.

Mr. Morrison

As I was saying—and I am glad it was received with such approval—the Government's achievement in hospital construction is very poor and the programme announced was very limited indeed. They have nothing much to shout about there.

The Prime Minister added: Now the time has come for a new effort and fresh advances. Where are the fresh advances? The supplementary Budget is deliberately designed to hold up and to limit these developments to the greatest possible extent.

I could go on throughout this pamphlet—promise after promise made and promise after promise being deliberately broken by the Government now. The Prime Minister is personally involved in all this, because his own preface commits him to every word which is said in the pamphlet. We therefore see that the result of these policies is that further local authority progress over the general field of local government is to be stifled.

In respect of the publicly-owned industries it is the same story. Less investment in the publicly-owned industries for productivity, less sales promotion, but commercial television can go on and sales promotion and private sales inflation. Altogether, apart from the waste that is involved in the administration and fees, the effect upon the electronics industry is serious. It is already short of labour and this business is deliberately brought in. The Government knew that it was wrong to go in for this policy—they know now if they did not know before, and they had no mandate to do it—but whether it be this, commercial road transport, or iron and steel, the Government will do anything to denigrate public enterprise and to elevate private industry.

When they come to private industry the Government do not require it to cut capital expenditure, but make some appeals to it. Consequently, as they know, that will be ineffective and private industry will do exactly as it likes. Our country is being made the victim of the anti-social dogma of the Government, misnamed Conservative freedom. It is freedom for capitalism, freedom for monopolists, on which promises were also made. It means less freedom for public authorities. It means the imposition of restrictions upon public enterprise and public authorities of all sorts and, therefore, it is an untruthful claim that the Government stand for freedom.

In our judgment the Government's policy of drift and neglect of the wider issues of economic policies is bad. I believe that there should be selective import controls — [HON. MEMBERS: "Rationing?"] That does not involve rationing. Surely even the Conservative Party ought to be able to face the dilemma the Chancellor is in. He himself shows that exports have not increased enough to pay for imports. He says that our imports are excessive in relation to exports, and that is true. It is particularly true of dollar imports. This problem cannot be solved merely by general orthodox financial policies. We have to do something definite about it by saying that we will not import certain things that we can do without, that we will take action to reduce dollar imports. The dogma of the Government that they will not touch any degree of physical controls is landing them into great difficulty. I do not say we should do it on a 100 per cent. wholesale basis, but there really is a case for some imposition of import controls.

There ought to be a proper export organisation and I do not think there is—an export organisation not only of the Government, but of industry itself. We are now getting too many motor cars at home and not sending enough motor cars abroad. The organisation of motor car manufacture for the export trade is not right. There ought to be a selective channelling of investment instead of the accidental way in which we are working.

It is not good enough to discourage investment in general by monetary policies. What we want is to discourage investment where it is not of much use and to encourage it where it is good. In selected cases there ought to be bulk buying to help our Commonwealth, as bulk buying did—look at what has been done to Jamaica—and to avoid dollar purchases. Where necessary, there should be price control and action should be taken on the majority Report of the Monopolies Commission. In all these matters the Government are negative. They say no, no, no in the most determined way, because there is a conflict with their dogma. The so-called monetary remedies do not do it.

The Budget imposes the biggest burden on ordinary consumers. The Profits Tax, in a full year, will produce £38 million, but the Purchase Tax, in a full year, will produce £75 million, so the heaviest burden is to fall on the working and middle classes.

May I tell the House this from my knowledge of the former Prime Minister, the right hon. Member for Woodford (Sir W. Churchill)? I have known him very often capable of real understanding and sympathy with the problems of ordinary households, ordinary working and middle-class people. In the middle of a great war I have seen him arguing about food problems which seemed small. I believe that if the right hon. Member for Woodford had been sitting in the chair of the Cabinet this supplementary Budget would never have got through. That is my belief and I think it is a pity that the Prime Minister did not take a similar attitude. The truth is that the Government are pursuing a policy of everybody for himself and never mind the nation.

On the Purchase Tax the Prime Minister said—I agree that he said it in 1950, but he did say it and five years is not all that long: There must be some relief here so that extra effort wins a fair reward. We would also like to make a start on reducing indirect taxation, especially the Purchase Tax. Well, here he is doing the reverse. Prices are up, there are wage claims which are bound to involve difficulties in the economy, but that is inevitable if the Government go about things in this way. The Government cannot effectively complain. There ought to be effective room for consultation between the Government, employers and the unions about all these matters of economic policy, but how can that be achieved when the Government are indifferent and are merely drifting along? Prices go up again, we suffer from inflation at home, damage to our exports and then possible unemployment. I do not know whether that is what the Government want. There is ineffective economic education and leadership, yet the British people are great and could respond.

The Government must play the game with the people if their co-operation is to be won. The Government must not cheat, as they have been cheating and as they cheated the electorate at the Election this year. We of the Labour Party love our country—[HON. MEMBERS: "Oh."] Yes, we do—we love our country so much that we want it to belong to the people of our country and not to be handed over to bankers and investors. We believe, therefore, that our Motion is well based. I would urge the Government to get on with real, public interest policies. If they will not get on with real policies that are in the public interest, then let them get out and make way for those who will.

4.50 p.m.

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

We have listened to a thoughtful speech from the right hon. Gentleman the Member for Lewisham, South (Mr. H. Morrison) and if the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) will permit me just one more metaphor before I end my series, which has been such a source of satisfaction to him and such a quarry for his speeches, I would say that we have been watching, or listening, to the second of the trial gallops for the leadership stakes of the Labour Party.

It appears that the right hon. Gentleman the Member for Easington (Mr. Shinwell) has joined in the discussion today, in a striking letter to the "Star" newspaper, in which he complains very much of the backing given by the hon. Member for Woolwich, East (Mr. Mayhew) to the right hon. Gentleman the Member for Leeds, South. He used these very disagreeable words. The hon. Member is wrong. The leader will not be appointed by a collection of old school ties, but by a party sensible enough to like somebody whose service to the party is beyond question, and who has proved his capacity for leadership. I understand that the right hon. Gentleman's support is to be given to the right hon. Gentleman who has just resumed his seat. As for the "Third Man," whose name—

Mr. E. Shinwell (Easington)

I only want to say a word on the subject of leadership. The right hon. Gentleman is well acquainted with the subject. He has been trying to be leader of his party for a long time, and he has failed.

Mr. Butler

Whatever other mud may or may not have stuck in the course of the last week, it is well known that I have never tried to be leader of my party. I have had an easy task, which the right hon. Gentleman has not had, in not being selected as leader, and in supporting my right hon. Friend and his predecessor throughout their careers.

There is only one name missing from the Motion on the Order Paper, and that is the name of the "Third Man," the right hon. Gentleman the Member for Ebbw Vale (Mr. Bevan). If I may give him a little consolation may I say that in these stakes in which he is so bitterly engaged, he will in future, having heard the speech of the right hon. Gentleman the Member for Leeds, South last week, no longer need to "stoop to conquer."

Before I come to one or two of the arguments which I wish to use in replying to the charges of deceit, incompetence and dishonesty, and other charges which have been levelled by the right hon. Gentleman, which I shall have the greatest pleasure in taking one by one, I should like to answer a very important point raised by the right hon. Member for Lewisham, South, whose great knowledge of local government is almost unrivalled in this House.

He stated that local authorities were anxious whether they would be able to get their finances in the immediate future. I would remind him that I said that there must be a transitional period. It will take a little time for the authorities and their market advisors to organise the flow of new issues in the stock market. We believe that they will find their own credit rather better than they expected, and will get the money they want. But it is important that the Public Works Loan Board should make such advances as are required to help authorities through this transitional period, and, therefore, we have arranged that the transitional arrangements should be the subject of discussion with the Standing Committee of the Local Authorities' Associations, as soon as this can be arranged. I say that in reply to the right hon. Gentleman, because I do not wish the new system to result in local authorities being penalised.

I should like, before I come to what may be described as the more "knock-about part," which is the Motion on the Order Paper, and which I shall be delighted to deal with, to refer to two matters. One is a very short assessment, for the sake of the country and foreign opinion, of what I think the position will be after the introduction of this Budget, and the other is a short statement of my reasons for introducing the April Budget. I hope that hon. Members will listen to them patiently because charges have been made, and I think that, in addition to my Budget speech, it is important that certain things should be on record. Then I shall be perfectly satisfied for people to make up their own minds as to my motives or anybody else's.

In dealing with this Budget first, and what matters more than personalities, and the rivalries and political manoeuvres, which I am sure we all enjoyed, I should like to tell the younger generation who have been speaking to me since some of these attacks have been made that they are no different from similar episodes a generation or a century ago. What is more important than these political manoeuvres or political incitements is what will be the effect on our economy, the standard of living, and the employment of the people, and what is to be the effect on our sterling and the reserves position.

In my opinion, the whole object of the April Budget and this supplementary Budget is to combat inflation. No one can doubt, in assessing the situation now, or who heard the introduction which I made a day or two ago, that this is desirable and essential. We hoped that, as a result of raising the Bank Rate, starting credit control in February, curtailing hire purchase and budgeting for what is clearly—perhaps hon. Members will be glad to hear this—going to be a very large budgetary surplus, we had inflation under control.

I believe that now, when the dust has cleared—and it has cleared a good deal this weekend—it will be seen that this Budget has just brought that further pressure to bear in the right direction in the fight against inflation. It has to be seen, I would remind hon. Members, in conjunction with the credit squeeze, the effect of which, I must warn the House, will increase in severity during the coming months.

Of course, the Budget has been attacked for being unpopular and unfair. Nothing could be more unpopular or more unfair to the working people than allowing inflation to continue unchecked. I do not believe that any measures of the kind that we have suggested, the change in the housing subsidies, to which I will make reference, the new arrangement for local authority finances, to which I have made reference, the cuts in Government expenditure, the request to local authorities to limit their expenditure, the Purchase Tax or the Profits Tax can be expected to be popular.

I do not expect them to be popular, But I do claim that they are logical, and that they are fair. They do not revert to outmoded and discredited controls which, I think, did our economy great harm. They do not diminish incentives by taxing earnings which, I think, are vital to the future of our economy. They do discourage bad spending by individuals, by private business, by local authorities, by nationalised industries, and by Government Departments.

So far as one can see, the more the effect of the measures on the economy, including their effect on public expenditure, sinks in, the more will be the good effect on sterling. I am able to report the following to the House already. The October reserve figures will be out on Wednesday. We now know that this month, while we had to pay a debt at the beginning of the month of no less than 80 million dollars to the E.P.U., we shall end the month having lost less than this figure and, therefore, having made up some of that deficit. We are also carrying forward far less into next month by way of E.P.U. deficit and the rates of the exchange are now firm. I am, therefore, satisfied with the first impact, provided that the Government carry on with their policies and carry them through to their logical conclusion and continue to deal faithfully with Government expenditure.

Now a word or two about the April Budget. The right hon. Member for Leeds, South said: … in this country Chancellors of the Exchequer are normally expected to budget for a year ahead and not to chop and change in the middle."—[OFFICIAL REPORT, 27th October, 1955; Vol. 545, c. 392.] In my opinion, the over-riding duty of the Chancellor of the Exchequer is to preserve the balance of the economy. The Budget must be based on the best judgment of the prospects that can be made at the time. I should have thought that the right hon. Gentleman's own disastrous attempt at forecasting in his only Budget, that of 1951, would have given him a lively recognition of some of the difficulties. The Budget of 1951 must also be compared with the disastrous forecasts of 1947 and 1949.

The proper doctrine, not as announced by the right hon. Gentleman, was announced by Sir Stafford Cripps, his predecessor, in his Budget of 1948, when he pointed out that if circumstances changed … we must then make a rapid readjustment of our economic and financial policies."—[OFFICIAL REPORT, 6th April, 1948, Vol. 449, col. 49.] That was on 6th April, 1948.

Hon. Members

What is the change?

Mr. Butler

I will explain. Sir Stafford Cripps was speaking of the dangers of becoming more inflationary, but his words apply equally when things, as they are now, are going more the other way, that is becoming more inflationary. Presumably the right hon. Gentleman himself would have waited until the early signs of difficulty turned into a crisis. It would have been much easier for me personally if I had not felt called upon to propose the measures which I have done, but it is wiser, and certainly much better for the country, to act in good time.

Mr. H. Morrison

If all this is so, why did the Chancellor bring in in April a Budget of an inflationary character, of quite the wrong sort? If he believes in this, why did he not bring in a Budget more like the present one than the one he introduced in April?

Mr. Butler

For the reasons which I am just about to give, I personally take the view—and I am supported in this by most intelligent opinion—that the value of the Budget of April was very considerable in increasing incentives and giving a spurt to our export trade. I do not for one moment say that the April Budget was wrong, based, as it was, on the analysis that we made at the time.

I will now sum up the position so that hon. Members may judge. Put very briefly, the view which I took in the Budget in April was that production would increase faster than demand, thus leaving us with a margin for increased exports. In the first six months of this year, in fact, industrial production was 6 per cent. higher than it was in the first half of 1954. The figures for the third quarter are still provisional, and July was, I think, undoubtedly affected by the dislocation of the dock strike. [Interruption.] I am not claiming—hon. Members opposite need not howl—that this is the only reason, but there is absolutely no doubt that our trade figures and our balance of payments were affected badly by the dock strike. However, the rise in production is now continuing, possibly at a slightly reduced rate. My main, and I think only, underestimate in the field of production was in the case of coal, where the deficiency is particularly expensive and disastrous to our balance of payments.

The right hon. Member for Lewisham, South referred to consumption. I claim that the estimate or judgment made about consumption in April was approximately correct, and that is that up till now the rate of increase in personal consumption has been slowing down. So, up to the present time—that is, during the summer—my forecasts of the course of consumption as well as of production have, in fact, been fairly well been borne out by events.

On the other hand, I have had to take account—perhaps I have been too conscientious in taking account of these things in good time—of the fact that consumption has still increased substantially recently. The large increases which have taken place in personal incomes in recent months would no doubt lead to a further rise in consumption in the period ahead if no check were imposed. The signs of inflation, which I expected to diminish, have, in fact, become more marked, as I said in my Budget speech last week.

The right hon. Member for Leeds, South denied this, but he cannot have studied the comparative figures of unemployment and of unfilled vacancies, which form the clearest evidence. Since the Budget, unemployment has shown a downward trend, touching the lowest level ever recorded, and the proportion by which the number of vacancies exceeds the number of unemployed had roughly doubled by mid-summer.

In my April Budget I estimated that fixed investment would increase by at least the same amount as last year, while stock building would go on at the same rate. The right hon. Gentleman, in his own analysis during the April Budget debate, did not actually make any forecast about investment, but he said: … it is fairly evident that there was virtually no increase in investment in the private sector last year at all."—[OFFICIAL REPORT, 20th April, 1955; Vol. 540, c. 187.] All of his remarks on the subject were, in fact, sneers at the efforts which I had been making to increase investment. But it is in this field that my expectations and the expectations of the country have been exceeded and the right hon. Gentleman has been proved to be totally wrong.

The boom in investment has been stronger than was foreseen. This, I think, is no matter for condemnation. It is common ground in this House that investment required stimulation in our long-term interests, and I think I have done as much as anybody in this country to try to bring this about. When I made my assessment of investment prospects, I had regard to the tighter monetary policy which I expected to affect both stock building and marginal investment in building and equipment. It seemed reasonable then to expect that investment as a whole would have been held within the forecasts that I made. On looking back, it can now be said that the investment boom was stronger than expected. More time was required and additional measures were needed to bring about the effects of stricter money upon which I was counting. I gave a warning of this, incidentally, in my April Budget speech, when I said that it might be a possibility.

If these were mistakes, I say—I do not believe that, in their hearts, hon. Members disagree with me—that they were mistakes in the right direction. If I made a mistake, it was because I was most anxious not to jeopardise the achievement of full employment. I was particularly anxious not to do more than I needed to restrain the development of industrial investment which was at last beginning to show results. I should have been worthy of censure only if I had sought to avoid charges of inconsistency now by not taking the earliest opportunity, once the effects of investment and of the credit squeeze had become clear, to recommend the steps which I considered necessary to deal with the situation now. In fact, the alternative to the policy which the right hon. Gentleman describes as "chop and change" is the policy of taking no risks.

In plain terms, this could mean—hon. Members opposite had better get it into their minds—that every Chancellor should budget for a certain amount of deflation, so that he will always have a margin in hand, and that would be a margin of less production and less employment. I and my right hon. and hon. Friends on this side of the House flatly reject this defeatist and restrictionist conception.

I therefore assert that on the evidence before me, and judged by the light of subsequent developments, the judgment in April was a perfectly reasonable one and a fair one, and that equally I and the Government have not delayed in making the necessary adjustments, as some of my predecessors delayed, in previous crises of the past. I must thank the House for listening to the review of what I think happened last April and the under-estimate made of the investment boom.

I now turn to the Motion. It is, as the right hon. Gentleman said, and like ancient Gaul and the modern Labour Party, divided into three parts. It refers to incompetence and neglect, deception, and injustice, to which the right hon. Gentleman did faithful service.

I take, first, the charge of incompetence and neglect. Socialists are con- noisseurs of incompetence. Let us look at some of the vintage years—perhaps, I should say the port wine years—1947, 1949 and 1951. In 1947, the mistake of the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) was so great that it needed correction six months later by an autumn Budget very much more drastic than my own. In 1949, the halcyon calm of Budget Day turned quickly into the hurricane that swept us into the devaluation crisis. In 1951, there was in April no prevision of the crisis that was soon to break down the Government and to drive them into the greatest voluntary liquidation of modern times, shortly afterwards made compulsory by the electorate.

So each Labour vintage Chancellor, in turn, produced his own distinctive crisis with his own distinctive brand of incompetence. I reserve neglect for the right hon. Gentleman the Member for Leeds, South. It may be remembered by some of my hon. and right hon. Friends on this side of the House that when I was speaking some eleven or twelve days after assuming office I had to say some very disagreeable things to the country about the measures to be taken to put things right in the winter of 1951 to 1952. I said nothing critical by way of the handling of affairs by the right hon. Gentleman or his right hon. Friends on that side of the House, and the story of exactly what happened has not, therefore, been fully given. Now I intend to give it.

From the end of June and throughout the whole summer—that is, throughout the summer of 1951, after a warning in the spring—the reserves were pouring out; we continued to use blood, our lifeblood, from our reserves. We lost £112 million—not dollars, but pounds—in that October alone. The right hon. Gentleman must have had regular reports of what was happening, but nothing adequate was done to deal with the situation. I have searched every record.

Two main policy statements were made by the then Government in the summer and autumn of 1951. The first was made by the right hon. Gentleman the Member for Leeds, South, in this House on 26th July, 1951, and contained the statement: The Government propose, therefore, to review the dollar import programme, which is, of course, very much larger than the programme last year, and reduce expenditure wherever this can be done without damage to our long-term interests."—[OFFICIAL REPORT, 26th July, 1951; Vol. 491, c. 654.] Nothing in the terms of this statement suggests that it was other than the first indication that the Government contemplated remedial action. However, what did we find? We found a continued loss. Then two months went by until the right hon. Gentleman spoke at the Mansion House on 3rd October, and said—and the first is the ironical word— Further action both through direct controls and so far as possible through credit restriction will, I think, be required. But what happened? No public announcement was made, no public measures were announced for correcting the situation either then or later, and all the record shows is that cheese imports were reduced to save 40 million dollars a year. This marvellous roaring lion is a little mouse who could only gnaw at a bit of cheese.

Meanwhile, in face of this miserable cut of 40 million dollars worth of cheese, the trade deficit with the non-sterling area in the third quarter of 1951 was running at a monthly rate—a monthly rate—of £123 million. Instead of an autumn Budget or an autumn censure Motion hon. Members opposite had an autumn Election, and we all know the result.

It is interesting, in passing—I have had to read these miserable documents most carefully—to note that neither the right hon. Gentleman the Member for Leeds, South nor the right hon. Gentleman the Member for Lewisham, South said anything about this crisis at all in their 1951 Election addresses: not one word. It is rather like Sherlock Holmes and Dr. Watson: what was significant about the action of the dog? The dog did not bark. Indeed, they were in good company, because there was not one word about the balance of payments in the Election address of the Leader of the Opposition either.

The right hon. Gentleman the Member for Leeds, South, in fact, shirked his responsibilities, and now he is attacking me for facing mine; and yet he had the sauce, in his broadcast the other night, to say that he hoped he would have taken considerably speedier action to deal with the obviously dangerous exchange position. I turn to the views and words of the Third Man, the right hon. Gentleman the Member for Ebbw Vale, when he said: Why look in the crystal when you can read the book? I now come to the second charge in the Motion, that of bribing the electorate. I think I can quite easily quote the right hon. Gentleman's own words to show that he thinks very little of my attempt to do so. In the debate, which we all remember, on the April Budget, the main burden of his criticism, and that of hon. and right hon. Gentlemen opposite, was, in his own words, this: And now the Chancellor has handed another present to the same people who have already been doing better than anyone else. …"—[OFFICIAL REPORT, 20th April, 1955; Vol. 540, c. 202.] That is, the rich men and the City. What did the right hon. Gentleman say in his Election address in 1955? He said this: Tory Budgets have reduced taxes on the rich, but done little for the poor people. … A typical Tory Budget. To show the validity of some of these arguments against me, he now conies to this House and says that the City men and the rich whom he attacked so violently in April have become 52 per cent, of the electorate.

At the time he thought my concessions so small that he dismissed the Budget as worthless to any but the rich. What nonsense this all is. But, in all this welter of extravagance, irresolution and exaggeration, one thing is clear, and that is that the Government did win the Election and the Opposition did lose it.

Why did the Opposition lose the Election? The day following the Report of the right hon. Member for Huyton (Mr. H. Wilson) the "Daily Herald," in its leading article, said this, somewhat bluntly: Hitherto, there have been some Labour people still ready to cry, 'We were robbed,' and to seek excuses. But the Report seeks no white-wash. Defeat is realistically laid at the door of Labour's own deficiencies, largely organisational. Therefore, to sum up shortly, in other words it was not my 6d. which lost the Election for the other side but their own rusty penny-farthing. It is no wonder that we are told by the right hon. Member for Llanelly (Mr. J. Griffiths) that Socialists must go back to the classroom for three years. At any rate, we on this side of the House think that the classroom is a good deal better than class war. While we wait three years for Socialist policy to emerge we intend to govern the country on the forward lines which we have already announced.

Now I come to the last point in the Motion on the Order Paper, the censure that this is an unjust Budget. Let me, first, take building. I found one interesting item in the Election address of the right hon. Member for Leeds, South, in 1951. He wrote this: As for housing, Tory promises are just dishonest. The plain truth is that you cannot build more houses than we are doing and rearm at the same time. I think that the House will notice that the right hon. Gentleman's use of the word "dishonest" is becoming positively inflationary.

When we come to examine the record, what do we find? We find that this Government have not only built a record number of houses but that we have also been able to maintain, carry forward and sustain the patriotic defence programme which the right hon. Gentleman and the Leader of the Opposition undertook. We have enlarged it and brought it up to date, and we have built a record number of houses. The right hon. Gentleman is pleased to call our decision on the subsidy for general housing needs, "outrageous and reactionary" but we are following here a policy and a philosophy in which we happen to believe as social reformers, because the record of our friends on this side of the House in social reform is really more marked and more progressive than that of the other side of the House.

We cannot understand, for example, where the equity lies in the claim that those who occupy local authority houses have, by reason of that fact alone, a prescriptive right, of indefinite duration, to be subsidised at any given figure by the general taxpayer and the general ratepayer. We are, therefore, concentrating our subsidy by degrees where it is most needed, on slum clearance and the overspill from our big cities. The House will have full opportunity of discussing housing in detail on the Bill which is to be introduced. That being so, I will say no more on it today except perhaps to say a few words about building and the building of cinemas, and so forth, about which I was asked by the right hon. Member for Huyton.

Before I do that I ought to reply again —I have already done so many times—to the charge made against me by the right hon. Member for Lewisham, South on the subject of the food subsidies. My answer to that is that this subject was fully canvassed at the last Election and the electorate gave a decision in no mean way that we had been right to take the action that we did.

Mr. Alfred Robens (Blyth)

Did or did not the right hon. Gentleman break his word?

Mr. Butler

No. I did not break my word, for two very good reasons. The first is that I probably had as big a hand in drafting the Conservative Election manifesto as any other person, and we there laid down the view that we should establish proper priorities for investments and for distributing Government subsidies and money. At that time I used the words to which the right hon Gentleman referred: In present circumstances, while we fight and strive to reduce the cost of living, we shall maintain the food subsidies. I then went on to say, which is not publicised by hon. and right hon. Members opposite, We have no means test in mind. We simply want to ensure that those whose needs are greatest get the most help. Then, in my 1952 Budget speech, in order to get the record clear, I said that I regretted that we had had to deal so early with the food subsidies, but it was necessary in view of the awful mess which we were left by hon. and right hon. Members opposite. I therefore claim that we had made clear that we intended to readjust the subsidy burden, that we intended to do so and that we had to do so earlier than we intended because of the inheritance which we found. As the present Lord Chancellor, speaking in North Berwick, said during the Election campaign, we were entirely justified in our action by the good effect on employment and production and on the prosperity of the country of the action that we took.

I want to deal with a point which was made by the right hon. Member for Huyton. He made the untrue suggestion that our removal of the controls on building was endangering the capital programme for the social services. He used this to justify his arguments for a return to building licensing. Let us look at the facts. The total new building work last year is likely to be about £1,200 million. It should be higher this year. The share of miscellaneous building in this—offices, shops, churches, and everything else, apart from housing, public building and industrial building—comes to only about 8 per cent. We have deliberately analysed this matter because we are aware of the anxieties of hon. and right hon. Gentlemen about the nature of the building increase. The increase in miscellaneous building between 1954 and 1955 is estimated at about £20 million, but over half of this is new office building, mainly in London, for which a programme had been approved and begun even before building licensing came to an end. There is also sonic provision for the building of new churches. This leaves rather less than £10 million for shops, cinemas and similar building.

Mr. Hugh Dalton (Bishop Auckland)

The figure for private office building which the Chancellor gave is very important. Does he say that that has gone up by £20 million a year? I should like to get the figure correct.

Mr. Butler

The increase in miscellaneous building altogether for the next year is estimated at about £20 million, and the office building is about half this, mainly in London.

Mr. Dalton

About £10 million?

Mr. Butler

Not plus £10 million, but about half of that figure accounts for office building in London. This leaves about £10 million for shops, cinemas, and other building. We have no separate figures, though I have tried to get them, for public houses and petrol stations, but I am assured that there are only three new cinemas now being built in the whole country. I hope that that is an answer to the right hon. Member for Huyton.

The right hon. Member referred to shop fitting. The shop fitting which is going on, including the motor showrooms mentioned by him, calls mainly for specialist craftsmen and does not divert much building labour from other projects. These facts, therefore, seem to me to demolish the right hon. Gentleman's arguments and anxieties. I should like to say on behalf of my right hon. Friends and myself that we shall continue to see how the building situation develops. At the moment, we do not think that the proportion of various buildings being erected is unsatisfactory, particularly the reference I have made to cinemas, and we think that we can go on as we are. However, we shall watch the situation in order to see that building is satisfactory and fulfils the social needs of the country.

Now, before I conclude, I have only to mention the Purchase Tax. Much of the attack on the Budget has been concentrated on the Purchase Tax changes. The object in the Budget is, of course, to clear the way for exports by curbing home consumption and the over-rapid surge forward of investment. The House should remember that many of the goods, the taxation on which I am increasing, are made of metal, and to that extent home demand for metals is reduced and the metal using industries can increase their concentration on exports. In broad outline, the means that I have adopted to curb home consumption is a moderate increase in Purchase Tax across the whole range from top to bottom. The Opposition have mostly exaggerated the difficulties which this will cause for the ordinary family. The hon. Member for Stechford (Mr. Roy Jenkins), whose speech the other day I thought was a little less intense than on previous occasions—[An HON. MEMBER: "But good."] Yes, I thought it was a good speech—asked me to give the details of the Purchase Tax figures.

Of the total yield in a full year of £75 million about £27 million will come from the., taxes on motor cars, radios, television sets and the more expensive domestic electrical equipment. About £15 million will come from the household goods about which the main controversy has raged, £3 million will affect clothing only, and from furniture will come about £3½ million, leaving the balance over a huge range of miscellaneous goods, many of which do not affect the cost-of-living index at all.

The tax on household equipment at £15 million has been particularly criticised. I have made this calculation, that when allowance is made for purchases by hotels and catering establishments, this increase averages—that is to say, for people who buy these goods, which are not a day-to-day necessity or always a day-to-day luxury as are some of the other things that are taxed—between 4d. and 5d. per household per week. As against this, the House should be aware that weekly wage earnings of adult male workers in industry have been increasing at the rate of 14s. each year since 1951. Between April, 1954, and April, 1955, the increase was about £1 a week. As the right hon. Gentleman says, we have to take account of price increases as well.

This total of £75 million is certainly a considerable burden, but the Opposition seem to me to have lost all sense of proportion. The £75 million must be compared with the incomes out of which it will be paid and these have been rising rapidly. Last year total personal incomes rose by no less than £820 million, and hence the full yield of additional Purchase Tax is less than 10 per cent. of the annual increase in incomes. I think that the right hon. Gentleman who spoke about Purchase Tax should remember that it is not the poor who will pay the Purchase Tax on the motor cars, on the electronics, on the fur goods and on many of the luxury articles which will carry the main burden of the tax.

Mr. Hugh Gaitskell (Leeds, South)

If I may say so, the right hon Gentleman seems to be belittling the importance of £75 million now that it is being taken away in taxation, as compared with what he was saying about it when he was giving it away in remission of taxation last spring. I would like to ask him, also, whether he can tell us how much of the £75 million is to be attributed to the top band, the highest of the Purchase Tax rates, how much to the second, and how much to the third?

Mr. Butler

I have not yet been able to get an accurate estimate of those figures. When I am able to get an accurate assessment, which is rather difficult, I will give it to the House. I have only been able to get the figure of £27 million for motor cars, radio, television sets, and the more expensive domestic electrical equipment. Directly we have the full information and we can get a proper assessment, hon. Members will have it put before them.

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

The right hon. Gentleman says that this taxation will save metal which can then be sent abroad. I can understand that, but if £15 million comes to the Treasury it seems to me that people will still be buying the metal, so I do not see how it can be sent abroad.

Mr. Butler

It all depends on how people spend their personal incomes. The general effect of Purchase Tax as used by my predecessors, many of whom were of a different political complexion from myself, was to reduce home demand and to increase the export trade.

One thing that surprises me about right hon. and hon. Gentlemen opposite is that they voted against the Purchase Tax increase, including the removal of the D scheme, although they must know from their experience under their own Socialist Chancellor of the Exchequer that this action is designed to help our exports and to help the country as a whole. As I said in my Budget speech, the effect of the Purchase Tax increase on the cost-of-living index will be an increase of a little under one point or less than two-thirds of 1 per cent.

I now come to a very important suggestion made by the hon. Gentleman the Member for Sowerby (Mr. Houghton). He said that one of the most serious aspects of this Budget and of the present condition was the industrial situation. I must state quite clearly that I think the right hon. Gentleman the Member for Leeds, South was extremely irresponsible in his reference to the effect of the Budget on wage claims. I must also say that I think that the effect of this Budget upon the wage-earning population has been very much exaggerated. However, it is not in that spirit or in the spirit of criticism of any right hon. or hon. Gentlemen that I wish to—

Mr. Gaitskellrose—

Hon. Members

Sit down.

Mr. Gaitskell

I am most obliged to the right hon. Gentleman for giving way. I make no complaint against his comments. I hit him hard and he is entitled to hit back, as far as he can. I want to ask him this question, however: is he seriously suggesting that it is wrong for the trade unions to claim higher wages when he has deliberately put up the cost of living by the increase in Purchase Tax, and will put it up still further when rents go up?

Mr. Butler

All I can say to that is that it seems to me a pernicious doctrine for members of the Opposition to claim—and they will regret it if ever they return to power—that in the event of taxes being raised for national reasons there has automatically to be a rise in wages. It is not for me, and I rather suspect—even though the right hon. Gentleman has closer affiliations perhaps than I have with the trades union movement—that it is not for him to make the trades unions or their leaders decide how they will resolve this matter.

The Government have considered the suggestion made by the hon. Member for Sowerby and we have sent an invitation to the Trades Union Congress to discuss this matter with the Prime Minister and myself, accompanied by the Minister of Labour, at the earliest possible opportunity. I am glad to say that this suggestion, made in good faith, has immediately been taken up, and that the talks will, I hope, take place tomorrow afternoon.

I cannot say what will be the effect of the talks. We are dealing with men who are entirely independent, who have shown themselves to be courageous, and who have vast and heavy responsibilities at the present time. It is no wish of the Government to place upon such men any further responsibilities or to make things more difficult for them, or for that great mass of the wage-earning population who have done so much to increase our production.

In conclusion, I would like to make an appeal to the House as a whole. This Budget has been introduced for economic reasons, with great difficulty and after great doubts and anxiety on the part of the Chancellor of the Exchequer and his colleagues. It has been done for reasons which we think are right in the national interest, to protect sterling and to protect our standard of living. We believe that it will be successful.

All we now ask is not that hon. and right hon. Members opposite should cease to criticise us or should cease to debate or to attack us in whatever manner they think best. What we do wish is that we should send out from this House a message to the country that if we face these burdens, spread, as they are, over the vast range of the population, they are not really quite so serious as our debates have made out, that they will do good to our economy and that if they are faced in the right spirit, then, with unity, we may progress forward to save that full employment and that standard of living which this Government have done so much to defend.

5.40 p.m.

Mr. S. N. Evans (Wednesbury)

The Chancellor of the Exchequer has defended himself and his policies with spirited good humour, but in all that he said there was an ambiguity that his eloquence cannot be allowed to obscure. It is slightly optimistic for him to expect that the representatives of the workers will take the view which he expressed in the concluding part of his speech, having regard to the nature of the Budget. Referring to his hope that the Budget would help to strengthen sterling, let me say that those hard-faced Zurich bankers will not be impressed by the tax on Mrs. Mopp's coal scuttle and dustbin. They will want something very much more than that.

The record of the Government over the past four years stands out for all to see. Internally, the cost of living has gone up by 10 per cent. Externally, there has been a constant weakness of the £, resulting in a steady decrease in our gold and dollar reserves. Despite what the Chancellor said, there has been very poor success for whatever efforts he has made to bring about a higher rate of industrial rehabilitation in this country.

It is interesting to note that last year the Americans spent £180 per worker on plant and equipment alone. We spent £66 per worker on capital investment in industry on plant, equipment and building. So I do not think the Chancellor or the Government have any extravagant claims to make in this connection. There can be little doubt that the present financial crisis, the last of many—

Mr. George Brown (Belper)

The latest of many.

Mr. Evans

—is due very largely to the Government's policy of a free-for-all. If the Government would start analysing problems a little more and would spend a little less time memorising slogans, it may be that national recovery would be faster.

Of course, the main cause of our present trouble is the 300,000 houses. More than anything else, it was their promise in 1951 and what happened afterwards that got the Government elected. The present situation is known to all, or should be known. We are pouring out scarce dollars to buy coal to burn bricks to turn into houses, "pubs" and cinemas which make no contribution at all to the balance of payments problem. It would be better if the Chancellor said this instead of his very complicated method of cutting back house building—for that is what he is doing; he has got to do it. Until we can get sufficient coal from our own resources, he must cut back.

Then, there has been the drain of gold and dollar reserves for steel. We have poured out millions and millions of dollars to buy steel to please motor manufacturers whose aggressive salesmanship so far as exports are concerned has shown a sharp decline over the last 12 months. Here again, we have poured out precious gold and dollar reserves to bring in from the Western Hemisphere materials which are not being used in a manner which helps the balance of payments problem.

The Chancellor of the Exchequer should be aware that on the Continent of Europe there has been a sharp setback so far as the sales of British motor cars are concerned. In Sweden alone, in the first seven months of this year, Morris sales fell by one-third, Austin sales fell by one-half and Standard and Hillman sales fell by two-thirds. So we are, in fact, pouring out our precious gold and dollar reserves to buy steel to please motor manufacturers who are not doing what they ought to be doing in the interests of the nation. I am at a loss to understand how this state of affairs will be altered without the Chancellor applying pressure to these motor car manufacturers.

Because of the inflation in the system, there is a ready-made market at home and motor car manufacturers are not trying to sell abroad half as hard as they were doing even two years ago. Now, we are up against the German competition. The Swedes complain bitterly about British cars being obsolescent in design. They complain of the springing and of the price, and they complain of the finish. It is for this reason that they are switching to German cars on such a wholesale scale.

I am unable to see how this loss of gold and dollar reserves will be arrested unless the Chancellor puts his foot down firmly and says, "We are not going to buy sheet steel for you motor car manufacturers unless you are going to use that steel to make cars for sale abroad." That, it seems to me, entails a measure of physical control—let us be quite frank about it—and, in the long run, I do not think there will be any escape from it.

There are other grounds upon which the Government can be indicted. For myself, I think that the most lamentable of all the Government's failures has been to starve the restoration of our overseas investment. Everybody knows that our present weakness and our vulnerability to these constant crises is due more than anything else to the loss of our overseas investments. We on these benches, perhaps, sometimes tend to underestimate the importance of our invisible exports. I do not. Chief of those invisible exports is our overseas investments. The strides that we have made towards rebuilding them can only be described as miserable, for since 1948 our investments in the Commonwealth have gone up by about £35 million. Our investments in foreign countries have gone down since the present Government took office. They decreased by £16 million in 1953, the last year for which I have figures.

This failure to go to any lengths, to impose any sacrifices so that we may restore our income from overseas investments, is the principal charge which I lay at the door of the Government. When we come to embark on this great and imaginative Kariba Gorge Scheme, this bold scheme to harness the waters of the Zambesi in Central Africa, we find that the finance is coming from the World Bank. That is a national disgrace. We have a vast Commonwealth of inestimable use to us which could do great good for the peoples of its territories, and yet our investment in it from 1948 to 1953 amounted to about £35 million, and that from the Government which professes to be of an Empire and Commonwealth party is a shocking dereliction of duty.

There is something else about which every right-thinking Englishman should be concerned, and that is the way in which United Kingdom indebtedness to the colonial peoples continues to mount. Since the war it has trebled, and it now stands at £1,294 million. We are taking what they produce, their cotton, their rubber, their tin, their cocoa, their copper, and we are owing them for it, and that in a period when this country up to June, 1954, has had by way of loans and grants of one kind and another more than £2,500 million from the Americans and the Canadians. What we have had from the Americans, £2,450 million, plus what we have had since June, 1954, plus the Canadian loan, amount to about £3,000 million, £300 million a year for 10 years. There has been that on the one hand and, on the other, there has been a constant growth of the amount we owe to the Colonies.

When we get down to brass tacks, we find our much-vaunted prosperity and Welfare State depend on the twin pillars of American charity and colonial tick. That is a bad thing. I indict this Government—after all, they are the great party of Empire and Commonwealth—because what they have done to create better conditions and to develop the resources of the Commonwealth in the interests of the United Kingdom and of the people who live in those territories has been negligible.

Mr. Julian Ridsdale (Harwich)

Does not the fact that in the Budget we are aiming at a trading surplus approximating £300 million mean that we are getting the savings in this country to lend to the Commonwealth and Empire?

Mr. Evans

We had a Budget surplus approximating to £300 million last year, but, of course, what the Government did was to give £140 million of it to Income Tax payers, Surtax payers and big companies. I can think of a thousand and one ways in which the Government could have spent that money to better advantage. Our roads in this country are more like Red Indian trails than modern 20th Century highways. We could have spent some of that money on them. The Government could have spent some of it in the way I am now suggesting.

It is time the country began to stand on its own two feet. We create the impression that "God will provide" is our philosophy. For a nation whose intellectual week-end Press is almost wholly in the hands of atheists this is an odd philosophy. It is a fact that we are not preoccupied with this inflation; we are not really worried about the balance of payments problem, about the loss of our gold and dollar reserves, about the diminution of our competitive force in international markets.

I do not know what has come over us. This lack of initiative, this business of restrictionism on both sides of industry, everybody subsidising everybody else, worries me. It is time we took a good look at ourselves, because this is the way great empires wind to their ruin. This is the story of Rome, and I find ominous similarities. The Government have four years to run, and I will give them a little advice. There is nothing the Prime Minister or Chancellor of the Exchequer can do which will allow them to renew the lease in 1959, so they may as well do what they think best in the country's interests.

The people of this country are the smartest people in the world, and they know that after a party has been in power for six or seven years the ship of State has attracted to itself barnacles, just like the Queen Mary; and so into dry dock it goes. This is a healthy instinct, because, among other things, the crew is very tired. I say to the Prime Minister and the Chancellor of the Exchequer that they might just as well do what they feel to be in the best interests of the nation, because there is nothing they can do which will save them in 1959.

5.57 p.m.

Captain Christopher Soames (Bedford)

We had a characteristically entertaining speech from the hon. Member for Wednesbury (Mr. S. N. Evans), but I feel that when it is analysed it will prove to be much more in the nature of a censure of the Labour Party than of this side of the House. Indeed, we have a very rough Motion on the Order Paper, and up to now neither of the speeches from the party opposite has lived up to the terms of the Motion, and nor have they in any way endeavoured to prove their point.

I should like to concentrate on one phrase in the Motion, namely, that the last Budget was Calculated to deceive the electorate and was designed for party political ends. It is a serious charge, but what can there be as evidence? Had it been that in the three years previous to April, 1955, my right hon. Friend the Chancellor of the Exchequer had brought in one Budget after another imposing fresh taxation and suddenly in April, just before the Election, brought in a Budget in which he found himself able to give large-scale tax reliefs, in other words a Budget that was different from the continuity of policy which had been shown by the Government up to that time, there might have been something in the charge of electioneering. In fact, the Budget of 1955 was nothing more than a logical continuation of the Conservative policy that had been pursued by Her Majesty's Government for three years. Five hundred and fifty million pounds in tax reliefs had been given by the Chancellor of the Exchequer in four Budgets. Hon. and right hon. Gentlemen opposite are now apparently complaining about the £125 million which was given in the April, 1955 Budget.

One must remember the attitude of hon. and right hon. Members opposite when that Budget was introduced. I do not agree with those who say that hon. Members opposite did not in any way oppose the proposal to take 6d. off Income Tax. They certainly did. Many speeches were made by them suggesting that that was not the right sort of tax relief to be brought in at that time. But, surely, the important fact is that they did not in any way object, when the matter was before them, to the bare fact that £150 million more money was being left by the Chancellor of the Exchequer in the pockets of the people, in the form of tax reliefs. They said that the money was being put into the wrong pockets—but whatever the Chancellor had done they would have found reasons for objection. As the rate of direct taxation is brought down even more during the next four years, hon. Members opposite will put forward the same arguments; but at the time of the April, 1955, Budget they did not complain that it was inflationary, and they did not object to £125 million extra being left in the pockets of the people.

Mr. Donald Chapman (Birmingham, Northfield)

The hon. and gallant Member cannot have read that Budget debate. If he does, he will find a very long passage in the speech of my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) in which he said that it was an inflationary situation and that there was grave danger in giving tax reliefs. To my recollection there was also a long speech, which gained national recognition, by the then Member for Gloucestershire, South—Mr. Crosland—which was based upon that issue. Indeed, in speech after speech from hon. Members on this side of the House, it was pointed out that it might very well be dangerous to have an inflationary Budget at that time.

Captain Soames

During the last weekend I have read many of the speeches made by hon. Members opposite on that occasion. I was especially struck by the speech of the hon. and learned Member for Kettering (Mr. Mitchison) who led for the Opposition during the Committee stage of the Income Tax Clause, which was the matter to which I have just been referring. His only argument was that the money should not have been given as a relief from Income Tax but in some other way.

From that we can surely draw one of two deductions. Either the Opposition thought it wrong at the time to grant tax relief—and I do not believe that they did, because there is a large amount of integrity among hon. Members opposite and they would have voted against it in the Lobby—or they are just being wise after the event. If the second alternative is true, it does not warrant the terms of abuse which have been hurled across the Floor from the party opposite against my right hon. Friend the Chancellor during this debate, or the charges of deceit and dishonesty which are set out in the Motion and which, I am sure, right hon. Gentlemen opposite would not bandy about lightly.

In examining these charges it is necessary to go back further than the April Budget; it is necessary to go back to 1951, when the Conservative Party was elected to power. My right hon. Friend the Chancellor has given a very full account of what happened in the months leading up to that Election. He told us that our reserves were running out at the rate of £100 million and more per month at that time—yet the right hon. Member for Leeds, South did nothing about it. I do not think that we charged him with dishonesty and deceit at that time, although we wondered a little at the speed with which he decided to go to the country; and there must have been in his mind at that time a feeling that if he stayed any longer things were going to get worse.

How much worse was the position of our balance of payments then than it is today? In 1951 the balance of payments was running down at the rate of £100 million and more a month. During the last six months of last year our balance of payments—taking into account our arrangements with the European Payments Union and the International Monetary Fund—showed a deficit of £25 million, and in the first six months of this year a deficit of £30 million.

As the Chancellor said today, it may be that he under-estimated the speed at which the credit squeeze would have effect. He might have been guilty of not being a soothsayer and not being able to foresee the labour troubles that came later in the year, and which undoubtedly had a considerable effect upon the May and June export figures—although I do not want to labour the point—but to say that he was guilty of dishonesty and deceit, bearing in mind the record in August, September and October, 1951, of the party opposite, is, to put it mildly, going too far.

I do not wish to meet one charge with another, for there is an excellent case which can be put forward to refute the charge—and that is all I am endeavouring to do. I would, however, say that the record of the right hon. Member for Leeds. South at that time does not exactly fit him to set himself up as judge and jury upon electioneering tactics.

I very much regret that out of the Margate Conference came a decision from the party opposite not to bring out a policy for three years. I fear that a lot of invective will be thrown across the Floor of the House, but I am sure that hon. Members opposite will understand that, in the long run, invective is no substitute for a policy. I hope that we shall not have to wait as long as three years before hon. and right hon. Gentlemen opposite get their troubles straightened out and produce a policy so that they can offer something much more constructive than has been put forward in this Budget debate.

I feel very strongly about the Motion. I regard it as most insulting. It is insulting not only to Her Majesty's Government, but to the whole country. The Election was not won by the promise of 6d. off Income Tax, and if hon. Members opposite really think that it was, they are seriously underrating the political "savvy" of the British people. The last Election was won because the people appreciated that when the Conservative Party was elected to power in 1951 the country had been in the slough of economic difficulties, and that during the three years which followed—and here great credit must rest with my right hon. Friend the Chancellor of the Exchequer, who is being so much attacked today—the country was raised from that slough or morass of economic difficulties to a peak of general prosperity such as the people had never before enjoyed.

It is hard to prejudge the effect of the measures which the Chancellor has introduced in the Budget. I am confident that those measures will succeed, and that they will give new strength, vigour and support to the £ sterling. When that happens, I hope that the right hon. Member for Leeds, South will realise that there was no foundation for the invective which he chose to hurl at my right hon. Friend the Chancellor of the Exchequer. The Motion was drawn up in a fit of temper and thwarted bitterness by right hon. Gentlemen opposite. I hope that the House will reject it, and I am sure the country would wish it so.

6.11 p.m.

Mr. William Hamilton (Fife, West)

The hon. and gallant Member for Bedford (Captain Soames) said that we who sit on the Opposition side of the House had gone too far in this Motion. I contend that the Motion does not go far enough. The Chancellor of the Exchequer has said that the sole objective of his Budget last week was to cure inflation. We have to judge it by that yardstick.

Of the £75 million that he will take in Purchase Tax about half does not affect the cost-of-living index. That fact seems to prove that the index, as it exists, is a "phoney" instrument for measuring the well-being of the people. The Chancellor has now introduced five Budgets. The basic fact by which to judge the success of those Budgets is simply that in that period the £ has become worth 2s. less than it was when he started.

The hon. Member for Oldham, East (Sir I. Horobin) said last week that the value of money was the crux of the internal problem facing us. Judging by that, no one can say that the Chancellor of the Exchequer has been a success. He may have managed in the last four years largely because he had good luck in the international sphere, but his own policies have more than counteracted that, as has been seen in the loss of 2s. in the £ in purchasing power since he took office.

Let us look at the Budgets that the right hon. Gentleman has presented. The hon. and gallant Member for Bedford suggested that the last Budget did not fit into a pattern, but of course it did. Let me show the pattern. In 1952, within a few months of coming into office, the Chancellor slashed the food subsidies, despite the specific promise that he made at Berwick. The Chancellor's denial this afternoon in regard to this promise does not hold water. That action put 6s. on the food bill of the average family. It is true that some social benefits were thrown in, but the fact is that there was a net loss on the Budget as a whole for ordinary, humble, working-class people.

In the 1953 Budget, 6d. was taken off the Income Tax, and about 9 million workers earning £10 a week benefited on the average by about 1s. per week. At the other end of the scale, about one quarter of the Surtax payers benefited by an average of 32s. 6d. a week. There we see the pattern about which we are complaining. In that Budget Purchase Tax was reduced by 25 per cent., which had the effect of giving the biggest relief to luxury goods.

The 1954 Budget was a "no change" Budget. The Chancellor of the Exchequer said, in April, 1954: We must not be frightened of a little more ease and happiness or feel that what is pleasant must necessarily be evil."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 198.] That was quite a different story from what we hear today, after the recent Election. When the Budget was presented in April this year the Election was a little nearer than it was in 1954, so it was a mass of bribery and deceit. The Chancellor took 6d. off the standard rate of Income Tax and 3d. off the reduced rates, but the lower-paid workers did not get any tax relief. Hon. Gentlemen opposite say, "Of course, if they were not paying Income Tax how could they get relief?"

Captain Soames

The hon. Gentleman has quoted me, but he must show a little consistency. Is he saying that the pattern of the Budgets of the previous Conservative Government was to give money only to those who had a lot and to give no relief to those who had nothing? Or is he saying, as is said in the Motion, that the April, 1955, Budget was a bribing Budget for the mass of the electorate? He can have it one way or the other, but he cannot have it both ways.

Mr. Hamilton

I am showing simply that the whole of the five Budgets that the Chancellor of the Exchequer has introduced are all of a pattern, because they all hit hardest those who are least able to bear the blow. I challenge the hon. and gallant Gentleman or any other hon. Member to deny that statement.

I have tried to show that the 1955 pre-Election Budget not only contradicted the credit policy announced in April as designed to curb spending, but had the effect of making the workers net losers after the Election when they had to meet increases in National Insurance contributions to pay for the pension increases given as a bribe just before the Election. It is within the recollection of everybody in this House that prior to the Election there was a whole spate of promises about roads, railways, education, and the rest. The Tory Campaign Guide for the last General Election used these words: Under Mr. Butler's firm direction in the economic field we have been paying our way, repaying our debts and rebuilding our reserves. That was in the manifesto. Let us look at the reserves.

At that time, June, 1954, as a matter of fact, under a Tory Government the peak figure of our gold and dollar reserves was £1,078 million. That was £100 million less than the peak figure under the Labour Government at the end of 1950. The present Government have never yet come within £100 million of the peak figure of our reserves under the Labour Government. They had the temerity to say in their manifesto, "We are rebuilding our reserves," although from June, 1954, until April of this year, just prior to the Election, there was a drop of £120 million in our reserves. Since then, of course, there has been a further drop of £120 million.

The Campaign Guide went on: "Inflation has been curbed." Are the Government prepared to say that now? Who will be able to say it after the full effects of this Budget are felt? Does the Chancellor—or anyone on that side of the House—really believe that this Budget will contribute to the combating of inflation? The Chancellor and the Prime Minister are to see the trade union leaders. I wish them luck. If I were a housewife in a council house in West Fife and read what was to happen to the rent, I would say to my miner husband "Go and get a wage increase".

The House may rest assured that that kind of reaction to the Budget is inevitable. Indeed, even the former Secretary of State for the Colonies, Lord Chandos—who is not exactly what we on this side of the House would call a "progressive"—says that the Budget is bound, of course, to be inflationary. In the last ten years the people have had an increase in their standard of living. Working people the world over—not only in this country—are realising that the poverty, and misery and starvation they suffered in the 'twenties and' thirties is no longer inevitable; that it was due to maldistribution of national and international wealth.

If they now see the Government trying to put back the clock and to take from them something which has been hard won they will say, "We are not prepared to accept that. We are still going to buy these things and then demand the wages to pay for them." That is the psychology of the workers today. For the Government not to realise that, for the Chancellor of the Exchequer to talk about his port and his pheasant, shows how far removed hon. Members opposite are from that psychology.

Let me return to the Campaign Guide. We have talked about the deception practised by the Tory Party at the last Election. The Guide says: Exports in 1954 reached a record level. Of course they did, but that is a worldwide characteristic. In fact, our competitors are doing very much better than we are. In its last issue, the "Economist" makes that quite clear. A few months ago the Treasury Bulletin for Industry said that from March, 1954, to March, 1955, our share—the British share—of the total world trade in manufactures fell by one per cent.; that is, by about £100 million. The Bulletin for Industry of February this year said: There is no sign that our competitive position is improving. It seems a very strange doctrine on the one hand to say that our welfare, our prosperity, our future well-being depends on exports in a competitive world and, on the other hand, to introduce a Budget which must have an adverse effect on the cost of living, and therefore on wage demands, on our costs of production, and on the prices of exports that have to compete with those of Germany and other countries. It seems a fantastic state of affairs.

The Campaign Guide talks about full employment, and the Chancellor preens himself about it. It is rather significant that the average monthly figure of unemployment—not the percentage, but the monthly total—for 1952. 1953, 1954 and 1955 is nearly 30,000 more than it was in the last four years of the Labour Government. There is no doubt that at the last Election we had the picture painted by the Conservative Party of the beautiful "Garden of Eden." The snakes in the grass were kept carefully hidden until after the Election, when they slithered into the open. Now we get this spiteful Budget, hissing class hatred. Members on the other side of the House talk of us mouthing our class hatred, but this is it in practice, and we have seen it over the years.

The lash of this class hatred is to fall—on whom? It is to fall on council-house tenants, on the housewives, on the working people generally—with a mild admonition to the profit makers. The Government will deceive nobody by the 2½ per cent. increase on the tax on distributed profits. They will deceive nobody on this side of the House, at any rate. But the Budget does not, in fact, satisfy a whole range of people even on the other side of the House. The Government's friends both inside and outside the House are saying "The Chancellor of the Exchequer has failed. He should have gone a lot further." In its issue of last Thursday, the "Evening News" said: Mr. Butler ought to have gone hard for Government spending. What was needed was a Geddes Axe plus a May Report. The crux of the matter is that this Government's policy is a welter of contradictions and deceptions. The deceptions I hope I have outlined—food subsidies, the April Budget and the like. The contradictions are, I think, almost as obvious.

Sir Robert Boothby (Aberdeenshire, East)rose—

Mr. Hamilton

I see the hon. Member for Aberdeenshire, East (Sir R. Boothby) trying to intervene. He knows that one of our basic problems today is increased food production at home—but what do the Government do? One of the effects of the credit squeeze is to make it much more difficult for farmers to get the credit which they require. Another is that it will retard rural electrification—and it may have an adverse effect on housing in rural areas.

Already we have had thousands of workers leaving the land because of the lack of amenities and because of a wage that is, on average, £3 a week less than that of the industrial workers. Is this kind of policy likely to bring back those workers to the land? On the contrary, more and more of them will leave. We get an appeal for decreased consumption, yet we have, on Independent Television, the spending of—what?—£1,000 a minute on advertising; telling people to buy more of this, that and the other thing. Independent Television has only one good feature at the moment—yesterday's debate on the Budget, despite the 14-day ban.

Another contradiction in the Government's policy is the increase in council-house rents. One of our biggest problems today is to increase the mobility of labour; to get labour to move from one part of the country to another. I fear that this housing policy, this raising of rents, this deliberate attempt to cut the whole housing programmes of local authorities, will do nothing but increase the immobility of labour. That will have a bad effect on the economy as a whole.

This Budget is not only a contradiction of what went before it but is blatantly inflationary. I believe—in fact, I have overheard one or two Government supporters saying that they believe—that the Chancellor has gone into this with his eyes open. He knows very well that the effects of this Budget will be to put up prices and boost wages, and that we shall move into a period of unemployment because of difficulties in the export market; then, when there is a queue of unemployed, wage increase demands can be resisted. I believe that policy is deliberate. If it had been expounded at the General Election, I believe that this Government would not have been in power. That is why I condemn the Motion, because it does not go far enough.

6.30 p.m.

Sir Robert Boothby (Aberdeenshire, East)

In spite of the eloquence of the hon. Member for Fife, West (Mr. Hamilton), I do not think there is the slightest justification for any of the attacks that have been made during the last few days upon the Chancellor of the Exchequer. As my hon. and gallant Friend the Member for Bedford (Captain Soames) rightly said, personal abuse is no substitute for arguments; and certainly many of the speeches in these debates have given evidence that personal abuse can be used to conceal paucity of thought.

There is not a great deal of thought on the Opposition benches about policy, at the moment at any rate. According to the newspapers, hon. Members opposite are engaged on thinking about other things just now; and I think it is having a very disturbing effect upon some of their more responsible leaders. I hope, for all our sakes, that they will get this business of the leadership of the party finished as quickly as possible so that we can all settle down once again to normality.

I believe that excessive taxation is caused by excessive public expenditure, and that these two things are the primary cause of our present inflation. I have never concealed that belief. I therefore regret the increases in taxation, small though they are, because I believe that they sap the economic strength of this country and do no good. At the same time, I welcome the Chancellor's proposals to cut down public expenditure: and I am particularly glad that he has not reduced the initial investment allowance. To seek to increase exports by repressing industrial development and expansion at home is a policy of desperation. Even now, the rate of our industrial investment does not compare with that of the United States or Western Germany, and several other countries. The list is increasing. If we cut down our productive investment, we simply shall not survive.

I should like to ask my hon. Friend the Economic Secretary to the Treasury two questions arising out of the Budget, which he can answer whenever he likes. First, is the Chancellor satisfied with his statistical service? Lord Keynes once told me that this would be one of the vital things in the post-war world. I should like to know whether the economic information service at the disposal of the Chancellor is good enough. I do not think it is. I do not think it compares with the statistical service of the United States of America which is at the disposal of the Secretary of the American Treasury.

My second question is this. Will my hon. Friend ask the Chancellor, between now and the next biennial Budget, to look into the possibility of providing some more incentives for saving than the present very modest increase in the permitted amount of National Savings certificates? I am referring to savings by the workers and by the professional classes, who, however high they may rise in their profession, find it practically impossible to save anything out of earnings. It is very bad for any country if the people as a whole are unable to save anything out of earnings.

The Economic Secretary to the Treasury (Sir Edward Boyle)

Perhaps I may answer my hon. Friend's question about statistics now. I said something about statistics when I wound up the Finance Bill. We are trying to improve this, and in particular we are trying to get more details about the investment plans of companies.

Sir R. Boothby

I am obliged.

Mr. Arthur Lewis (West Ham, North)

Does the hon. Gentleman suggest that the Post Office Savings Bank rate and the small trustee savings banks rates should go up to 5 per cent.?

Sir R. Boothby

Do not push me too far. I am prepared to go a long way, but I cannot answer impromptu questions without consideration. I have risen to speak on one point which I believe to be as important as anything else, and which has been to a large extent ignored throughout these debates. In doing so, I shall have to ride an old hobby horse, but I shall only ride it for 10 minutes. It is a good, if unpopular, horse; and I shall take it at a brisk canter.

My argument applies not to this Budget, but to the months and years which lie ahead. I believe that the real cause for anxiety is, more than anything else, the balance of payments. We are all apt to talk about inflation as if that was the real cause of the trouble; but the real cause of the trouble is that we are not paying our way in the world. That is what gives us a headache. One can deal with inflation much more easily if one is a self-supporting country like France. We are now running on a surplus of less than £40 million at the moment—and that is largely a paper surplus—instead of the £300 million which all economists put as the minimum which we require.

Two years ago Professor Austin Robinson estimated that we should have to adjust the national economy to a situation in which we should be able to obtain little more than four-fifths of our pre-war imports, and I have never seen that opinion contradicted in any responsible quarter.

Now we have the O.E.E.C. Report which wrote of this country a few days ago: The demand for imports must be restrained. Since the previous statement by Professor Robinson, our import bill has been rising steadily; and by no less than £114 million, or nearly 50 per cent., during the first six months of this year from the dollar area alone. This relates not only to cereals, cotton and tobacco, but also to feeding stuffs and coal; and I read to my astonishment in "The Times" only last week: The Board of Trade announce that arrangements have been made for the import from the United States of fresh pears to a value of £335,000 and of grapes, other than hot house grapes, to a value of £220,000. This is to be paid for in dollars. It will not do.

As against this, American exports have been rising and their imports have been falling. The United States is the greatest creditor nation in the world, with the highest productivity, and the largest internal market enjoying the greatest protection. They produce more than 40 per cent. of the world's manufactured goods; yet their imports have fallen since the war from 10 per cent. to less than 5 per cent. of their total national income.

I say to the Government: You cannot laugh that off. Nor can we get rid of the existence of farm surpluses, to which I read in one of the papers this morning a more energetic approach to their disposal is now to be made—import restrictions, shipping discrimination, the Buy American Act, the escape clause, the peril point provision, and all the rest of it. We cannot get rid of these things by the process of wishful thinking.

Sooner or later we shall all have to make up our minds. We shall have to cut our dollar imports to the level of our dollar earnings—

Mr. Lewis

Come over here.

Sir R. Boothby

—and it can only be done by protection and discrimination, and by increased production of food and coal in this country. I suggest that, so far as the commodity markets are concerned, we shall have to put some limit upon the allocation of dollars. We simply cannot go on giving unlimited quantities of dollars to the commodity markets, because we have not got them. I would also like to see a levy-subsidy imposed upon imported cereals. And I would like to see the development of alternative sources of supply, by means of tariff discrimination and long-term contracts. None of these things involves rationing.

It is extraordinary that I should be mocked for saying this, because I am preaching the pure milk of Tory doctrine. I believe that the present economic dis-equilibrium in the free world is due to fundamental processes of change which have been going on for half a century and have been accelerated but not caused by two world wars. The proportion of international trade in relation to production all over the world has been steadily falling for the last 50 years; and, meanwhile, the United States has been accumulating all the gold, and the rest of the free world is suffering from an endemic lack of monetary reserves which is the main cause of the biennial crises which afflict us all.

In short, the problem of the dollar gap is not a temporary phenomenon. It is a permanent feature of modern life, which neither the American Loan nor Marshall Aid was able to cure, and which we will never be able to cure by a vast increase in the export of manufactured goods to the United States of America.

Despite that, the Treasury, since the war, has committed us successively to non-discrimination, free multilateral trade, fixed exchange rates, free convertibility, and, at one horrible moment, to the elimination of Imperial Preference. I have said before, and I repeat now, that these things cannot be made to mix. In a recent report of the International Monetary Fund, we find these words: The attainment of a stable international equilibrium … still eludes large parts of the world and there has been little secure or sustained progress towards the Fund objectives of unimpeded multilateral trade and general convertibility of currencies. Sad words, but no surprise to me.

I just want to add that I remain an unrepentant believer in Protection, discrimination and preferential tariffs. It is because I believe in them that I remain a member of the Tory Party; but I am bound to say that the gradual, steady, corroding conversion of the Tory Party to the fiscal doctrines of the Liberal Party is the greatest grief of my declining years. Even the Commonwealth has been infected. After the last two Commonwealth Conferences, communiqués were issued which might have been manifestoes issued by Nonconformist gatherings in the 19th century in the Free Trade Hall in Manchester presided over by Mr. Cobden. That is where the Empire has got to now. It is all very well for Lord Beaverbrook to talk about developing it; but it is even worse than we are so far as preference and discrimination is concerned.

The Strasbourg Plan, which I helped to draft, was designed to expand the economy and trade of the free world outside the dollar area by providing assured markets and using the capital resources and manpower of Western Europe to develop alternative sources of supply throughout the Commonwealth and the countries overseas associated with those of O.E.E.C. What has happened to that? It went into a pigeon-hole so quickly that nobody even saw it; and it has never been brought out since.

If the Chancellor of the Exchequer would only hold firm to the true traditions and fiscal policies of the Tory Party, he would have no need to impose fresh taxation. If he had held firm to those traditions, he would have had no reason to impose increased taxation in this Budget; and we should not now be half as frightened as we are of inflation.

Mr. Frederick Peart (Workington)

Will the hon. Gentleman allow me? He mentioned the Strasbourg Plan just now. I agree that he supported it very strongly at Strasbourg, but he also supported the approach to multilateralism in the field of common markets for agricultural products. How does he square his views with his support for the Green Pool?

Sir R. Boothby

I did not support the Green Pool. The Strasbourg Plan envisaged a closer association between the economies of Western Europe and of the sterling area; and there is really nothing incompatible between the two things. I merely thought the Green Pool was not so practical a proposition.

I believe that my right hon. Friend the Chancellor, who once believed in this doctrine very firmly himself, will come back to it again; and that is why I am not half as worried as other people are, because if it were not for the possibility of pursuing a policy of discrimination and some kind of control over imports, I would despair. I believe that the Chancellor will come back to it, and I only hope that it will not be too late. When he does, it may well be that it is our last card; but it will be the ace of trumps. I therefore do not think we need worry unduly. We shall get to it in the end. The only thing that concerns me at the moment is that we seem to be taking an awful long time to do it.

6.45 p.m.

Mr. Clement Davies (Montgomery)

I quite agree with the hon. Member for East Aberdeenshire (Sir R. Boothby) that he has just been preaching what used to be—but what I now understand is not—the pure milk of the Tory doctrine of Protection. It was certainly so 50 years ago, but it has now been so watered down that I do not think anybody could recognise it.

If the hon. Gentleman is seeking for a spiritual and material home, I think he ought to accept the invitation given to him so warmly from this side of the House, because he has been arguing for a planned economy, which is what the Socialists want. The hon. Gentleman does not seem to realise that he has been using their very phrases and going a long way along the line they would like to follow, except that he is using tariffs instead of the much more effective weapon which the Socialist Party would use.

Sir R. Boothby

It is a very interesting point, because I have here a quotation from the Chancellor in 1947 when he believed in it. Here is what he wrote: I do not see how it is possible to be a warm advocate of tariffs while opposing a central plan, because tariffs must be built on a principle, and that principle is the conscious guidance of the national economy into predetermined channels. So he then agreed with the right hon. and learned Gentleman.

Mr. Davies

The Chancellor has seen the light and has been converted, and it may be that, if he remains on the Government side of the House for a little longer, the hon. Gentleman himself will also see the light.

I agree entirely with what the hon. Gentleman said at the beginning of his speech, that nothing is gained by vituperation. I have never known anything to be gained from it in the long experience which I have had in this House and for a long time before I became a Member here. Nothing is gained by personal attacks and seeking for motives or suggesting that somebody is in some way acting under some evil influence. We can challenge a principle and we may differ among ourselves, but let us at any rate agree with one another that we have the best motives for saying what we do.

May I also, in referring to this matter, suggest to the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) that it would have been very much better if he had followed his usual practice and his own particular style and had not tried to emulate the style of his right hon. Friend the Member for Ebbw Vale (Mr. Bevan). The right hon. Member for Ebbw Vale has an amazing natural gift. Words come quite easily to him. He is a natural orator, and I am afraid that it was perfectly obvious, as I listened to and watched the right hon. Member for Leeds, South, that not only had he carefully prepared and written out a speech, but that he actually read it because he could not actually remember the phrases. One never sees his right hon. Friend the Member for Ebbw Vale doing that.

That reminded me of the famous retort of Mr. F. E. Smith, as he then was, when appearing as a junior at the Bar. He had a quarrel with a county court judge, in which the county court judge realised that he was getting the worst of it. He turned to Smith and said, "I am afraid we are getting very rude to one another." F. E. Smith replied, "Yes, we are; to you it is natural, but I do it on purpose."

Clearly we are in an inflationary period, clearly the inflation is growing and clearly the object which the Chancellor has in mind is to stop that inflation if he possibly can. If I thought for a moment that his proposals were likely to have that effect and to bring about disinflation—not deflation—I should certainly be supporting him, but to my mind, instead of bringing about disinflation, his proposals will increase inflation.

One cannot blame any Chancellor for failing to make an accurate estimate in April in the changing circumstances of the world. The Chancellor very rightly referred to what has occurred in the past, events which are well in the memory of many of us. Estimates made in April, 1947, proved to be quite wrong by October, 1947. Estimates made in April, 1949, proved to be so wrong by October, 1949, that we had to suffer a devaluation of the £ for the first time in our history.

In 1951 we had the estimate made by the right hon. Member for Leeds, South. At that time I thought he was too optimistic, just as he says the present Chancellor has been too optimistic. I suggested at that time that he would have to reassess the position and introduce an Autumn Budget. My guess was right, except that he did not stop to introduce it.

Mr. Gaitskell

We did not have an Election in May, at any rate.

Mr. Davies

All the more reason, I should have thought, to stay in office instead of going straight to the country within 15 months of the previous Election.

Mr. Frederick Lee (Newton)

We had a majority of five.

Mr. Davies

That is no reason why one should not have had the courage to stand at the Box and admit that the original estimate was wrong, putting the facts before the country. My view of these matters is that one always does best by taking the people into one's confidence.

A challenge was thrown out by the right hon. Member for Leeds, South, in which he asked why the Chancellor had not called Parliament back earlier. I quite agree that that should have been done, but I did not hear that challenge from the leaders of the Opposition at any time during the whole of August, September or October. I asked, but I am not in the same position as the leaders of the Opposition. They are practically in a position to be able to demand the return of the House. But there was not a word from them.

If I may turn to the proposals, I will deal first with the Purchase Tax. It is a bad tax. It is a war tax. It is a tax imposed only in moments of real difficulty when the economy cannot increase its production; money has to be found and consumption has to be cut down in some way or another. It is a tax which was rightly imposed during the war. Why is it continued now, 10 years after the war, and why does the Chancellor add to it? The right hon. Gentleman said that he has done so because it will help exports. I have never for a moment thought that it would help exports. On the contrary, in my view it handicaps exports. The manufacturer will always try to meet his customers and in order to meet his customers' pocket in the face of Purchase Tax, what does he do? He tries to produce something cheaper, and unless he introduces new methods into his factory, the only way he can do that is to produce a poorer quality of article.

The export trade must always be based upon the home market. One first of all establishes one's position in the home market and then the excess ought to be for export. Our position throughout the world has always depended upon the quality of our goods, and I think we have suffered a very great deal because of the insistence upon retaining this Purchase Tax after the war.

Now the Chancellor, with the avowed object of helping exports, increases the tax. The Economic Secretary to the Treasury, in a very able speech on Friday—upon which I congratulate him—said these proposals would help in the export market, but I cannot for the life of me see how they will do that. What are the Government doing to help the manufacturers and to bring British goods to the attention of foreign purchasers? Precious little. That is where a great deal could be done to help the manufacturers and to help in the export markets.

This is where I differ from the hon. Member for Aberdeenshire, East, who thinks we can do with fewer imports. We cannot. With a growing population and full employment, the demand all the time is for more goods, more raw materials upon which to work. The suggestion that we ought to be restricting imports in that way surely is nonsense. What we want is more raw materials on which our people can work, and then we want to open markets and encourage exports.

I feel that this increased Purchase Tax will inevitably lead, as already is the case, not only to irritation—and that is bad enough—but to irritation of the most important Chancellor of the Exchequer throughout the country—the housewife. Hers is the influence which will matter. Already she is complaining. What will happen? Of necessity the man will demand higher wages, and one cannot resist his claim. That being so, it will be met, and there will be more money than ever chasing fewer goods. What is that but inflation, with encouragement coming from the Chancellor towards inflation?

May I, in passing, refer to the remarkable speech of the hon. Member for Sowerby (Mr. Houghton) on Friday? At all times one listens to him with respect and with advantage, because he speaks always on close reasoning and with deep experience. I am glad that the Chancellor has taken the very sound advice which the hon. Member tendered on Friday to call the trade unions into conference with himself and the Prime Minister. I sincerely hope that they will try to work together, for the position of the trade union leaders in this country today is such that for the first time in our history we have an outside body as important as the Government themselves. The leadership of these men has been remarkable throughout very difficult times. They are men of great experience and deserve the highest tribute and honour we can offer them.

Mr. Sydney Silverman (Nelson and Colne)

In view of that statement, does not the right hon. and learned Gentleman think that it might have paid the Chancellor even more to have consulted them before the Budget?

Mr. Davies

I certainly think so, but I gathered from statements made by the Chancellor that he had consulted certain trades. I do not know whether he had consulted the trade unions.

Turning to profits, I do not understand why we should encourage high profits and then, after they have been made, tax them in order to reduce them. Surely the right thing is to see that it is impossible to make high profits, and the only way to do that is to encourage competition as much as possible. What are the Government doing about monopolies and restrictive practices, rings and matters of that sort? If they tackled those problems they need not be afraid of very high profits or of having to deal with them. The proposals which the Chancellor has brought forward, instead of helping the country, as he hopes, will, I am afraid, have exactly the opposite effect.

I do congratulate the Government on their courage in undertaking to look at the Rent Restrictions Acts. I have felt that ever since they were put on in a great hurry in 1914—

Mr. A. E. Hunter (Feltham)

Why were they put on?

Mr. Davies

Because at that time there was nothing else to do quickly, just as a moratorium was put on to stop payments from all the banks in the country in 1914. We had had no experience of war for 100 years. We were taken aback and, so that advantage of the situation could not be taken by landlords, we decided that the rents should not be raised. The position has always been maintained that by Act of Parliament individuals, private persons, are called upon to subsidise other private persons. That must be wrong. If private persons need help, that help should come from all of us, from the State, not from other individuals. That is why it is wrong, and I am glad that it is to be put right.

In regard to subsidies and grants, I hope that the very greatest care will be taken, especially in reference to small boroughs in the rural areas. The right hon. Member for Lewisham, South (Mr. H. Morrison) mentioned some of the weaker county boroughs. I am much more familiar with the weaker boroughs themselves. I have six of them in the County of Montgomery with a penny rate for the whole county bringing in only £700 a year. I have in my hand a letter from the town clerk of my own little borough. I do not intend to read the letter. My borough holds the unenviable position of being the highest rated borough in England, Scotland or Wales. Its rates are 31s. 8d. in the £. In June, after trying very hard with a Government Department and having had a promise of an increased grant, it signed a contract to build 16 new houses which are badly needed.

The borough does not take in any overspill population, but the houses are to meet the growing needs of a rural area. The moment the borough had done that up went the interest rates. At the time it entered the contracts it thought it could let the houses at 30s. a week for two bedroomed houses and 33s. a week for three bed-roomed houses. Because of the increased interest the amount went up to 35s. and 36s., and now it is feared that the economic rent which will have to be asked under the new system will be 39s. and 41s.

It is just impossible for a little town like that to do its duty by the public as it desires. I know that the Minister of Housing and Local Government said that special attention would be paid to the position of smaller towns, but this problem applies not only to little towns but also to the rural areas. How often have I made a plea in this House that every effort should be made to stop the continuous exodus from the rural areas into the towns. The exodus will continue and will increase unless we can have decent housing in the rural districts. I do hope that nothing will be done to make the position of rural district councils more difficult, but that everything will be done to try to help them in their very difficult circumstances.

7.5 p.m.

Mr. Angus Maude (Ealing, South)

We have listened, as we always do, to the right hon. and learned Member for Montgomery (Mr. C. Davies) with the great interest and respect to which his experience entitles him. I am bound to say, however, that at the end of his speech I found that we had again been walking the Liberal tight-rope breathlessly hanging on, trying to discover whether the right hon. and learned Gentleman proposes to support or to oppose the Motion of censure before the House. He said a number of things with which I agree, but it was still a toss up at the end as to which way he will come down.

On the one hand, the right hon. and learned Gentleman said that he admired the courage of the Government; and he disapproved of the tactics adopted by the right hon. Member for Leeds, South (Mr. Gaitskell). As he made no mention of deceit or allegations of bribery of the electorate, I presume that the right hon. and learned Member does not accept the premises of the Motion and, although he dislikes Profits Tax and Purchase Tax and an increase in council house rents, I take it that we may still await his decision in the Lobby with interest.

Mr. Clement Davies

I think I said that my main point, and what really matters, is whether the proposals of the Chancellor will achieve disinflation. My view is that they will not and, for that reason, I shall vote for the Motion tonight.

Mr. Maude

My intervention has at least succeeded in relieving the suspense and in our discovering the intentions of the right hon. and learned Member.

It is to something like the same points with which the right hon. and learned Member dealt that I propose to devote the bulk of what I have to say. Like the hon. Member for Wednesbury (Mr. S. N. Evans)—whom I am very glad to see in his place—I have long had a feeling that many of the essentials of the economic situation about which we ought to be legislating and about which we ought to be speaking are masked behind an enormous amount of talk about technical details relating to symptoms rather than to the malady itself. There are so many things which we are all a little afraid of saying but about which we on both sides of the House really might agree, at least to a certain extent.

I do not propose to go over again the same ground as so many hon. Members have covered about whether our policy at the last Election was based on bribery or not. I think that hon. Members opposite are trying to base themselves on two mutually inconsistent arguments. One is about all those Surtax-payers who would have voted Labour at the last Election if there had not been 6d. off the Income Tax and so on. Really that argument will not hold water. What we ought to be discussing today is the part of the censure Motion which relates to the most important question—whether the policy of the Government will, in the long term, really affect the basic malady from which the economy is suffering.

We can take the whole financial operation, the budgetary operation and the extra-budgetary operation together. Perhaps one may have mixed feelings about various parts of the proposals put before us. I think it was inevitable that the Government should turn to the Purchase Tax in order to produce some immediate alleviation of the inflationary symptoms which, without doubt, exist at the moment. I do not quarrel with that too much, provided that we realise that the Purchase Tax is in the long runlet us look forward over the twenty-five years about which the Chancellor was talking—a bad tax and a distorting tax. Until we are completely free of it we cannot hope that the most efficient industries and those on which our future, particularly in export markets, may well depend will develop to the uttermost.

Something of the same can be said about the Profits Tax as well. There may be something to be said for an increase now, provided we realise that in the long run a company which by efficiency makes profits—perhaps leaving its investors without dividends for a number of years whilst by increased investment it builds up its profitability—ought to be able to enjoy the benefits of its investment without having most of them taken away. That tax again is not a particularly good one, but there is something to be said for it, perhaps, in the short run.

If we look at the non-budgetary part of my right hon. Friend's proposals, without any doubt at all we can see that they are part of a long-term plan which has been designed to bring relief back to the economy, and to get rid of one of its most unstable symptoms at the moment. It needs courage for any party nowadays to tackle the housing subsidies and to tackle rent restriction, and if we were all being honest with one another, right hon. and hon. Gentlemen opposite would admit that they were only too grateful to this Government for daring to tackle these problems and to do something about them while a Conservative Government is in power, because they know that rent restriction, in its present form, cannot be allowed to go on indefinitely in present conditions of full employment and inflation.

Something had to be done. I think that hon. and right hon. Gentlemen opposite may well have cause to be grateful to us, if and when they are returned to power, for having had the courage to do something about this first.

Mr. Lee

Will the hon. Member agree that the same principles must apply to the derating Act?

Mr. Maude

I am sorry, but I did not catch what the hon. Gentleman said. I do not want to detain the House for long, and I would rather not be pressed to give way. No doubt, the hon. Gentleman will have an opportunity to speak later.

As I have said, we ought to be trying to deal with the real malady rather than with the symptoms. It is no use trying to treat the spots instead of the measles. Let us look at what is the fundamental problem that we are trying to deal with today. It is, in this country—and it is not confined to this country—a fact that we have now reached the limit of possible man-hours of working. We cannot cut unemployment any more than we have done. There are already two unfilled vacancies for every man unemployed. We cannot increase the actual hours of work much more, perhaps not any more, because many people in this country do not seem to realise the extent to which the hours worked have increased since the war, and that in many industries they are longer than they were before the war.

If we cannot, out of the number of man-hours now being worked, get production adequate to meet export needs and our home consumption with the volume of money in circulation, there is only one thing that we can do—increase the output in every one of these man-hours worked. If we do not do this, some of the other countries, which are actually or nearly in the same position as ourselves, will do it first. Those countries are our competitors in the export market. I want to mention two, because the prognosis here seems to me alarming.

The first is Western Germany. I suppose that of all the achievements in Europe since the war, the most fantastic is the ability of the West German Federal Republic to have absorbed the millions of refugees from Eastern Germany, and to have achieved a condition of full employment. Western Germany now has virtually no surplus capacity. They are working up to the hilt; yet they are about to undertake a programme of rearmament over the next few years. What are they going to do?

They are faced with the problem of an economy at full-stretch. There are two things which they can and will do. They are starting now to import Italian labour for some kind of industrial work, mostly unskilled and semi-skilled work on road construction and capital projects of that kind. The other thing which they will now begin to resort to increasingly is automation. The Germans are not afraid of experiment, and not afraid, as so many of our cost accountants are, of writing off obsolete plant, no matter at what figure it is standing on the balance sheet. If it is obsolete they will scrap it, and if they see the chance of saving so many man-hours of work with a new process, they will do it.

Something like that is about to happen also in Holland at the moment. The Dutch are getting to the stage of full employment, although they have a certain number of local pockets of unemployment due to regional difficulties. They are now beginning to recruit Italian coal miners for their coal mines, and let it be said at once that the Dutch State mines are among the most progressive and efficient mining organisations in the world. They, too, when they come up against the problem of a full-stretch economy, will begin to resort increasingly to automation, and we shall find ourselves faced with a degree of competition in export markets of which we have not yet begun to dream.

So far from keeping up with these other countries in the race, we have not even got to the point where we can honestly say that our productivity, our output per man-hour, in this country bears any relation to the amount of capital investment that we have put into industry since the war. I know that in some industries the increase in productivity has been phenomenal. One can point particularly to the chemical industry and to some of the synthetic fibre industries, and to a certain section of the iron and steel industry. As a result of an enormous amount of investment, we are now beginning to see soaring productivity, and, in some cases, even a cutting of the price in some of the very few industries where that has happened. Of how many industries is it possible to say that?

I take the opportunity of saying with what relief I welcomed the recent statement by the leaders of the cotton weavers' union about the introduction of three-shift working, because it seemed to me that the conditions hedging that offer around were precisely the sort of conditions which were likely to increase the economic efficiency of the industry. They widen the gap between the most efficient and the least efficient, whereas half the efforts of industry on both sides seem to me to be devoted to narrowing the gap, nullifying the advantages of the most efficient firms, and trying to enable the least efficient firms to get by.

If one were asked what the Government could or ought to do in this process, I suppose we could divide the task into three sections. The Government have responsibilities in respect of the whole of private industry, because they create, by their budgetary and other measures, the climate in which industry functions. Next the Government have—and this is the half-way house—a responsibility for a whole sector of private industry into which they pour money as a consumer; in which, in some cases, the Government are almost the sole market for the product of the industry. Finally, there are those industries for which they have direct and almost sole responsibility, namely, the nationalised industries and the Post Office.

The vast sector lies within the field of private industry, and here the Government can perhaps do least directly, but have perhaps the most responsibility in the long run. Competition, as the right hon. and learned Member for Montgomery said, is the basis of the future of private industry, and it is only in increasing competition that we can see any hope at all of doubling our standard of life in twenty-five years. At the moment, British industry—and we may as well admit it—is riddled throughout with a conspiracy to restrict competition.

There are conspiracies between firms inside one industry. These may be connected with the geographical zoning of markets to keep one firm out of the territory of another. There may be price fixing. There may be any one of the hundred methods which we have seen referred to in the reports of the Monopolies Commission. There is also—and this is the most dangerous form of conspiracy of all—the conspiracy within a firm or within an industry between employers and labour to restrict the reduction of costs and prices and thus exploit the consumer. That, too, is rife in British industry now and it is fatal to our survival and our future. The Government really must press through with the utmost vigour their Monopolies and Restrictive Practices Bill.

Mr. Jack Jones (Rotherham)rose—

Mr. Maude

I am sorry, I have a lot to say and not much time, and it would not be fair if I were to give way to the hon. Gentleman. In my view, not merely must that Bill be introduced quickly but it must be pressed through without a shadow of weakening to the vested interests on both sides of industry which will undoubtedly try to water it down. That is the great risk, as I see it, with which that Bill will be faced, and in my view the opposition must be fought.

Then there is the question of the attitude of the Government to profits and dividends. I have never made any secret of my attitude on this question. I have said inside this House and out, both before and since 1951, that we cannot make British industry more competitive by making profits difficult to hold on to once they have been made. What we ought to be doing is to make sure that profits are a little more difficult to earn. For that reason, dealing with this problem through the Profits Tax does not in the long run have much effect. On the contrary, an increase in Profits Tax makes almost every firm a little more careless and a little more extravagant in the way in which it furnishes its offices, whether it replaces its motor vehicles, and so forth.

I believe the Monopolies Bill to be psychologically as well as practically the key to this problem. I do not think we shall get this problem solved merely by making competition a little keener and profits a little more difficult to earn because I say frankly that if I were a trade union leader—whether or not I was a member or not of the party opposite—I should look a little sideways at any one who came to me from this side of the House and talked about my restrictive practices unless the Monopolies Bill had been introduced, pressed through this House, and become law first.

But let me say here and now that this works both ways. Once the Government have got that Bill through and into law, and once it is beginning to work, then the country has a right to expect that there should be some co-operation and reciprocation from the workers' side of the industry. I am not talking about the kind of things about which the hon. Member for Erith and Crayford (Mr. Dodds) has been engaging in controversy during the Recess. One knows that there is a certain amount of that going on. No, what worries me is that an enormous volume of money and resources are being poured into industrial investment without anything like a commensurate return in savings of labour and of hours worked.

We all know how in some cases a process is invented and machinery is available which will cut the number of men employed on a process by six or by twenty-five, and the employer is lucky if he gets an agreement to cut two instead of six or ten instead of twenty-five. Now that is a gross waste of resources and it is not at all in the interests of the workers concerned.

However, I do not want to speak for too long, and I will pass on from private industry to say a word or two about the other two sectors I mentioned. I shall not spend long on the second sector, that is to say, private industry into which the Government are pouring money, except to say that if we want, as my right hon. Friend the Chancellor of the Exchequer has told us he does, a taut, virile and competitive industry, someone ought to take a look at the military aircraft industry of this country. So far from being taut and virile and filled with a sense of urgency and the need to keep costs down, in my opinion—and I know a little about it—it is as soft as butter and it is one of the industries that needs hardening up because there is a great deal of the taxpayers' money going into it.

Then there is the sector of the nationalised industries. We cannot expect private industry to take much notice of Government exhortation, whether it is direct exhortation in words or implied exhortation by credit and taxation squeezes, unless the Government can be shown to be doing everything possible in their power to make their own nationalised industries efficient. What is the good of saying, as we all do when we are looking ahead to the twenty-five years in which we are to double our standard of living, that what we need is more horsepower behind the elbow of every worker in industry? What is the good of saying that when every employer knows that if he puts more horsepower behind the elbows of his workers, he is putting himself at the mercy of a number of statutory monopolies which can raise their prices or even leave him without coal or electricity? There is no certainty that an investment involving a substantially increased use of fuel and power will be a paying investment at the moment.

We sometimes talk now as if economy in fuel or atomic energy will be our salvation, but at the moment this is mere wishful thinking. It will take at least fifteen to twenty years of the twenty-five years we are talking about for atomic energy to make a really substantial contribution to electrical production in this country. And if we speed up the production of atomic power stations too much we shall only find ourselves with a large number of obsolete white elephants at the end of twenty-five years because, without doubt, technical progress will be so rapid in that field that we shall find ourselves over-committed to the wrong type of plant.

That leaves us still dependent on coal to an overwhelming extent. Even with the new oil refinery schemes, oil will supply only about 20 or 25 per cent. of our total requirements of fuel and power. Incidentally we have to import it at a cost of about £8 10s. a ton, although I know that its thermal equivalent in coal would be about £5¼ a ton. But the bulk of our power has got to come from coal and there is not much scope for economy in coal, or not nearly as much as we sometimes think. After all, the domestic consumer who is supposed to waste so much in his grate is using only about 32 million tons out of 200 million tons and his consumption is going down steadily every year, so there is not a lot of economy that we can get out of him.

If it all depends on coal—and the basis of the whole structure is unquestionably coal—the public has a right to ask what is going to be done about coal. I think that a steady increase in the price of coal would be tolerable if it were part of a reorganisation which would put the industry, as a result of enormous investment, reorganisation, the transfer of manpower from one field to another, and so forth, on a thoroughly efficient basis which would meet our requirements over the years. But we have no hope whatever of knowing that that is so.

Look at the inequalities of result over the whole field. Looking at the last Annual Report of the National Coal Board, one finds that over a period of two years, absenteeism has been, on average, 12¼ or 12½ per cent. but that in the best divisions it was as low as 9¼ or 9½ per cent. Look at it this way. Even if there were over the whole country the same level of absenteeism as in the best divisions, we should get another five or six million tons of coal a year, which would save £30 or £35 million worth of dollar imports. We have been told that there is to be a pit by pit inquiry into the relative efficiency of various coal fields. I ask the Government, when that is completed, to publish the result, because the public is anxious to know what is wrong.

Let us consider the results in terms of output per man-year at the pits. This is not found in the Coal Board's Report because it talks only in terms of output per man-shift; but the number of shifts worked has, on the whole, been going down from about 250 to 245 a year. The total output per man-year varies between 298 and 303 tons irrespective of the amount of machinery and investment which has been poured into the pits.

All we hear from the miners' representatives—I have seen some of them and I know that they have this problem sincerely at heart—is the suggestion that we need more men and that the only way to get them is to offer higher wages as an attraction to get men into the industry. We ought to tell them frankly that something which would result only in a slight increase in production at a higher cost per ton produced throughout the industry would be disastrous. It would simply make our problem worse than it is now.

Mr. Tom Brown (Ince)rose—

Mr. Maude

I shall sit down presently, and the hon. Member can question me then. I do not wish to detain the House, but I had rather a lot to say.

We all know what the shareholders in a company would have said of a board that produced results of that kind. If they could not get better results than that from the amount of investment and out of experienced coal miners such as there are in this country, the shareholders would have said that a new board of directors was needed. If we cannot have a new National Coal Board, at least let us tell the public a lot more about what is wrong in the pits, and what prevents the investment from being properly used and results in increased prices, otherwise the public will tell the Government that it requires a complete rethinking of the whole basis on which the nationalised industries are owned and operated.

One could talk about electricity, in which investment has been enormous, and I, for one, shall not quarrel with my right hon. Friend the Chancellor of the Exchequer if he looks closely at some of the investment in that direction. I am not so sure about the proposal to economise in invesment in the gas industry. It is a matter of only £3 million, and I regard gas as on the whole the most efficient of the industries since nationalisation. I am inclined to think that it might be given a little more latitude.

We have heard a great deal about the redevelopment plan for the railways. I am inclined to think that the last pay increase has already made it financially obsolete. In that case, it is time we had a new statement about what is proposed for the railways. The Chancellor of the Exchequer said in his Budget speech that there would be no early call on labour and resources. Why not? How long is it since the railways were nationalised? Are we not yet within measurable distance of any call being made on labour and resources for their redevelopment plan? The whole of industry is waiting for it. The roads are jammed. At least we ought to have some progress on the roads.

One has only to look across the Channel and see what has been happening in France. I understand that Sir Brian Robertson has just got around to going over to France to see what has been happening there. It has been happening virtually ever since the French railways were nationalised. The French set out deliberately to do one thing—to cut the manpower employed on their railways and to leave the best of the men with greatly increased earnings. The success they have achieved is fantastic. It is a totally different railway system now, down to even a quite different kind of railway line bedded differently to sleepers.

In doing all that, the French railways have got their manpower down to 73 per cent. of the 1938 level compared with about 93 per cent. in 1948. The earnings of the railwaymen involved have gone up in the most extraordinary way. There have been no wholesale dismissals or anything like that. Recruitment has been slowed down and a certain number of elderly people have been pensioned off with fairly generous compensation. But now, the French railways are getting the utmost out of every man.

The degree of differential for responsibility and effort on the French railways is much larger than it is over here. In this country, the driver of a crack long-distance express—that is a job which not many of us here would care to undertake—does very little better than the driver of any other kind of train; but in France he gets a bonus of about 20,000 francs a month compared with only 7,000 francs a month for a suburban train driver. France is now going in for electric signalling and control to get rid of still more people and to increase safety. It is true that there will be in control a man who is something like a genius—and some of our nationalised industries could do with some of that.

I should like to conclude my remark on this subject with a word by the President of the French nationalised railways in a recent talk, when he said that the aim of mechanisation in France was, first, continuously to increase safety; secondly, to eliminate as far as possible manual operations by the man, not to enslave him to a machine but to release him from inferior work and to leave to him only the functions of a superior being. Even in my somewhat halting translation, that may still sound a little Gallic and high-flying, but it is not a bad slogan for the dawn of the age of automation. That is what we ought to be doing with our industry.

There is so much that the Government can do. I could sum up in a few words what I have been trying to say—and I am sorry to have kept the House so long—by saying that the Government must first set their own industries in order. Secondly, they must infuse a real sense of urgency and a real lowering of costs into the industries which they are so heavily subsidising. They must make restrictive practices much less profitable and much less easy to undertake. Finally, as my hon. Friend the Member for Oldham, East (Sir I. Horobin) said on Friday, the Government must be able to make the public feel that they intend to do something about prices and the cost of living, for neither side, as my hon. Friend said, can take any credit to itself, except for a brief space last year, when for about a year we did hold the cost of living steady.

A feeling of relief went all through the country. It had a lot to do with the result of the Election, as I found during my own campaign. It was a feeling that it was possible at least for a year to keep the cost of living steady, and now that feeling has gone. But let the people once feel that it is something which the Government passionately mean to do and which the Government want to get them all into alliance to do, and we can get somewhere.

If one wants people not to waste the productive resources with which they work, one must make them feel that what they are doing is not just having a sit down when they ought not, or refusing to make an agreement to get the best out of a machine, but are putting a penny on something which is being purchased by an old-age pensioner. Those are the terms in which people have not yet been taught to think about the subject. That applies just as much to an employer who is simply increasing his profit without making any effort to reduce the price at which he sells his product. If the Government could get people to feel that this was a crusade in which everybody could help, and would do something about the industries over which they have direct control, they would be surprised at the results and how glad everyone in this country would be to see them.

Mr. T. Brown

The hon. Member for Ealing, South (Mr. Maude) has been critical of the miners. Is he aware that no shaft has been sunk in British coal fields for over thirty years? Is he further aware that coal faces are now two or three miles further in than they were and that one has to maintain roads and haul the coal further, and that as a consequence costs have increased and output per man-shift is going down? Will he remember that when criticising miners?

Mr. Maude

I was not criticising the miners; I was criticising the whole mining industry. I am perfectly well aware of those things but the fact remains that in every other country in Europe where it is impossible to increase output per man-shift they are getting Italian miners who are doing just that, and we might have a little of that here.

7.42 p.m.

Mr. Percy Daines (East Ham, North)

The House will be indebted to the hon. Member for Ealing, South (Mr. Maude) for his very calm survey of most of the economic problems of the country. As I was anxious to speak, he will understand that my enthusiasm for his speech was kept somewhat within the bounds of restraint. If we on the back benches get back to speeches of a quarter of an hour or twenty minutes, that would be something all of us would appreciate.

I propose to speak about the Motion. It is a political Motion, and I intend to make that sort of speech. I hope that nobody expects me to apologise for that, because, if anything, I am a controversialist—I am certainly not a cold fish but, I suppose, rather a forthright person. I could not help contrasting the attitude of Government supporters this afternoon when the Chancellor was speaking with their lack of support for him when he was taking it from my right hon. Friend the Member for Leeds, South (Mr. Gaitskell). There is no party line when I say frankly that when one's chap is in difficulties, he should at least be given a little support and moral backing to make it more reasonable for him. I have many personal friends on the other side of the House, and I was extremely disappointed with them and more than a trifle shocked.

Mr. Ronald Bell (Buckinghamshire, South)

What did hon. Members opposite do this afternoon?

Mr. Daines

That is the sort of remark that is really not too bright. We did our best, as we always do, and let it go at that. My objection is that hon. Members did not try to do their best when the Chancellor was faced with his difficulty. The trouble with Government supporters is that they want it both ways, and here I shall deal with the underlying fundamentals of the Motion. Government supporters want the electoral kudos of social progress and at the same time the restoration of their pre-war economic position. As the Chancellor has rightly said, no real cuts in taxation can come by administrative changes. He said that to his own supporters; and, after all, there are as many real divisions on the other side of the House as on mine, even if they are not so vocal and do not leak quite as often as ours do.

It is by a change in policy, and only by a change in policy, that cuts can come. The truth of the matter is that on the Government side—and I exclude from this some of the white blackbirds who made a practice of supporting Tory policy and mark themselves out individually by kicking it in the pants—not many Members recognise the broad line that the Welfare State, in essence, is a national redistribution of income. That is just as true for us as it was of hon. Members opposite.

To a certain extent the Chancellor is a person with a split personality. On one side there is the election winner and on the other there is the good old Tory who wants to maintain the class structure. From 1947 onwards when he began to play a part in the background work of the Tory Party and when the hon. Member for Ealing, South was one of the disciples, the Chancellor's line was to fall over backwards to appease the electorate. Appeasement is a word upon which the Chancellor can pause to reflect when he remembers the 1930's. During the whole period of the last Conservative Government, the main watchword was never to do anything that would upset votes but always to fall over backwards to appease any element where there was real political power. I have even heard trade union leaders say that the present Minister of Labour has acted more kindly and sometimes given more considerate treatment than some previous Labour Ministers of Labour. That was all part of the policy of falling over backwards to appease.

Now they have won the Election and the time for the pay-off has come. Winning the Election was one of the main strategic aims of the Government, and that hangover is still in the Chancellor's mind. In his Budget speech last week, the Chancellor quoted as one of his de, fences his line on the April Budget. In his previous speech in April, he said that it would … naturally, take some time for the effects of the Bank Rate and of the tightening of credit to make themselves fully felt on our balance of payments."—[OFFICIAL REPORT, 19th April, 1955; Vol. 540, c. 40.] If he meant anything at all, he meant that when he formulated his April Budget he was completely unsure about what its actual effects would be. Previously we had had his grim words of February and the rise in the Bank Rate, and then we had the Chancellor himself recalling his own doubt. Yet, in spite of those doubts, we had the April Budget when all was light and sunshine. Of course, 6d. off the Income Tax did not win the Election. What nonsense to say that it did. It was only part of a build-up. I do not believe that the Conservative Party suddenly started printing their Election posters after the Chancellor's speech. I have not the slightest doubt that they were in print weeks before. I recall some of them, "Invest in Success," "Tory Freedom Works" and the much quoted statement of the hon. Member for Ealing, South—"In 25 years we can double our living standards."

It was all part of the process of a build-up among the people in order to snatch an electoral success, building up the idea that everything in the garden was lovely and that there was no need for strong and firm action. The truth of the matter is that there is just as much need for the Crippsian approach to be applied sometimes today as there was a few years ago. I could not help contrasting the almost masochistic delight that Sir Stafford Cripps had, with his great, high-minded integrity, in his public pronouncements and the tactics of the Chancellor in his attitude at the last Election.

Perhaps it is not polite to recall it, but what really settled the question of the date of the Election was not the difficulty of the Prime Minister in carrying on a Government with a fresh mandate. That question was certainly dealt with, if in a somewhat laboured way, by my right hon. Friend the Member for Lewisham, South (Mr. H. Morrison). I do not believe that it was that at all. What really decided the question was that a Budget fitted into the whole picture, including the trouble of a probable split in my own party.

It was not until the cold and chill winds of autumn came that the metaphors began to roll out. I do not want to go over the wonderful collection of quotations mentioned by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), because I get into an awful mess with quotations. I have one here but I do not know whether I have got it right. I believe that the Chancellor said something about "blowing the froth off the roses and pruning the beer." That shows the difficulties in which we get.

I turn now to the question of full employment. I recall that about five years ago we dealt with a Bill about restrictive practices when my right hon. Friend the Member for Southwark (Mr. Isaacs) was Minister of Labour. On that occasion I said that if we had a Tory Government there would arise a strong fear in the organised trade union movement that the Tory Party, in order to get the type of society they want, would eventually come to a position where full employment would go and unemployment would return. I happened to believe that then and said it. I believe it to be true now.

The position is this: full employment and unrestricted dividends equal inflation. That is a political equation, but it is a good one. Full employment equals trade union power to get increasingly higher wages. Therefore, high profits and no inflation equal trade union power checked by unemployment. That is the simple logic of it. The right hon. and learned Gentleman for Montgomery (Mr. C. Davies), speaking about organised trade unions, said that they had a power almost equal to that of the Government. Surely, the fact is that in conditions of full employment the organised trade union movement is irresistible if it chooses to assert its full power. It is only because of its sense of social restraint and deep understanding of the national needs that it has not used that power.

The equation I have suggested is the sum total of the dilemma of the Government. Full employment and the type of society that the Tory Party stood for before the war—the return in this country to a leisured class or a class who take the rake-off as it did before the war, which is what many hon. Members opposite want—can be got only by a return to unemployment.

I have made a few strictures of the Chancellor of the Exchequer. Now let us have a look at the Prime Minister. Was he an accessory before the fact of the "cheat" Budget of April. As I see the position, it was a "cheat" Budget. Not only will time prove that to be true, but so will any examination of it in the light of information now available. We all know and respect the Prime Minister. He is likeable and approachable. He is without side. We all know that foreign affairs were his main work.

If he was so innocent of economic knowledge, I find it most difficult to square that with the speech he made at the end of August of this year when the sort of phrases he used included one saying that in certain conditions "we were in mortal peril." I want to say something which, by relief, is not strictly political. I should like a really good answer to the question why the House was not called back in the early days of September in view of the Prime Minister's speech. In self-defence, I would say that I made a strong speech against the three month Recess when we discussed the matter in July.

It is a public scandal for the House of Commons to be shut up for three months in the summer. The public are getting cynical about it. We are becoming the subject of cheap jokes and jibes. I believe it to be fundamentally wrong. There is not only this great economic issue, but there are many other questions which ought to have been debated in the last three months. I know that it is very nice to put off the Burgess and Maclean question for seven or eight weeks after it "blew big" so that we can be much more "reasonable" and our interest flag, but it is the wrong way to treat this House.

There are many other questions which ought to have been discussed within a reasonable time of the events. I strongly oppose the long Recess. I know that it is very nice for some people including some of my colleagues who are ex-Ministers. I believe that on these sort of issues—and this is a back-bench matter—there is an unconscious "ganging up" between the two front benches which is uncalled for. The idea seems to be, "When we are in, you boys play the game, and when you are in we will play it with you." I do not agree with it. It is wrong and I strongly condemn it. I give due warning that if I am fortunate enough to catch Mr. Speaker's eye when we are sent away for four weeks at Christmas, I will strongly oppose the Motion. A fortnight is ample. If hon. Members want to go to Switzerland—and I am looking very closely at one hon. Member now—I hope that they will postpone their visit until later.

Finally, on the question of the Prime Minister, I come back to the series of broadcasts which he made. I think that he had five broadcasts in about three weeks. I am glad that he stopped it. Whether it was my protest in this House that helped him to stop it, I do not know, but I know that on the occasion of the last broadcast the B.B.C. said it was made at their invitation and not at his request. There is a limit to what he should have done in that line. In passing, I would say that his broadcast on the railway strike was most ill-advised, and it certainly did no good either to the issue or to himself. I refer to these matters because he kept repeating that what we now have to do is to forget class hatred.

That is all right for the Prime Minister and his like. Of course they can forget class hatred. How nice and convenient it would be if I, and the rest of my kind who are the other end of the stick, would quietly forget all about their position, and never be imbued with class hatred. There have been times in my life when my class hatred has been fierce and bitter. I wonder whether the Prime Minister ever knew what it was to see his mother sitting round the table on a Friday trying to solve the great problem of where to find 4d. in order to get some "block ornaments" to make a pudding for her seven, eight or nine children. It is easy enough for one to say that one does not believe in class hatred when one's life in society is preordained because one has chosen the right parents. It is quite another thing when the bitterness of poverty gets into the soul of a man.

I do not want a class war, but I believe that this Budget marks a turning point in the policy of the post-war Tory party, and that the logic of events will drag it on until the class war has once again become bitter in this land. I do not want that. I want our problems to be solved with reasonableness and without bitterness and hatred. I say, quite sincerely, to the Government and hon. Members opposite, that by this step—make no mistake about it—they are setting the clock back in a time fraught with the greatest danger to the world, the outcome of which none can foresee. One of the greatest mistakes we can make is to think that history repeats itself. I do not believe it. There are new and terrible forces in the world today, and if mass unemployment came back it might mean the veritable end of all that we live for or hope to achieve.

8.2 p.m.

Mr. Godfrey Nicholson (Farnham)

I liked the speech to which we have just listened—first, because it was a political speech, and I am going to make one, too; secondly, because I like the hon. Member for East Ham, North (Mr. Daines) and, thirdly, because he is dead honest. I hope that he will allow me to make a few comments upon what he said.

He spoke about class hatred, and about some hon. Members on this side of the House having had the sense or luck to be born of better-off parents than those of some hon. Members opposite. We accept all that, but I still say that if we, in this small island, allow ourselves by unwise action—whether it be on our part or on the part of hon. Members opposite—to split the country into two mutually-hating parts, it will be all up with us. A very, very heavy responsibility lies upon hon. Members on this side of the House to see that that does not happen, but an equally heavy responsibility lies upon the party opposite to see that in the course of its propaganda, although it may rouse indignation against injustice, it does not adopt the fostering of bitterness and the raising of hatred as a helpful auxiliary. I could fight with the hon. Member, and I could work with him. I can be friends with him—and I hope that we are friends. I hope that he will believe in my sincerity.

I said that I would make a political speech, and I propose to do so. I was amazed, surprised and sorry to see the terms of the Motion, and the way in which it was introduced. It is aimed at the wrong target. Hon. Members opposite do not see what our people crave and demand. It is not an articulate craving or demand; it is a sub-conscious one. Most people are not interested in our party quarrels and political antics. They are amused by them, but not very much concerned with them. There is an inarticulate craving on the part of every section of the community for stability.

The charge which the Opposition should have brought against the Government is involved in the question of whether what the Chancellor has done will do the trick. Will it contribute towards our stability? The Opposition could have made out a perfectly good case—in their view—for saying that it will not so contribute. That, surely, is the burden of the charge which they should bring against the Government and the Chancellor. That might ring the bell, but this cheap political stuff and this vituperation have no influence upon the people or upon the course of events.

The people are sick and tired of crises and rising prices. They are sick and tired of the economic world in which we are living. They demand stable prices and a stable cost of living. There has been talk about a fully-stretched and flat-out economy, but I prefer to talk about an over-stretched economy. I want us to cut out the jargon and tell our people the plain truth. There seems to be a conspiracy of silence as to the real cause of our trouble.

Since the war we have been living in an inflationary economy and have benefited enormously as a result. We have made great social progress. The Welfare State has largely been built upon this economy, as has our recovery since the war. Our recovery has largely been helped by luck, but it is apparently also due to the inflationary economy. But it is always bursting at the seams. And always needs patching and tinkering—and every single patch or tinkering means that we are one step further down the path to disaster.

Without stability we shall perish. We boast of the security which we have brought to the people, but that security is nonsense without stability. People are ready to make any sacrifice, or to face any hardship, if they feel that it will mean the abandonment of the over-stretched economy; and the people are right. In the long run, inflation is fatal. It is like a dangerous drug. A small dose causes immense stimulation, but in the long run it produces death.

Inflation is a "Pandora's Box" which contains every evil, both moral and economic. It brings about unrest and speculative booms; it wrecks the morale both of employers and labour; it means—and this is often forgotten—cruelty and immorality, for it steals and robs the savings of the people, both poor and rich; it makes the £ a prostitute instead of an honest woman. Finally, it tends to price us out of world markets. This can be remedied only by successive devaluations, which certainly cannot go on for ever.

Sooner or later the day must come when both sides of the House make their prime objective the attainment of economic stability. I believe that that day is here. This Government, and every future Government, will stand or fall according to whether they succeed or fail in bringing about stability. The line to be taken by the Opposition—although I do not agree with them—should be that the Budget is just another patching of, and tinkering with, an over-stretched economy which is bursting at the seams and will go on bursting.

I reject that line. I believe that the object of the Government is stability, and that they are aiming permanently to get away from the over-stretched and flat-out economy. That is why I shall support them this evening. I hope that the Prime Minister will stress that point, and will make it clear.

It means two things, one of which may be rather unpleasant. We have two gods, one an increase in national production; the other, full employment. We must worship them a little differently from our present practice. We mislead the people if we say that any increase in national production is necessarily good. An increase in the production of wealth which leads to increased imports not balanced by the right proportion of increased exports is inflationary, and does more harm than good. I am glad to see an hon. Member opposite nod.

Each party in the State tends to say, "What good, clever chaps we are. We have brought about an increase in national production this year by so much per cent." If that increase means an increase in imports without a corresponding increase in exports it is inflationary, and leads us into a worse position.

Full employment is a subject that we sheer away from as being political dynamite. We have not only full but very dangerous over-employment, in which there are twice as many vacancies as there are unemployed. We should have the courage to say to the people that a steady cost of living, steady prices and economic stability are incompatible with over-employment. A wild scramble for labour by employers means that they compete against each other for the available labour. That must put up costs and in the long run put up prices and the cost of living.

Mr. J. A. Sparks (Acton)

It is the same with stocks and shares.

Mr. Nicholson

The law of supply and demand works in the same way, whether with labour or with stocks and shares or with physical substances that we can handle. My policy and the policy of the Government which I support is full employment, but it is dangerously misleading to tell the people today that we can safely have over-employment. The law of supply and demand works in the case of labour as well as in anything else.

The primary problem of this country is to keep the labour market brim full but not coming over the brim or sinking below brim level. Nobody likes political warfare more than I and no one deplores it more than I when both sides are more or less in agreement. Political warfare then means the stagnation of democracy and deception of the people. But cannot we agree that the criterion by which we should judge any Government, whether Conservative or Labour, is the success that they achieve in bringing about economic stability?

I was in this House before the war and during some part of the 1930s. I must bear a share—I hope a small share—of responsibility for the drift into war which marks those years. So far as I was concerned, we drifted into war partly because of my indulgence in wishful thinking. I did not think Providence could possibly allow anything like a Second World War to occur. I cannot draw an exact parallel between then and now but I have something of the same feeling. We are all guilty of allowing our economy to go on sliding, because of our wishful thinking. It will not bring us into a cataclysm or a catastrophe like war. Nevertheless, if our economy goes on drifting we may wake up one morning only to find that we have priced ourselves out of world markets and that real unemployment has come, with all the misery and class hatred that hon. Members opposite speak of. There may be justification for it if we become a defeated and a poverty-stricken nation.

I do not wish to carry a sense of responsibility for the present as I have to carry it with regard to the past, but unless we show the courage which is the hallmark of statesmanship and face the prime issue before us, an over-stretched economy which has in it the seeds of death for this country, we shall not deserve well of the country or of posterity. Because I believe the Government that I support hold these views. I shall vote against the Motion.

8.15 p.m.

Mr. Frederick Lee (Newton)

None of us who know the hon. Gentleman for Farnham (Mr. Nicholson) would dream of doubting his sincerity in what he has said, but how we can square what he has said with support for the Government in the Lobby tonight is beyond our under standing. I should have thought the criterion of stability and a policy which would bring the nation together to be precisely the opposite of everything that the present Budget will achieve. Some of us wonder whether the Budget is really designed not to achieve it.

One of the most remarkable things in the course of this debate has been that two ex-Parliamentary Private Secretaries of the right hon. Member for Woodford (Sir W. Churchill) have told us how much we should deplore invective in Parliamentary speeches. That is a new one on us. When they are followed by the right hon. and learned Member for Montgomery (Mr. C. Davies), who has the honour of putting on the mantle of the late David Lloyd George, telling us the same thing, we begin to wonder whether the idea is to damp down the arguments which we wish to adduce. If that is the objective, I assure them that they will fail dismally.

I agree with one or two hon. Members who have suggested that we must go much farther back than the present Budget to make clear the reasons which have led us to put down the Motion, which I consider to be long overdue. When the Chancellor of the Exchequer asked us in the concluding part of his speech today to do what we could to assist in showing the nation how necessary it was to keep out of inflation and so on, I could not help wondering how it was, despite the fact that for three and a half years in the last Parliament my party courted destructive criticism outside because it attempted to be constructive in its opposition to the Government, after we have sacrificed plenty of opportunities to make political capital, we could be asked, at the conclusion of one of the most class-ridden Budgets that I have ever seen, to forfeit our legitimate right of criticism and to sell the idea to the people that the Budget is nationally necessary. I do not believe it for one moment. I am going to accuse the Government of carrying out a policy deliberately designed to split this nation. I will deal with that theme in a moment.

The Chancellor's defence of his Budget today left me completely unimpressed. He tried to tell us—I interpret it in my own words—that his Autumn Budget was designed to mop up the inflation which he had caused in his April Budget. If we analyse the amount which was distributed in April and the amount which the Chancellor now takes back, we find that the amounts almost balance to a ld. The only difference is that now, in pursuit of his long-term objective of creating the pre-war pattern of life in Britain, the Chancellor gives to the highest income group in April and takes from the lower income group in October. That is the essential difference between the Budgets.

The Motion speaks of the Government as guilty of incompetence and neglect. It is interesting to look back on the political history of this nation over the last 50 years. To do so is to realise that during the whole of that period—with two notable exceptions—Tory majorities in this House have synchronised with incompetent ignorance and gross neglect of the interests of the nation. The only exceptions were when sheer disaster and possible defeat in war seemed to be upon us. When that loomed near, the Tories were compelled to accept two great war leaders, neither of whom were acceptable to them in normal conditions; indeed, they got rid of Mr. Lloyd George, as he then was, and of the right hon. Gentleman the Member for Woodford as soon afterwards as they conveniently could.

In our Motion, we have referred to duplicity. We have been invited to look back a little beyond this Budget. When we look back at the history of Toryism in the present century we find that, whether they were planning civil war over Ireland while posing as arch-constitutionalists, or bribing the electorate by a false and misleading Budget immediately prior to a General Election, Toryism has most certainly merited the description of organised hypocrisy with which one of its most knowledgeable exponents has branded it. Why the Chancellor should now pose as an injured innocent when his misdeeds are brought home to him is difficult to understand.

As I have said, some of us in this House have spent the last four years trying to impress upon the Government the results which would flow from policies designed to re-create the pre-war pattern of wealth distribution. Indeed, I have suggested to my own party that, in the event of the Government going ahead with such policies, a clash on the industrial front would become inevitable. It would appear that we are now getting dangerously near to that. I return therefore to what I said. The sort of minds which are capable only of calculating the effects of a Budget—or of this Budget—in terms of a point on the cost-of-living index have indeed become a menace to us all. If they are not able to understand the psychological effects of that attitude upon millions of workers, it is an indictment of them, and they have no right to sit on the Treasury Bench.

For my part, at this stage—and I know that I have argued differently, and in a straight economic debate I would do so again—I am not interested in graphs which seek to show that wages have increased more than profits, or vice versa. I believe that wages, and what I term social wages combined, should always continue to increase as a percentage of the national income. Judged by those laws of supply and demand which the hon. Member for Farnham said were so sacred, then, during the last 16 years labour should have increased its percentage of the national income to a far greater degree than it has.

In a debate on 3rd March, 1954, I tried to show that during the period when we were setting up the Welfare State we were, in fact, increasing the social wages of millions of people. I also argued that, as the prime condition of our survival was our national ability to continue to increase our production, the Government, at that time, dare not attempt to create conditions which would permit of any attack on wages. In those circumstances, the Government were determined to make inroads into that social wage which we had created, while hoping to fob off the workers with misleading statements about levels of earnings in industry.

It was under such a cover that the Chancellor cut down the tax on distributed and undistributed profits, reduced Income Tax, slashed food subsidies and so on. The atmosphere created by that is really the basis of the Motion which we are debating tonight. I believe that we are now seeing a bolder step in this process of recreating the prewar pattern of wealth distribution. The Government are becoming bold in the manner in which they indulge in their policy of "Divide and conquer."

Let us consider for a moment how the way was prepared for the attack upon working-class housing. First, we had the campaign to get people who were living in bad conditions under private enterprise to protest that they were paying subsidies to help better-off people living in council houses. Indeed, it became almost a crime to be living in a council house. Having created that basis for the attack, the Government have used the fact that council house rents have been increasing to proceed to the next stage. That has been to complain that, because of the increases in council house rents, those houses covered by the Rent Restriction Acts are getting away far too lightly and those rents, too, must be increased.

We have thus a process which started with a Government-inspired attack by people not living in council houses, which has resulted in those people having their rents placed outside control and quite certain to be increased. Whilst the Government continue with such a policy, how can they possibly present themselves as people whose policies are based on the need for national unity? They have done more to split this nation, in a number of ways, than one could have imagined possible in the four years since they won their first election.

May I remind the Government also of the line which was being "plugged" a few weeks ago? It was said that the cause of our unbalanced trade was the confusion caused by the dock and the railway strikes. That started with an inspired statement from the Board of Trade, it was backed by certain statements from the Treasury and taken up by the financial editors of the various newspapers. That was the reason advanced for the unbalance of our trade around June and July. I should like to ask the Prime Minister to tell us, if that is or was the main cause of our problem, how it will be cured by altering the provisions of the Rent Restrictions Acts. What basis is there for trying to correlate the two things?

The real reason was that the failure of the Housing Repairs and Rents Act—of which we heard so much 12 months ago—proved that the day when private landlords could provide adequate housing to let at rents which, while remaining within the scope of the average wage packet, could enable repairs to be effected and still leave a profit, had gone. The decision to lift the provisions of the Rent Restrictions Acts springs from a determination to put back the clock to the days of the fulfilment of the profit motive with the production of living accommodation for the working people. That is the interpretation of what we have heard from the Minister of Housing and Local Government. Some of us have a little sympathy with him. The prima donna got all the cheers and ran away. It is said that the Chancellor of the Exchequer has been a little too late in trying to do the same thing. We are told that having got the cheers for three years, he has been trying to get the Prime Minister to take him away from the Treasury, but unfortunately for him it has not worked quite so effectively.

The party to which I belong looks on the provision of good housing as an essential social service. My division consists wholly of small urban and rural authorities, none of them possessing a large rateable value, and because of the brakes which are to be put on our ability to build council houses, it will shortly be impossible for any of those local authorities to rehouse my constituents. On the strength of that, I am asked to try to make my constituents believe that the Government are actuated by a desire for national unity amongst us all. I have never heard such nonsense in all my life.

Returning to industrial matters, last week there was a conference of the British Employers' Confederation, and it is interesting to read some of the matters they discussed. In the "Manchester Guardian" of Saturday, 29th October, I read that the President of the Confederation said: We hope … that as a result of the discussions at the conference there will be greater understanding and more restraint. … We are asking firms which make unfair bids for labour by paying more than the national rate to stick to national agreements. A short time ago an hon. Member said something about the payment of too high wages in certain areas in order to outbid firms in other areas. It is not for me to worry if some men are able to get a little above the minimum rate. I spent 20 years trying to get a little over the minimum rate for the men.

This sort of thing has arisen as a result of the Government's own action in decontrolling industrial building. This has led to firms seeking to close small factories, some of them in development areas, in order that they might return to the same area as the parent factory or extend the parent factory itself. I believe that if a proper analysis were taken, it would be found that much of the industrial building about which the Chancellor complains as being inflationary has been caused by the efforts of firms which we directed into development areas to get back into the area of the parent company.

This also accounts for the fact that the Chancellor is able to say "Look how successful we have been. There are 2½ more vacancies than there are people to fill them." The object of the Distribution of Industry Acts was to get vacancies and those needed to fill them in the same place. The effect of decontrolling industrial building has been to create vacancies in one place and unemployment in another. If that goes on as it is, pockets of unemployment will begin to show in places other than Lancashire, where we are beginning to get used to this phenomenon. In Durham, and development areas of that type, before long as a result of this policy of freeing industrial building, pockets of unemployment may begin to form. It is ironic to see that those who screamed for decontrol of industrial building are now complaining about the "immoral" practices of their fellow employers in the scramble for labour. It is one of the contradictions of the Tory Party which they alone should be able to solve.

If I may continue to quote from the "Manchester Guardian" the report of this interesting conference, I come to an even more dangerous line of argument: The delegates also discussed the role of the trade unions 'in the light of changes which have reduced both the need for workers' mutual protection and the relative value of union benefits in times of unemployment sickness and old age.' My first instinct is to tell them to mind their own business about what members of trade unions do.

I should like to quote from another interesting publication of the British Employers' Confederation published as recently as September. After mentioning brim-full employment, this publication says: … there are about 200,000 persons unemployed while about 2½ times that number of unfilled vacancies have been notified to the employment exchanges. In this connection it may be recalled that, according to Lord Beveridge's criterion of 'full employment' which involved an unemployment rate of three per cent., nearly four times as many persons as are at present unemployed might be expected at any time merely to be changing jobs or to be temporarily stopped. That means a demand for at least 800,000 people on the unemployment register.

If I may recall something which I brought to the notice of the House in the debate of 3rd March, 1954, I should like to quote this passage: I turn now to a political argument. The basic dilemma of Toryism is caused by the fact that the economic and industrial conditions under which the Tories ruled pre-war Britain no longer obtain. Their beloved law of supply and demand in relation to manpower depended on an excess of workers over the demand for them. That position changed only during a war, but in 1951 the party opposite inherited an economy in which productive levels were higher than ever before, and the world situation was such that the only condition of survival was to increase production still more. In other words, it was quite impossible for the Tory Party to re-create the pattern of pre-war days, with 2 million unemployed as a bargaining counter for regulating wage rates. Their dilemma is that until that pattern can again be produced, industrial power will continue to reside in the trade union movement. We have had in the last two years the most complex paradox that Britain has ever known. We have had a Tory Government in political power and the trade unions in industrial power. It is anybody's guess how long this could go on."—[OFFICIAL REPORT, 3rd March, 1954; Vol. 524, c. 1274.] I believe that it is possible that we are getting very near to the end of the road. Indeed, we built up a Welfare State and a new type of economy in Britain based on economic controls, and we have seen the Government go from stage to stage in the bringing down of these economic controls. How can we now believe that, once the structure which brought full employment has gone, they can in fact retain it, even if they wanted to?

We have heard the Chancellor say again and again that no matter what happens the dogma of financial measures only will continue to be the policy of this Government. In no conditions will they again introduce controls, in spite of the fact that the hon. Member for East Aberdeenshire (Sir R. Boothby) and one or two others have shown how uneasy they are, because they are beginning to understand that the financial mechanism can never create full employment in the complicated industrial economy such as Britain has.

For these reasons, we are apprehensive. On this issue, I can certainly speak for 900,000 members of the A.E.U., for 3 million in the Confederation of Shipbuilding and Engineering Unions and, I think, for a lot of others. My final words are these. Just as the wild men in the Baldwin Cabinet succeeded in effecting the deadlock which brought about the General Strike, while the T.U.C. representatives and the miners' leaders were working on a formula which might well have resolved the crisis, so today there may well be those in high places, both political and industrial, who believe that the time for a show-down has in fact come.

Until this Government can satisfy those of us who have responsibilities to organised labour that they can in fact create the type of economy which can guarantee full employment to our people and a proper distribution of the wealth which they produce, we will continue to move and support Motions of the type which we are debating today, believing that in doing so we are bringing to the notice of millions of people in this nation not only the fact that they were hoodwinked during the last General Election, but that the presence of a Tory Government in the second half of the 20th century is an anachronism which this nation cannot afford.

8.39 p.m.

Mr. Anthony Hurd (Newbury)

The hon. Member for Newton (Mr. Lee) has given us a robust speech, as he so often does, but the Opposition have not managed to raise much steam or indignation in the debate. I think they will find the report of the debate rather disappointing when they read it tomorrow.

Surely the reason is that the public at large, and certainly those to whom I have spoken this week-end, have come to realise pretty quickly that in presenting this supplementary Budget and making his proposals on economic policy, the Chancellor of the Exchequer has been the victim of his own conscience. A less conscientious Chancellor of the Exchequer—and we have had some like that in recent years—would have taken the risk of lettings things go crash. Our present Chancellor is not that kind of man.

A conscience can be a very worrying companion, and my right hon. Friend certainly has a very active conscience. He has taken, and asked us to approve, measures which he thinks will put our national economy on a surer basis and continue the high rate of our general prosperity beyond a peradventure. He does not mean to take risks. That is how the public to whom I have spoken—and I have addressed meetings this weekend—have accepted the proposals, and I believe they will prove to be right.

Mr. Thomas Hubbard (Kirkcaldy, Burghs)

The Housewives League?

Mr. Hurd

The basic facts were given to us clearly by the President of the Board, of Trade at the end of last week when he told us that in this booming prosperity at home there has been since 1952, a. rise of 7½ per cent. in the volume of consumption per head, with household goods up by 26 per cent., food up by 6. per cent., clothing up by 5½ per cent. and motor cars up by no less than 50 per cent. Those figures are in quantities, not in value, and they mean that we have a very much wider spread of prosperity and a much wider use of those things which we all like to have. That is fine. We have many new factory buildings going up. In the first six months of this year there was an increase of 60 per cent. in the area space of new factories. In all our constituencies we know what is going op. It forecasts still further advances in our industrial production and still fuller opportunities for good employment and for higher output.

But here is the rub: in the first nine months of 1955, compared with the same period of 1954, our exports were up by 6 per cent. and our imports were up by 15 per cent. Some of those increased imports were to supply the expanding home demand and to feed the higher standard of living which is more widely enjoyed in this country. Two items have been stressed in the debate—the extra call on imported coal and the extra call on imported steel. Those two items have amounted to £100 million in our balance of payments.

Another item which has scarcely been mentioned in the debate is the increase in imported feeding stuffs. I, as a farmer, and as one who knows something about the economy of our agricultural industry, want to bring this point to the attention of the House. The Chancellor has referred to it himself. The increased call we are now making on imported feeding stuffs amounts to £55 million. Together with the extra coal and the extra steel which we are having to import to satisfy consumers' requirements, that brings the total to £155 million for the three items together. That is quite a considerable part of the imbalance which is worrying us all, and which the Chancellor is determined to put right.

When we look at the figures of these imports of feeding stuffs we find that barley imports in particular have increased very heavily. They cost £20 million in the first nine months of 1955 compared with £13 in the first nine months of 1954. Almost all of the extra came from Canada. The total from Canada, I think, was £18 million.

The Chancellor has referred to feeding stuffs in his comments on the agricultural subsidies. He made the statement in his speech at the Conservative Conference at Bournemouth, he might equally have said it in this debate. He said: We must aways continually review the subsidies to see that we do not spend too much on overseas payments such as an increased bill for animal feeding stuffs. I would ask the Chancellor and the Prime Minister, who is to reply tonight, may we please have this line of thought developed more definitely? Farmers need to know the balance of subsidies, the relative weight which is to be given to each product in the scale of guaranteed prices, so that they can frame their farming policies accordingly.

Some people are talking airily, without thinking of the meaning of their words, about the abolition or slashing of farming subsidies. The farming cornmunity—this applies to farm workers as well as to farmers, as the hon. Member for Norfolk, North (Mr. Gooch), I know, would agree—has to depend, for protection and stability in the market, on subsidies rather than on tariffs. A great many of us would rather have tariff protection, but no political party would give it to the farming community, and so we have subsidies instead. We had them in the days of the Labour Government and we have them today.

I think we must assume—but I would hope that the Chancellor or the Prime Minister will confirm this definitely this evening—that that policy of underwriting the home production of food is to continue in full, and that what the Chancellor had in mind particularly was the balance that should be held between different kinds of subsidy so as to help him and to help the country as far as possible to get the best value—the highest output here with the least call on imported feeding stuffs and so on.

I believe that we can tackle this problem of obtaining enough feeding stuffs to continue a high level of output of pigs and poultry, which we very much want, and also for milk and meat, without such an embarrassing demand on imported feeding stuffs. We can do it by making better use of our grass; and, to deal with the import of coarse grains problem, I think we could very well adjust the price of barley and oats in the guarantees to give an extra incentive in home production to those items which we want and correspondingly to adjust the prices of those things we do not want particularly, in so far as they take heavy subsidies.

We have to ensure that the farmer gets a fair price when he grows coarse grains to take the place of imported feeding stuffs, and also to make sure that he has a market for those products when he grows them. As the right hon. Member for Lewisham, South (Mr. H. Morrison) reminded us, the Labour Party would restore a system of import controls and allocation to ensure that we had the right measure of imports and fair shares in distribution. I think the right hon. Member made that quite clear again in his speech this afternoon. We do not favour that policy.

Rather than that, surely we could get a voluntary undertaking from the provender millers and the flour millers that they will use at least half the homegrown grain in the months between harvest and Christmas, and publish the quantities they use each month. That would give a firm assurance to farmers that the market was there ready to take their grain when they grew it, and would help the Chancellor over the seasonal hump of dollar imports at this time of the year, when American tobacco is coming in and at the same time we are buying Canadian coarse grains, which adds to the Chancellor's embarrassment. I believe that we could reduce our very considerable dependence on imported dollar feeding stuffs by the provender millers supplying feeding stuffs and the flour millers supplying the home consumption of bread and flour using a bigger proportion of home-grown grain immediately after our harvest.

I say, in conclusion, that I think that our agricultural policy and our economic policy as a whole are following the right lines for the long-term, continuing prosperity of the country. I see no grounds for censoring the Government on the recent course of economic policy; indeed, I praise the Chancellor for having such a sensitive conscience. It would have been a good thing if some of his predecessors on the other side of the House had been equally sensitive to what was likely to happen, and equally courageous in taking action to prevent a crisis. I am anxious that the farming community should be left in no doubt about the part expected from them in helping our country forward.

8.51 p.m.

Mr. Hugh Dalton (Bishop Auckland)

This debate hinges upon a Motion of well-merited censure of a four-year Tory programme, ending in a Budget, recently proposed, which contains a financial programme of most odious injustice. After four years of prudent concealment, the real Tory Party is creeping forward into the light. This is the first open and unashamed attack upon the Welfare State. It will not be the last. It will not even be the last within this Parliamentary Session. I say this in the light of the statement made by the Minister of Housing and Local Government some days ago.

Beginning with compliments, I thought that the best thing in the Chancellor's Budget programme was the increased tax on distributed profits. Since it may not be possible for me to congratulate him a second time, I should like to congratulate him, small though this increase of taxation is, on having disregarded the very unconvincing argument of the Royal Commission on Taxation, that distributed and undistributed profits should be taxed at the same rate. I am quite sure, as he is quite sure, that that is wrong. I am rather proud of this differential Profits Tax. I take paternal pride in it, because it was one of the fiscal innovations in my Budget of 1947. I am very glad that it remains intact, at any rate for a while longer, under this Government.

But though I praise this in principle and congratulate the Chancellor on resisting this temptation to do evil, yet what a miserable, trumpery increase it is! It will add only another £40 million to the Revenue in a full year, and a full year will not come for another two years—and, as one of my hon. Friends said, it may be snipped off again in the meanwhile.

How did the Stock Exchange judge this increase? The next day the prices of all industrial shares jumped for joy. The "Financial Times," the day after the Budget, stated of this increase in the distributed profits tax: Fortunately, in its effect on earnings"— that is the earnings of companies— it is small. Cases when the increase will actually jeopardise the dividend are probably few and far between. I am sure that the "Financial Times" is right.

If the Chancellor recognises, as even the very small increase in this tax suggests, that rising dividends are a strong inflationary force, as they are, both in themselves through giving additional purchasing power to those who receive dividends and also in provoking increased wage claims; if he realises that on both these grounds rising dividends are an inflationary force, why did he not take courage enough to impose a straight dividend freeze, as my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) proposed in 1951, and would have taken steps to impose had we, at the General Election in 1951, not only got more votes than the Tories, as we did, but also more seats?

In my view, a dividend freeze remains as a most moderate and justifiable proposal; a dividend freeze for a year or two, while some more comprehensive scheme for the permanent control of profits and dividends is being worked out. I say that the Chancellor could at least have done that in this Budget if he had wished to impose a further check upon inflation, and to have had at any rate something to say in his defence to the leaders of the General Council of the T.U.C., whom we are glad to hear that the Prime Minister and the right hon. Gentleman and the Minister of Labour are meeting tomorrow.

I am afraid that I cannot pay the right hon. Gentleman any more compliments. I turn to the Purchase Tax. That, quite frankly, is a wicked business, even although the Chancellor this afternoon endeavoured to minimise its weight and its effect. What has he done? He has increased the Purchase Tax upon all goods previously subject to it, with the exception of a short and rather ridiculous list headed by cut glass and silverware, and including also gold and silver picture frames and trophy cups made of precious metal.

Apart from that short and rather absurd list—the "Economist" agrees with me in calling it an absurd list—the right hon. Gentleman has increased the Purchase Tax on every article previously subject to it and, worse still, he has brought back under the tax a large number of articles which either were under the tax during the war and taken out of it by Labour Chancellors—I took a lot out in 1946—or else have never been under it at all, even in the war, even in the period of our greatest financial need, under Sir Kingsley Wood and the present Lord Waverley when they were Chancellors of the Exchequer.

It is fantastic to read the list of those things which are now being made subject to Purchase Tax for the first time in its history. We begin with table china, and we go on with what the "Economist" calls "a tinker's miscellany" of saucepans, bread boards, pot scourers, scuttles, irons, kitchen scales, shopping baskets—all those are brought under the tax for the first time at 30 per cent.—a substantial tax—and I say there is no justification whatever for doing that.

This afternoon the Chancellor was concerned to try to prove that the revenue he would get would be very small. Then why upset everybody to the extent to which he has done, and why give offence and raise apprehension in so many homes? The housewife is hard pressed by the rise in the cost of living under the present Government, and she has now this further fear that the price of practically everything she wishes to buy for her home will go up, due to this rise in Purchase Tax.

Moreover, as my right hon. Friend the Leader of the Opposition so aptly said the other day, the first impression which he derived after listening to the Budget speech—an impression which we still hold to—was that it is the young married couple, once the Election is over, who are to be shot at by the Chancellor of the Exchequer. The young married couple are one of the deliberately selected human targets at which the Chancellor is taking aim.

I hold in my hand a most agreeable piece of Conservative publicity. I quote: Typical of British youth are Patrick Coulter, 25, and his 22-year-old fiancée, Sheila Clayton, shown on our cover. Then are given particulars about their way of life, where they met, and what are their intentions. It appears that among their intentions is marriage. We then read: Very soon the engaged couple shown on our front cover will start life on their own. The future is bright for them. … For this they should thank the Conservatives. They are right to do so. They are house hunting … Pat and Sheila have to buy furniture. The Conservatives, by progressive reductions of Purchase Tax, have brought down the prices of all essentials. … For Pat and Sheila, like other engaged couples, Conservative policy brings an age of opportunity. Finally: If you agree with Pat and Sheila—you will vote Conservative. I am assuming that the Chancellor of the Exchequer, who still has some control, I think, over the operations of that office in Victoria Street, will now have this document pulped or, alternatively, will have it revised, and particularly that last sentence. I will go and canvass the young couple myself and see whether they will vote Conservative after this.

I have quoted that and, judging by its reception, it had its amusing side, but it does show how very quickly party propaganda from the Tory head office may get out of date. It is a shocking thing that all these high hopes should have been broadcast among these young people at the Election, so soon to be destroyed by the deliberate acts of the Chancellor of the Exchequer, who will make the early married life of so many young people harder and more expensive through these needless and shameless impositions upon all the necessities that they will need to buy.

What is the good of producing a statistical statement that the total of these Purchase Tax increases will only raise the cost of living by less than one point? That is an average statement, but what we are concerned with is the people who will be specially hit by these things; and the people who will be specially hit are housewives everywhere and young people, whether engaged and soon to be married or recently married. These, as I have said, are the Chancellor's chosen targets, and they are not the targets at whom he should have aimed.

I pass now to a question on which we have asked for information which has not yet been furnished, and I therefore ask again. I am speaking now of hospitals and schools and what is to happen to future capital expenditure. The statements that have been made and also the printed statements that have been circulated, including the message to the local authorities, are in parts obscure. Part is clear and part is obscure. What is clear is that, beyond immediate programmes already authorised, these expenditures are liable to be severely cut. I do not think that that will be denied.

Leaving aside, for the moment, the programmes already authorised, the Chancellor is reserving a completely free hand to slash and slaughter all the capital expenditures of these authorities and all their capital projects, in particular schools and, through the hospital boards, the hospitals. Beyond the immediate authorised programme, everything is subject to unlimited cuts. That is clear.

What is not clear is whether the programmes already authorised are safe from cuts. On that I will put in precise form a question arising out of what my right hon. Friend the Member for Lewisham, South (Mr. H. Morrison) said today in seeking an answer; but let me lead up to the question by quoting from the message to local authorities, in which it is said: The aims of your review should be to ensure first, that your authority's total capital expenditure in 1956–57 does not exceed that for 1954–55 and, secondly, that no new works, even those already authorised,"— even those already authorised— are undertaken unless your authority are satisfied that those works are urgently necessary to meet the needs of the area In his Budget speech the Chancellor explained to us that a similar communication had been sent to the hospital boards. I take that to mean that even the already authorised programmes to cover the years immediately ahead are liable to be reduced by pressure from the Government on these estimates. I think that is clear from the message which I have read.

The question to which I therefore seek a precise answer, following the question put by my right hon. Friend the Member for Lewisham, South is whether, first, the programme of school building and, secondly, the programme of hospital building already announced and approved, are absolutely safe from further reduction or postponement, because postponement is just as bad as reduction in its effect. I do not know whether the Chancellor would like to answer that question now, or whether the Prime Minister will say something about it.

The Prime Minister (Sir Anthony Eden)indicated assent.

Mr. Dalton

The Prime Minister will answer later? Good. The Prime Minister is exercising his overriding function over all Departmental Ministers and will give an answer in due course.

My right hon. Friend the Member for Lewisham, South has just asked me whether we can be quite sure that the figures, which he quoted and which he obtained from a local authority source, about the added cost of flats, are accepted. They indicate the great increase which will arise in rents as a consequence of the successive increases in the rates of interest charged to local authorities and the prospective housing subsidy cuts. We should like those figures verified. So much for hospitals and schools, or perhaps we should say so little for hospitals and schools, in the future.

I want now to refer to the housing subsidy cut. It is quite clear that the aim—not immediately avowed—and the net effect of imposing a cut on the housing subsidy, in addition to the proposals for further increases in the rates of interest charged to local authorities, and this new, complicated and troublesome mechanism which has been invented for the obtaining of loans by local authorities, is that the building programmes of local authorities, apart from slum clearance, new towns and expanded towns, shall first, be rapidly slowed down and, finally, stopped altogether, possibly even within the lifetime of this Parliament.

That is the clear intention of the Government's proposals. I have already heard—no doubt many of my hon. Friends and hon. Gentlemen opposite have heard—of a number of local authorities who are so concerned about these projected changes in the subsidy, in the rates of interest and mode of finance, that they have declared that they will have to abandon all new building, other than slum clearance. In consequence of these changes the rents of new houses will be so high that only a very small minority of persons on the waiting lists will be able even to contemplate occupying the houses.

Let me try to put in concrete, human terms what is meant by the people on these waiting lists. Great numbers of the people on the waiting lists for council houses have been waiting for many years past, and long queues of weary and frustrated people are living in overcrowded and wretched conditions, waiting and waiting. These weary and frustrated people are waiting for an opportunity, at long last, to move into a council house.

What is the message which goes forth at this time to these people whom we can envisage waiting in long queues stretching from the doors of the town halls in many of our great cities for miles along the thoroughfares? What is the message that the Government send to these long queues? It is this, "Abandon hope all ye who linger here." It is hoped gradually to break up, to dismiss and send away the people on these waiting lists. It is hoped that these people will disappear into the darkness and be no more trouble to the Conservative Member of Parliament, who, until the next Election, will continue to appear to represent them.

This is bad enough, but there is worse to come. It is clear from what was said by the Minister of Housing and Local Government that the Government now intend to move towards the complete abolition of rent control of private houses. They intend to make the private landlords richer and their tenants poorer. It is just as simple as that. I ask, as was asked by my hon. Friend the Member for Newton (Mr. Lee), in a most cogent speech earlier tonight, how it can be argued by the Chancellor of the Exchequer or the Prime Minister or by any other Member of the Government or any of their expert advisers that a transfer of wealth of this kind from tenants to landlords of private houses will be any kind of cure, or help, at all in facing the problems that now confront the country?

What will such a transfer of wealth do to help us put the balance of payments in order or prevent the seeping away of our gold reserves? What possible connection can there be between a further maldistribution of wealth and a solving of these problems which the Budget is, at any rate, designed to solve? It is no contribution at all. It is a totally irrelevant piece of class legislation, designed to transfer purchasing power from one class to another, and it has no social justification whatever. I warn the Government that it will cause most bitter anger in countless British homes and that its repercussions will be both wide and strong.

I turn to the Tory drive against the local authorities, for that is what the Government are engaged in. Local authorities have to face today not only a multiplication of Departmental discouragements and disallowances of projects for loan sanction but they also have to face still higher rates of interest in prospect, in addition to the many increases made within the last year. Also there is what I have referred to as this "new financial mechanism." They are all to be put through the mangle by the Public Works Loan Board, and the purpose is—as has been explained quite frankly—to push a number of them away from the Board into the City of London, where, apart from all other considerations, a number of additional charges become payable.

One of the advantages of local authority borrowing from the Public Works Loan Board—as I thought when I was Chancellor, and as I think still—is that there are no underwriters' charges; there is no necessity for such arrangements to be made. There are no financial middlemen of any kind intervening. The advance is frankly and simply made from the lending authority—the Board—to the public authority receiving the money. It has Government sanction, and Government security is, in effect, behind it. That is as it should be. These are public authorities, dealing with an organ of the central Government. But once they are pushed into the City all sorts of other charges become payable, in addition to the delays and difficulties of timing which have been referred to by my right hon. Friend the Member for Lewisham, South, and the whole cost of the proceedings is very much increased.

The Chancellor has a tender spot for underwriters. He is not only anxious to put a little business in their way in connection with financing local authorities but—and there is in his speech a queer little passage about this, which has not been mentioned by any other speaker so far—half a million pounds a year of revenue is being sacrificed in the remission of Surtax to a special, privileged group of persons, namely, the underwriters at Lloyds. It is too late tonight to go into that matter. I shall not ask the Chancellor to explain it—he has not explained it yet—but it will come up when the Finance Bill is in Committee, and we shall then want to know why this small group of not wholly indigent persons is being relieved of tax, at public expense, while the young people and others to whom I have referred are being made to pay more.

Some people in the City welcome the increases in the rates of interest. That is very natural. Dear money is intended to throttle many of the projects of local authorities, but a large number of those who lend money—it is apparently all right to say "those who lend money," but offensive to call them "moneylenders," and, being purely descriptive, I say "those who lend money"—are getting along very well. Some years ago they used to tell me that it was not possible to live on 2½ per cent. They are doing very well now, because they are already getting 5 per cent. on the very best security, and the rate is rising. We need not grieve too much for them.

What a contrast is presented between the attitude of the Government towards local authorities, public boards and public bodies generally, and their attitude towards private enterprise, in relation to the curbing of inflation and excess expenditure! Public enterprise in all its forms—local authorities, public boards, nationalised industries and hospital boards—is to be hounded, harassed and halted, whereas private enterprise is subject only to a very mild admonition. We read, from the Chancellor's Budget speech, that: It would not be in accordance with the Government's policy to try to control directly investment in the private sector.—[OFFICIAL REPORT, 26th October, 1955; Vol. 545, c. 219.] There was a time when the party opposite called us theorists and thought that they were practical men—but what theorists they are, with all this doctrine. They say they want to check private investment—the Chancellor said so—but it is against their political religion, as they fervently and devoutly hold it, to try to control directly the movements of their "sacred cow."

Is there any answer to the argument which was put forward in a most forceful speech by my hon. Friend the Member for Wednesbury (Mr. S. N. Evans), who referred to the absurd situation which has arisen, in which dollar imports have been liberalised to the extent that there is no control over imports of dollar materials—and, in particular, my hon. Friend instanced sheet steel—imported at considerable cost in terms of the balance of payments and foreign exchange? Why should it be made up into motor cars which only go to crowd and congest our own thoroughfares instead of being, in much greater quantity, exported to those external markets of the world which are open to us?

Can there be any justification at all for saying that we shall not impose any direct control upon the motor manufacturers, no conditions as to how much they should sell and in what markets, whether abroad or at home; that, on the other hand, they are to be allowed all the steel and other materials for which they may have the spare cash to pay? It is an absurdity. It is the reduction of the political religion of the Tory Party to an absurdity.

Let me give one other example. I do not want to multiply illustrations, but this was mentioned by my right hon. Friend the Member for Huyton (Mr. H. Wilson) in the debate last week. Why do we not reintroduce the building permit for substantial building projects? That was a weapon which served us very well in war and in peace. It could be applied with every degree of discrimination, and with greater or less pressure. It was a most flexible instrument. Why has it been cast away, simply owing to the doctrinal scruples of the Tory Party?

Certainly we should now be using the building permit to prevent the much-too-great expenditure on the building of private offices. I will not speak now of petrol stations, public houses or cinemas but will take what is quantitatively a much more important illustration, private offices. There is a tremendous burst of private office building going on, most of all in the City of London, but also elsewhere. If I understand aright figures that have been given today about £10 million a year is being spent on private office building at this time. [An HON. MEMBER: "In London."] I am not sure whether it is all in London, but certainly mostly in London, and it is much too large a figure, having regard to other calls upon our productive resources.

Many people in business, and with commercial knowledge—I am not now speaking of what is said politically—consider that office building is being overdone, and that in a few years' time it will reach saturation point, when it will not be possible to let some offices in the City at rents that will even cover current outlay. There is no reason why the competitive instincts of the builders and holders of the offices, once they are set free, should arrive at the complete harmony of all interests.

If there is a danger of saturation in office building being reached in a year or two, we shall still be far from saturation point in hospital building or school building or in housing. The very pos- sibility that that may happen is proof that the Government are not holding the balance of public interest fairly, but are allowing too much rope to private enterprise, including those who are building these offices, and too little to the essential needs of the country.

The Chancellor of the Exchequer told us that the Government are stopping the new Colonial Office building on the Westminster Hospital site at basement level. There is a decision. There is Whitehall speaking. It is no doubt a very wise decision; I do not challenge it. The right hon. Gentleman has the knowledge. But why can he not apply the same principle to blocks of office buildings and stop them at basement level? The voice of Whitehall could be heard equally well in other places, if we had the building permit again in use, where the public interest is even less well served than in the case of Government buildings.

It is worth while for a moment to consider—because this is one of the clues to what has been happening—the Chancellor's state of mind in the early months of this year. He made a long defence this afternoon, but I was not convinced. At the end of February—and this is the problem of the two Budgets on which I am once more touching—he told us that all was black; the gold reserves were falling, the balance of trade worsening, there was rising demand, and inflation was rampant. He said at the end of February that there was almost a crisis, and he was going to take stern measures.

In the middle of April—less than two months later—he brought in a "sunshine Budget," glittering with tax reliefs. Nothing significant had happened in those 7½ weeks. Nothing significant had happened—except one thing. The new Prime Minister had decided on a quick Election. Everything else was the same. When he produced that Budget in April, the Stock Exchange was astonished, many other people were astonished, and in the debate that followed many of us on these benches tried to find out what the justification was—other than the obvious one which I have mentioned.

We criticised the Budget and the Chancellor's proposals each according to his ability, and he replied according to his ability—sometimes being left very lonely in debate by all the phalanxes of his supporters. At the end, we were more and more convinced that he had done wrong. I shall quote one short passage from one of the speeches made then which seems to me most forcefully to put the view we held. The passage reads: It seems quite clear that one cannot say that there is any improvement in the situation since 24th February, and that either the statement which the Chancellor then made or his Budget statement yesterday"— this was said on 20th April— is totally and completely fraudulent. He was either misleading the country about the crisis in February or misleading the country in the middle of April. In particular"— and this is the essence of the argument we deployed— to say on 24th February that we must take measures to restrain demand, and then, on 19th April, to increase demand by nearly £150 million, is an inconsistency so obvious as to amount to complete chicanery."—[OFFICIAL REPORT, 20th April, 1955; Vol. 540, c. 242.] Those words were spoken by an hon. Member of the House who, for a while at least, is not here now—Mr. Anthony Crosland. I kept the name back until I had read the quotation. It was one of many most forceful comments.

"Complete chicanery" is the key phrase. In the conditions of April the Chancellor of the Exchequer must have known that he was doing wrong—he must have known. But he was following Tory tradition; he was treading in the footsteps of Stanley Baldwin, who, in a notorious speech in this House, referring then to German rearmament, said: "If I had told the country the truth I should have lost the election."

Mr. C. J. M. Alport (Colchester)rose—

Mr. Dalton

The epitaph on that Tory leader was written by—

Mr. Peter Remnant (Wokingham)rose—

Mr. Dalton

—the right hon. Member for Woodford (Sir Winston Churchill). who, in the first volume of his history of the Second World War, has in the index this entry—[Interruption.] He was until very recently the leader of hon. Members opposite, and now they are unwilling even to listen to his words. His words in the index to that book are: Baldwin, Stanley—confesses putting party before country. The only difference between Stanley Baldwin and the Chancellor of the Exchequer is that the right hon. Gentleman has not yet confessed.

9.32 p.m.

The Prime Minister (Sir Anthony Eden)

The right hon. Member for Bishop Auckland (Mr. Dalton) has closed with a charge against the late Stanley Baldwin which, he must have enough knowledge of the historical controversy to know, is one which at best is based on a very arguable hypothesis. [Interruption.] The right hon. Member for Leeds, South (Mr. Gaitskell) need not be so enthusiastic. The Leader of the Opposition knows this as well as I do. If one reads carefully that passage of Stanley Baldwin's as it actually was—I have got it here, although I have not got time to read it now; I have other things to bother about—[HON. MEMBERS: "Read it."] I am only suggesting to hon. Members—[An HON. MEMBER: "Why carry it about?"] I saw it circulated last week.

I am not going to read it now, because I wish to answer this debate. It is nothing for the right hon. Member for Ebbw Vale (Mr. Bevan) to giggle about. [HON. MEMBERS: "Read it."] I am not going to read it. I think the House might let me proceed with my speech. In order to make that passage comprehensible to the House, I would have to go back into a great deal of the history.

Hon. Members opposite need not attack me. They know perfectly well what my own record was in this matter. I am only doing this as what I believe to be an act of historic justice, and I am asking the right hon. Member for Bishop Auckland to do what I have not yet had time to do, namely, to read Dr. Jones' account of this business and to read some of the other historical accounts, when I think he will find that he was in all probability tonight doing an injustice to Stanley Baldwin. [HON. MEMBERS: "Read it."] I simply cannot read through in 25 minutes the whole history of the Fulham by-election and everything that followed after.

The right hon. Gentleman also made some accusations against my right hon. Friend and attacked him for his administration of finance. In particular, if I remember rightly, he said that my right hon. Friend had a tender spot for underwriters. Has the right hon. Gentleman entirely forgotten that there is still one Government stock, which I believe is familiarly known by his name—it is still called "Daltons"—issued at 100 in October, 1946—I think with a song in the right hon. Gentleman's heart—which had fallen to 64 before the Labour Government left office? I have never blamed the right hon. Gentleman for that, and I do not blame him now. [Interruption.] No, I do not, but I do not consider that his charges against my right hon. Friend, with that record behind him, are other than utterly regrettable. They were utterly unjustified by the record of the gilt-edged stock issued by him.

This censure debate opened in a somewhat confused tone. In fact, as I listened to the right hon. Member for Lewisham, South (Mr. H. Morrison) for an hour and 10 minutes, and as I watched the faces behind him, I began to wonder who was being censured—whether it was the Government or the right hon. Gentleman's unfortunate supporters. They certainly looked both bewildered and unhappy. Yet the right hon. Gentleman himself admitted that, even in a censure debate, there remains the problem of the balance of payments, of the value of the £ and of our gold and dollar reserves, which is, in fact, the problem of the existence of our people.

The hon. Member for Wednesbury (Mr. S. N. Evans) was perfectly correct in what he said about the cushion. He called it invisible exports, but it was the cushion which we enjoyed in a certain respect in the years between the wars as the result of the foresight of our ancestors in building the Argentine and American railways. Surely, there is nothing to be ashamed of in that—in having built the American railways or the Canadian railways? The hon. Member for Wednesbury rightly said that it was a cushion which, despite all our difficulties between the wars, we still enjoyed, but which to a large extent has now disappeared. I was venturing to agree with the hon. Gentleman, I hope without too much controversy in doing so.

It is against this background that successive Chancellors of the Exchequer have had to work, and of that there is no dispute. In an economy such as ours, even at the end of a censure debate, I think we recognise that it is not a very easy task to judge when to restrain, when to stimulate and when to leave things unchanged. This condition of things will continue until such time as we are able to rebuild the reserves and the resources to which the hon. Member for Wednesbury referred.

Last month I read some comments in an economic bulletin which, I think, is a non-controversial document; it will certainly be non-controversial with the right hon. Member for Bishop Auckland. It is the London and Cambridge Economic Bulletin. I read these words: Mr. Butler is probably right to reject the word 'crisis' as applicable to the present state of our economy. The high level of production, consumption and capital formation are all real and are all welcome in themselves. Our problem is one of getting the balance right in a state of prosperity without sacrificing too much of the prosperity in the process. That is about the best statement of the nature of our problem which I have yet seen, and keeping that balance right is exactly what we have been trying to do and shall continue to try to do. I know that in doing it all kinds of methods will have to be applied and they will not all be popular. That we are prepared to face. What we are working for is the national result, for the nation as a whole.

The right hon. Gentleman made much play with the month of February, when my right hon. Friend introduced some measures to correct the excessive pressure of demand in our economy. It is true that this had a good effect at the time, both in the balance of payments and in the balance of trade. We all know that. [HON. MEMBERS: "What happened?"] If hon. Members will allow me to develop the argument, I will explain the difficulties.

Mr. H. Morrison

The right hon. Gentleman must learn to take it. I had to take it from his people this afternoon. He must not get bad tempered.

The Prime Minister

I do not know whether the right hon. Gentleman is addressing me or the Chief Whip. The right hon. Gentleman was not interrupted. I have not the slightest objection to being interrupted.

Mr. Morrison

Indeed I was interrupted.

The Prime Minister

By the month of April there was evidence which encouraged us this far—to continue to encourage production. Let me add that unless we in this country encourage production whenever we can, then we can never attain the standards of living we desire or keep our present standards. Let me also remind right hon. Gentlemen opposite that when we gave no incentives in the 1954 Budget, they were the first to complain that we were timid and were not dealing with the situation in the manner in which we should have dealt with it.

I want to reply to the right hon. Gentleman in the criticisms which he made of the 1955 Budget. He says that every kind of epithet has been hurled at that Budget. They were not hurled then; mostly they have been hurled since. Sometimes it has been called an electioneering Budget and sometimes it has been called a "robbing-the-poor Budget." I must confess that how it can be both at the same time beats me.

The main charge now—and it has all the authority of the Leader of the Opposition—is that it is a reckless Budget which we would never had introduced had it not been for the Election. The Leader of the Opposition has lent the authority of his name to that charge and has said that the Budget was a trick to win the General Election. That is not true, and I want to explain to the House and to give reasons why it is not true. First, the House forgets that when the last financial year closed the Chancellor had a surplus of £280 million to distribute as he thought fit—an infinitely larger surplus than the year before when he had been chided for doing nothing with it.

In actual fact, what he did was to distribute about half of it. Was that reckless? [HON. MEMBERS: "Yes."] Was that electioneering? If it had been our intention only to satisfy the voters, we would not have produced a Budget of the kind the right hon. Member suggested; but we could have thought up some ways in which we could have tickled the palate of the electorate. Some were suggested during the debate last year; beer was one, tobacco was another. We could have done those things and, before the Election, still have had a Budget with a £100 million surplus, a very respectable surplus by any standard.

Are hon. Members opposite so very sure that, with a £280 million surplus, they would not have given more than that away? Personally, I think it is to the credit of the Chancellor that with that surplus he had regard to the uncertainty there always is about the British economy in respect of balance of payments. If the hon. Members opposite say we were so very reckless in April, why did they not vote against these proposals when they were put to the House? Why did they not go to the country and say how disgraceful they were? [HON. MEMBERS: "We did."] On the contrary, hon. Members opposite went to the country with an expensive programme which would cost at least £300 million more. The right hon. Member for Llanelly (Mr. J. Griffiths) estimated that it would cost £300 million a year extra. How was that possible if the country was in such a condition as right hon. Members opposite now say they saw it was?

Later, Mr. Balogh, the well known economist, put it at £600 million, yet we were the people who were so reckless. No one is going to accept that. The truth is that what my right hon. Friend did in April was in sequence with what had previously been done, whether it was liked or not, by trying to give incentives in one Budget followed by another. We relieved several millions of people from paying any Income Tax at all. I suppose that is to be called "robbing the poor" as well.

I want to say a word or two about the autumn measures. I admit that all this time the Government had a very difficult decision to take; whether on balance we were likely to get by with the steps already taken, including the credit squeeze, or whether we should add to that further action. We decided on the latter course.

I say to the House, if hon. Members will accept it from me, that there are two reasons why the steps taken in February and July did not in fact work as the House and the country expected them to work. First, the credit restrictions did not have their full effect on a very expanding and prosperous economy. The second reason was referred to by my right hon. Friend this afternoon, and sufficient attention has not yet been paid to it. It is that, encouraged by the incentive to invest which had been given in successive Budgets, and encouraged—as I think rightly—by hon. Members opposite, investment began after a slow start to go ahead at a galloping pace. Nobody could travel about the country this summer without seeing that with their own eyes.

In this respect, investment is very like an armaments programme. In the first year or two the consequences do not appear. When they do, they assume proportions. In fact, it reached such a size this year that, unless some restriction was placed on it, we would have been in a position in which competition between companies for material and labour would have brought our industry to chaos.

So we preferred to take the action that we have taken; action to prevent what otherwise must result, unless we keep the balance equal, in pricing ourselves out of foreign markets and unemployment for our people. Those who remember the '30s must always have that haunting their minds—[HON. MEMBERS: "Hear, hear."] I can assure hon. Members that it haunts mine. In that context, I cannot accept that these proposals are harsh.

The "Manchester Guardian"—not notoriously a biased paper [HON. MEMBERS: "Oh."]—I did not think it was—said on Saturday that the Opposition attack had been wildly overdone and had been too extravagant to convince. It is a fact, which we cannot escape, and do not want to escape, that this country today is enjoying a higher standard of prosperity and a fuller level of employment than it has ever before known. Taken as a whole, the level of purchasing power of wages in this country has never been higher than it is today. That is a very good thing. But in the face of all that, it really is quite absurd to pretend that the suggestions of my right hon. Friend—that is, what he proposes to impose—though disagreeable, are really either harsh or cruel.

I want to say a word if I may—I just have time—about housing and what we wish, as a party, to do. We do not consider—and I would like the House to await the fuller statement of my right hon. Friend—our action on housing subsidies oppressive. We came into office five years ago, and we appealed to the local authorities, to private enterprise and to others to make an extra effort to step up the rate of house building. They responded very well. We promised to try and secure 300,000 houses. [Interruption.] Everyone knows that. That rate was reached. In the last four years, within two years of our taking office, the 300,000 rate was reached, and we hope to maintain an average output around that figure.

In the last four years, some 1,200,000 houses have been completed in this country; two million altogether since the war. I think the House will admit that up to now these houses have gone mainly to those families who were without a separate home, who were sharing a house perhaps with relations or, perhaps, living in lodgings. Their need was great—is great; but there are many other families whose housing need is equally pressing. [An HON. MEMBER: "Where?"] I will tell the hon. Gentleman where they are if he does not know. I am referring to those who have to live in the dank and dreary and insanitary slum areas which are to be found in most of our big cities, and in many other places too. It is only fair that these people should now be allotted a larger share of the new houses that are built. In fact, we feel that the progress of house building in recent years places on us an obligation to take up again the slum clearance drive which many people on this side of the House, and no doubt on the other, wished to carry forward in the 30's but which, unhappily, was halted by the war. We stated this quite clearly in our Election manifesto.

Finally I want to deal with the questions which the right hon. Gentleman asked me, and fairly asked me, about the policy. [An HON. MEMBER: "What about rent?"] That can be fully debated when the Bill comes up. A statement has been made, and I have nothing to add to it. The right hon. Gentleman asked me a number of questions, which I should like to answer, on the policy about schools and hospitals. I have tried to put our measures in what I believe to be their true perspective, whatever hon. Gentlemen opposite may think. We all agree that our economic situation is not of merely domestic concern, it is something which affects the whole Commonwealth and the influence of the Commonwealth in the world.

But before I reply to the questions of the right hon. Gentleman, there is this I must say, that the position we have internationally today is due in a remarkable degree to the patience and skill of my right hon. Friend the Chancellor of the Exchequer. With infinite care and perseverence he has laboured to improve our country's fortunes, and his authority in economic and financial affairs—the whole House knows it—has grown steadily. Certainly in all his work my right hon. Friend will continue to have our full support.

Now about the questions which the right hon. Gentleman asked me as to the various undertakings we have given and where we stand in respect of them. I propose to give the right hon. Gentleman a direct answer to them all. The right hon. Gentleman waved at me earlier in the evening a bit of paper. It is from that bit of paper I wish to give him the answer. First of all we put forward in our programme for this Parliament slum clearance, 200,000 people a year. That stands. Road programme, that stands. Railway modernisation, that stands. Education, that stands. The right hon. Gentleman asked two specific questions—

Mr. H. Morrison

You are not answering them.

The Prime Minister

Yes, I am answering them. Is school building to be cut? Answer, no. Does Ministry of Education Circular 283 stand? Answer, yes. That is the circular to the local authorities dealing with all-age schools. Extension of family allowances as long as a child is at school that stands. New hospital programme, that stands. The

hospital building programme is not going to be cut.

Mr. Morrisonrose—

Hon. Members

Sit down.

The Prime Minister

Finally, when the right hon. Gentleman says to me that the only things we are cutting are the nationalised industries, I say that is utterly false—[An HON. MEMBER: "What are you cutting?"]—because in our programme is nuclear power, and the coal mining industry has been given a clear bill to try to meet our needs.

I believe I have fairly stated all the programme. It is all in that document and we shall proceed with it, but there has to be an order of priorities between those things. [HON. MEMBERS: "Ah!"] Well, of course. Right hon. Gentlemen opposite ignored the order of priority when they were in Government and came to disaster. We shall carry through the priority and be judged when our term is over.

Mr. Herbert W. Bowden (Leicester, South-West)

rose in his place and claimed to move, That the question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly:—

The House divided: Ayes 261, Noes, 329.

Division No. 32.]	AYES	[10.0 p.m.
Ainsley, J. W.	Butler, Herbert (Hackney, C.)	Edwards, Robert (Bilston)
Albu, A. H.	Butter, Mrs. Joyce (Wood Green)	Edwards, W. J. (Stepney)
Allaun, F. (Salford, E.)	Callaghan, L. J.	Evans, Albert (Islington, S.W.)
Allen, Arthur (Bosworth)	Carmichael, J.	Evans, Edward (Lowestoft)
		Evans, Stanley (Wednesbury)
Allen, Scholefield (Crewe)	Champion, A. J.	Fernyhough, E.
Anderson, Frank	Chapman, W. D.	Fienburgh, W.
Attlee, Rt. Hon. C. R.	Chetwynd, G. R.	Fletcher, Eric
Awbery, S. S.	Clunie, J.	Forman, J. C.
Bacon, Miss Alice	Coldrick, W.	Fraser, Thomas (Hamilton)
Baird, J.	Collick, P. H. (Birkenhead)	Freeman, Peter
Balfour, A.	Collins, V. J.(Shoreditch & Finsbury)	Gaitskell, Rt. Hon. H. T. N.
Bartley, P.	Corbet, Mrs. Freda	Gibson, C. W.
Bellenger, Rt. Hon. F. J.	Cove, W. G.	Gooch, E. G.
Bence, C. R. (Dunbartonshire, E.)	Craddock, George (Bradford, S.)	Gordon Walker, Rt. Hon. P. C.
Benn, Hn. Wedgwood (Bristol, S.E.)	Cronin, J. D.	Greenwood, Anthony
Benson, G.	Crossman, R. H. 8.	Grenfell, Rt. Hon. D. R.
Beswick, F.	Cullen, Mrs. A.	Grey, C. F.
Bevan, Rt. Hon. A. (Ebbw Vale)	Daines, P.	Griffiths, David (Rother Valley)
Blackburn, F.	Dalton, Rt. Hon. H.	Griffiths, Rt. Hon. James (Llanelly)
Blenkinsop, A.	Davies, Rt. Hon. Clement (Montgomery)	Griffiths, William (Exchange)
Blyton, W. R.	Davies, Ernest (Enfield, E.)	Grimond, J.
Boardman, H.	Davies, Harold (Leek)	Hale, Leslie
Bottomley, Rt. Hon. A. G.	Davies, Stephen (Merthyr)	Hall, Rt. Hn. Glenvil (Colne Valley)
Bowen, E. R. (Cardigan)	Deer, G.	Hamilton, W. W.
Bowles, F. G.	de Freitas, Geoffrey	Hannan, W.
Boyd, T. C.	Dodds, N. N.	Harrison, J. (Nottingham, N.)
Braddock, Mrs. Elizabeth	Donnelly, D. L.	Hastings, S.
Brockway, A. F.	Dugdale, Rt. Hn. John (W. Brmwch)	Hayman, F. H.
Broughton, Dr. A. D. D.	Dye, S.	Healey, Denis
Brown, Rt. Hon. George (Belper)	Ede, Rt. Hon. J. C.	Henderson, Rt. Hon. A. (Rowley Regis)
Brown, Thomas (Ince)	Edelman, M.	Herbison, Miss M.
Burke, W. A.	Edwards, Rt. Hon. John (Brighouse)	Hewitson, Capt. M.
Burton, Miss F. E.	Edwards, Rt. Hon. Ness (Caerphilly)	Hobson, C. R.
Holman, P.	Mayhew, C. P.	Simmons, C. J. (Brierley Hill)
Holmes, Horace	Mellish, R. J.	Skeffington, A. M.
Houghton, Douglas	Messer, Sir F.	Slater, Mrs. H. (Stoke, N.)
Howell, Denis (All Saints)	Mitchison, G. R.	Slater, J. (Sedgefield)
Hoy, J. H.	Monslow, W.	Smith, Ellis (Stoke, S.)
Hubbard, T. F.	Moody, A. S.	Snow, J. W.
Hughes, Cledwyn (Anglesey)	Morris, Percy (Swansea, W.)	Sorensen, R. W.
Hughes, Emrys (S. Ayrshire)	Morrison, Rt. Hn. Herbert (Lewis'm, S.)	Sparks, J. A.
Hughes, Hector (Aberdeen, N.)	Mort, D. L.	Steele, T,
Hunter, A. E.	Moss, R.	Stewart, Michael (Fulham)
Hynd, H. (Accrington)	Moyle, A.	Stokes, Rt. Hon. R. R. (Ipswich)
Hynd, J. B. (Attercliffe)	Mulley, F. W.	Stones, W. (Consett)
Irvine, A. J. (Edge Hill)	Neal, Harold (Bolsover)	Strauss, Rt. Hon. George (Vauxhall)
Irving, S. (Dartford)	Noel-Baker, Francis (Swindon)	Stross, Dr. Barnett (Stoke-on-Trent, C.)
Isaacs, Rt. Hon. G. A.	O'Brien, T.	Summerskill, Rt. Hon. E.
Janner, S.	Oliver, G. H.	Swingler, S. T.
Jeger, George (Goole)	Oram, A. E.	Sylvester, G. O.
	Orbach, M.	Taylor, Bernard (Mansfield)
Jeger, Mrs. Lena (Holbn & St. Pncs, S.)	Oswald T.	Taylor. John (west) Lothian,
Jenkins, Roy (Stechford)	Owen, W. J.	Thomas, George (Cardiff)
Johnson, James (Rugby)	Padley, W. E.	Thomas, lorworth (Rhondda, W.)
Johnston, Douglas (Paisley)	Paget, R. T.	Thomson, George (Dundee, E.)
Jones, Rt. Hon. A. Creech (Wakefield)	Paling, Will T. (Dewsbury)	Thornton, E.
Jones, David (The Harttepools)	Palmer, A. M. F.	Timmons, J.
Jones, Elwyn (W. Ham, S.)	Panned, Charles (Leeds, W.)	Tomney, F.
Jones, Jack (Rotherham)	Pargiter, G. A.	Turner-Samuels, M.
Jones, J. Idwal (Wrexham)	Parker, J.	Ungoed-Thomas, Sir Lynn
Jones, T. W. (Merioneth)	Parkin, B. T.	Usborne, H. C.
Kenyon, C.	Paton, J.	Viant, S. P.
Key, Rt. Hon. C. W.	Peart, T. F.	Wade, D. W.
King, Dr. H. M.	Plummer, Sir Leslie	Warbey, W. N.
Lawson, G. M.	Popplewell, E.	Watkins, T. E.
Ledger, R. J.	Price, J. T. (Westhoughton)	Weitzman, D.
Lee, Frederick (Newton)	Price, Philips (Gloucestershire, W.)	Wells, Percy (Faversham)
Lee, Miss Jennie (Cannock)	Probert, A. R.	Wells, William (Walsall, N.)
Lever, Harold (Cheetham)	Proctor, W. T.	West, D. G.
Lever, Leslie (Ardwick)	Pryde, D. J.	Wheeldon, W. E.
Lewis, Arthur	Pursey, Cmdr. H.	White, Mrs. Eirene (E. Flint)
Lindgren, G. S.	Rankin, John	White, Henry (Derbyshire, N.E.)
Lipton, Lt.-Col. M.	Reeves, J.	Wilcock, Croup Capt. C. A. B.
Logan, D. G.	Reid, William	Wilkins, W. A.
MacColl, J. E.	Rhodes, H.	Willey, Frederick
McGhee, H. G.	Robens, Rt. Hon. A.	Williams, Ronald (Wigan)
McGovern, J.	Roberts, Albert (Normanton)	Williams, Rt. Hon. T. (Don Valley)
McInnes, J.	Roberts, Goronwy (Caernarvon)	Williams, W. R. (Openshaw)
McKay, John (Wallsend)	Robinson, Kenneth (St. Pancras, N.)	Williams, W. T. (Barons Court)
McLeavy, Frank	Rodgers, George (Kensington, N.)	Willis, E. C. (Edinburgh, E.)
MacMillan, M. K. (Western Isles)	Ross, William	Winterbottom, Richard
MacPherson, Malcolm (Stirling)	Royle, C.	Woodburn, Rt. Hon. A.
Mahon, S.	Shawcross, Rt. Hon. Sir Hartley	Yates, V. (Ladywood)
Mainwaring, W. H.	Shinwell, Rt. Hon. E.	Younger, Rt. Hon. K.
Mallalieu, J. P. W. (Huddersfd, E.)	Short, E. W.	Zilliacus, K.
Mann, Mrs. Jean	Shurmer, P. L. E.
Marquand, Rt. Hon. H. A.	Silverman, Julius (Aston)	TELLERS FOR THE AYES:
Mason, Roy	Silverman, Sydney (Nelson)	Mr. Bowden and Mr. Pearson
NOES
Agnew, Cmdr. P. G.	Birch, Rt. Hon. Nigel	Cooper, Sqn. Ldr. Albert
Aitken, W. T.	Bishop, F. P.	Cooper-Key, E. M.
Allan, R. A. (Paddington, S.)	Black, C. W.	Cordeaux, Lt.-Col. J. K.
Alport, C. J. M.	Body, R. F.	Corfield, Capt. F. V.
Amery, Julian (Preston, N.)	Boothby, Sir Robert	Craddock, Beresford (Spelthorne)
Amory, Rt. Hn. Heathcoat (Tiverton)	Bossom, Sir A. C.	Crookshank, Capt. Rt. Hn. H. F. C.
Anstruther-Gray, Major W. J.	Boyd-Carpenter, Rt. Hon. J. A.	Crosthwaite-Eyre, Col. O. E.
Arbuthnot, John	Boyle, Sir Edward	Crouch, R. F.
Armstrong, C. W.	Braine, B. R.	Crowder, Petre (Ruslip—Northwood).
Ashton, H.	Braithwaite, Sir Albert (Harrow, W.)	Cunningham, Knox
Astor, Hon. J. J.	Bromley-Davenport, Lt.-Col. W. H.	Currie, G. B. H.
Atkins, H. E.	Brooke, Rt. Hon. Henry	Dance, J. C. G.
Baldock, Lt.-Cmdr. J. M.	Brooman-White, R. C.	D'Avigdor-Goldsmid, Sir Henry
Baldwin, A. E.	Browne, J. Nixon (Craigton)	Deedes, w. F.
Balniel, Lord	Bryan, P.	Digby, Simon Wingfield
Banks, Col. C.	Bullus, Wing Commander E. E.	Dodds-Parker, A. D.
Barber, Anthony	Burden, F. F. A.	Donaldson, Cmdr. C. E. McA.
Barlow, Sir John	Butcher, Sir Herbert	Doughty, C. J. A.
Barter, John	Butler, Rt. Hn. R. A.(SaffronWalden)	Drayson, G. B.
Baxter, Sir Beverley	Campbell, Sir David	Dugdale, Rt. Hn. Sir T. (Richmond)
Beamish, Maj. Tufton	Carr, Robert	Duncan, Capt. J. A. L.
Bell, Philip (Bolton, E.)	Cary, Sir Robert	Duthie, W. S.
Bell, Ronald (Bucks, S.)	Channon, H.	Eccles, Rt. Hon. Sir D. M.
Bennett, Dr. Reginald	Chichester-Clark, R.	Eden, Rt. Hn. Sir A. (Warwick & L'm'tn).
Bevins, J. R. (Toxteth)	Clarke, Brig. Terence (Portsmth, W.)	Eden, J. B. (Bournemouth, West)
Bidgood, J. C.	Cole, Norman	Elliot, Rt. Hon. W. E.
Biggs-Davison, J. A.	Conant, Maj. Sir Roger	Emmet, Hon. Mrs. Evelyn

Errington, Sir Eric	Kirk, P. M.	Price, David (Eastleigh)
Erroll, F. J.	Lagden, G. w.	Price, Henry (Lewisham, W.)
Farey-Jones, F. W.	Lambert, Hon. G.	Prior-Palmer, Brig. O. L.
Fell, A.	Lambton, Viscount
Finlay, Graeme	Lancaster, Col. C. C.	Profumo, J. D.
Fisher, Nigel	Langford-Holt, J. A.	Raikes, Sir Victor
Fleetwood-Hesketh, R. F.	Leather, E. H. C.	Ramsden, J. E.
Fletcher-Cooke, C.	Leavey, J. A.	Rawlinson, P. A. G.
Fort, R.	Leburn, W. G.	Redmayne, M.
Foster, John	Legge-Bourke, Maj. E. A. H.	Rees-Davies, W. R.
Fraser, Hon. Hugh (Stone)	Legh, Hon. Peter (Petersfield)	Remnant, Hon. P.
Fraser, Sir Ian (M'cmbe & Lontdale)	Lennox-Boyd, Rt. Hon. A. T.	Renton, D. L. M.
Freeth, D. K.	Lindsay, Hon. James (Devon, N.)	Ridsdale, J. E.
Galbraith, Hon. T. G. D.	Lindsay, Martin (Solihull)	Rippon, A. G. F.
Gammans, L. D.	Linstead, Sir H. N.	Roberts, Peter (Heeley)
Garner-Evans, E. H.	Lloyd, Rt. Hon. G. (Sutton Coldfield)	Robertson, Sir David
George, J. C. (Pollok)	Lloyd, Maj. Sir Guy (Renfrew, E.)	Robinson, Sir Roland (Blackpool, S.)
Glover, D.	Lloyd, Rt. Hon. Selwyn (Wirral)	Robson-Brown, W.
Godber, J. B.	Lloyd-George, Maj. Rt. Hon. G	Rogers, John (Sevenoaks)
Gomme-Duncan, Col. A.	Longden, Gilbert.	Roper, Sir Harold
Gough, C. F. H.	Low, Rt. Hon. A. R. W.	Ropner, Col. Sir Leonard
Gower, H. R.	Lucas, Sir Jocelyn (Portsmouth, S.)	Russell, R. S.
Graham, Sir Fergus	Lucas, P. B. (Brentford & Chiswick)	Sandys, Rt. Hon. D.
Grant, W. (Woodside)	Lucas-Tooth, Sir Hugh	Schofield, Lt.-Col. W.
Grant-Ferris, Wg-Cdr. R. (Nantwich)		Scott-Miller, Cmdr. R.
Green, A.	McAdden, S. J.	Sharpies, Maj. R. C.
Gresham Cooke, R.	Macdonald, Sir Peter	Shepherd, William
Grimston, Hon. John (St. Albans)	Mackeson, Brig. Sir Harry	Simon, J. E. S. (Middlesbrough, W.)
Grimston, Sir Robert (Westbury)	McKibbin, A. J.	Smithers, Peter (Winchester)
Grosvenor, Lt.-Col. R. G.	Mackie, J. H. (Galloway)	Smyth, Brig. J. C. (Norwood)
Gurden, Harold	McLaughlin, Mrs. P.	Soames, Capt. C.
Hall, John (Wycombe)	Maclay, Rt. Hon. John	Spearman, A. C. M.
Hare, Hon. J. H.	Maclean, Fitzroy (Lancaster)	Speir, R. M.
Harris, Frederic (Croydon, N.W.)	Macleod, Rt. Hn. Iain (Enfield, W.	Spence, H. R. (Aberdeen, W.)
Harris, Reader (Heston)	MacLeod, John (Ross & Cromarty)	Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)
Harrison, A. B. C. (Maldon)	Macmillan, Maurice (Halifax)	Stanley, Capt. Hon. Richard
Harrison, Col. J. H. (Eye)	Macpherson, Niall (Dumfries)	Stevens, Geoffrey
Harvey, Air Cdre. A. v. (Macclesfd	Maddan, Martin	Steward, Harold (Stockport, S.)
Harvey, Ian (Harrow, E.)		Steward, Sir William (Woolwich, W.)
Harvey, John (Walthamstow, E.)	Maitland. Cdr. J.F.W. (Horncastle)	Stewart, Henderson (Fife, E.)
Harvie-Watt, Sir George	Maitland, Hon. Patrick (Lanark)	Stoddart-Scott, Col. M.
Hay, John	Manningham-Buller, Rt. Hn. Sir R.	Storey, S.
Head, Rt. Hon. A. H.	Markham, Major Sir Frank	Stuart, Rt. Hon. James (Moray)
Heald, Rt. Hon. Sir Lionel	Marlowe, A. A. H.	Summers, G. S. (Aylesbury)
Heath, Edward	Marples, A. E.	Sumner, W. D. M. (Orpington)
Hicks-Beach, Maj. W. W.	Marshall, Douglas	Taylor, Sir Charles (Eastbourne)
Hill, Rt. Hon. Charles (Luton)	Mathew, R.	Taylor, William (Bradford, N.)
Hill, Mrs. E. (Wythenshawe)	Maude, Angus	Teeling, W.
Hill, John (S. Norfolk)	Maudling, Rt. Hon. R.	Thomas, Rt. Hn. J. p. L. (Hereford)
Hinchingbrooke, Viscount	Mawby, R. L.	Thomas, Leslie (Canterbury)
Hirst, Geoffrey	Maydon, Lt.-Comdr. S. L. C.	Thomas, P. J. M. (Conway)
Hope, Lord John	Medlicott, Sir Frank	Thompson, Kenneth (Walton)
Hopkinson, Rt. Hon. Henry	Milligan, Rt. Hon. W. R.	Thompson, Lt.-Cdr. R.(Croydon, S.)
Homsby-Smith, Miss M. P.	Molson, A. H. E.	Thorneycroft, Rt. Hon. P.
Horobin, Sir Ian	Monckton, Rt. Hon. Sir Walter	Thornton-Kempley, C. N.
Horsbrugh, Rt. Hon. Dame Florence	Moore, Sir Thomas	Tiley, A. (Bradford, W.)
Howard, Gerald (Cambridgeshire)	Morrison, John (Salisbury)	Tilney, John (Wavertree)
Howard, Hon. Greville (St. Ives)	Mott-Radclyffe, C. E.	Touche, Sir Gordon
Howard, John (Test)	Nabarro, G. D. N.	Turner, H. F. L.
Hudson, Sir Austin (Lewisham, N.)	Nairn, D. L. S.	Turton, Rt. Hon. R. H.
Hudson, W. R. A. (Hull, N.)	Neave, Airey	Tweedsmuir, Lady
Hughes, Hallett, Vice-Admiral J.	Nicholls, Harmar	Vaughan-Morgan. J. K.
Hughes-Young, M. H. C.	Nicholson, Godfrey (Farnham)	Vickers, Miss J. H.
Hulbert, Sir Norman	Nicolson, N. (B'n'm'th, E. & Chr'ch)	Vesper, D. F.
Hurd, A. R.	Nield, Basil (Chester)	Wakefield, Edward (Derbyshire, W.)
		Wakefield, Sir W a veil (St. M'lebont)
Hutchison, Sir Ian Clark (E'b'gh, W.)	Noble, Comdr. A. H. P.	Walker-Smith, D. C.
Hutchison, James (Scotstoun)	Nugent, G. R. H.	Wall, Major Patrick
Hyde, Montgomery	Nutting, Rt. Hon. Anthony	Ward, Hon. George (Worcester)
Hylton-Foster, Sir H. B. H.	Oakshott, H. D.	Ward, Dame Irene (Tynemouth)
Iremonger, T. L.	O'Niell, Hn. Phelim (Co. Antrim, N.)	Waterhouse, Capt. Rt. Hon. C.
	Orr, Capt. L. P. S.	Watkinson, H. A.
Irvine, Bryant Godman (Rye)	Orr-Ewing, Charles Ian (Hendon, N.)	Webbe, Sir H.
Jenkins, Robert (Dulwich)	Orr-Ewing, Sir Ian (Weston-S-Mare)	Whitelaw, W.S.I.(Penrith & Border)
Jennings, J. C. (Burton)	Osborne, C.	Williams, Gerald (Tonbridge)
Jennings, Sir Roland (Hallam)	Page, R. G.	Williams, Paul (Sunderland, S.)
Johnson, Dr. Donald (Carlisle)	Panned, N. A. (Kirkdale)	Williams, R. Dudley (Exeter)
Johnson, Eric (Blackley)	Partridge, E.	Wills, C. (Bridgwater)
Johnson, Howard (Kemptown)	Peake, Rt. Hon. O.	Wilson, Geoffrey (Truro)
Jones, A. (Hall Green)	Peyton, J. W. W.	Wood, Hon. R.
Joynson-Hicks, Hon. L. W.	Pickthorn, K, W. M.	Woollam, John Victor
Kaberry, D.	Pilkington, Capt. R. A.	Yates, William (The Wrekin)
Keegan, D.	Pitman, I. J.
Kerby, Capt. H. B.	Pitt, Miss E. M.	TELLERS FOR THE NOES:
Kerr. H. W.	Pott, H. P.	Mr. Buchan-Hepburn and
Kershaw. J. A.	Powell, J. Enoch	Mr. Studholme.