BUDGET PROPOSALS AND ECONOMIC SITUATION

HC Deb 18 April 1956 vol 551 cc1014-136

3.34 p.m.

Mr. Harold Wilson (Huyton)

It might be helpful to the course of the debate if I were to follow the line taken by the Chancellor of the Exchequer in his statement yesterday and make the assumption—admittedly, somewhat speculative—that this Budget is designed to cover the whole financial year. That is, after all a reasonable thing to ask. We have a new Chancellor and his immediate horizon, as far as I am aware, is not obscured by an overpowering desire to win an impending General Election. At the same time, however, having heard the Chancellor yesterday, I must express very grave doubts about the prospects for this.

The nation yesterday was awaiting a clear, statesmanlike call from the Chancellor of the efforts and, if necessary, the sacrifices that are needed to lift the country out of the perpetual series of crises and near crises that have dogged us ever since the war. That was what we were led to believe would happen.

What did we get? We had a shambling, fumbling, largely irrelevant and, at one point, degrading speech. The Chancellor told us that the Budget was prepared under the piercing eye of Mr. Gladstone. There was one passage that was quite obviously written under a portrait of Horatio Bottomley.

With few exceptions, the Chancellor's proposals were imprecise, not fully worked out, and half-baked. They were the sort of thing we might have expected him to jot on the back of an envelope the day after he arrived at the Treasury. There were vague references to an Economic General Staff. We would like to know a little more about that sometime. There was a promise, too, of a £100 million cut in Government expenditure—we have heard that one before, as the Lord Privy Seal knows—but, again, there were no specific proposals.

It is not only the Budget that we are debating this week—its very few specific proposals could be dismissed in a few sentences—but this is the annual occasion when the House of Commons sits in grand inquest on the whole economic policy of the Government.

Miserably has the Chancellor failed to come up to the needs of such an occasion. He began by briskly sidestepping any review of the past year—we can understand the reason. For this Committee, the starting point of the debate is the Economic Survey, and I propose to do a little, at least, to make good the Chancellor's perfunctory references to this important document.

The Economic Survey is a brutally frank report. The Chancellor still takes an impish delight in revealing to the nation the economic consequences of the Lord Privy Seal. Dealing largely, as it does, with the year 1955, the Economic Survey is a gloomy record of a year of missed opportunities and of stagnation and failure in a world of expansion and success.

The very first sentence in the Economic Survey tells us that In 1955 world economic conditions were highly favourable. What was the record of this nation under Toryism in the face of these "highly favourable" conditions? In production, we had an increase smaller than that of every other major industrial country in Europe—the Survey says so. While every other country is still increasing its production, ours is now falling. I would like the Chancellor to tell us what are the prospects for production. Yesterday he refused to assess them, and after the gross miscalculations of his predecessor in every sphere I can understand his shyness.

The nation, however, has a right at least to know this. Is the Chancellor aiming at an increase or a fall in production this year? In his speech he used these words: I think we have learned this lesson from the events of the past year. We cannot afford to run our economy flat out. …"—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 855.] Does that mean that the Chancellor wants to see production—and employment, too—less this year than it was last year, when we were flat out? The nation has a right to know. Are the Government trying to cut production below the present level, or do they want it to expand?

Turning to the trade figures, there is a 16 per cent. increase in world trade in manufactured goods. Ours is up by 4 or 5 per cent. The Survey tells us that conditions were favourable for rising gold and dollar reserves. The whole of the non-dollar world outside the Soviet bloc saw its gold and dollar reserves rising, according to the Survey, by 1,600 million dollars. Ours fell by £642 million.

The Chancellor was at least frank about our balance of payments position—at any rate, up to a point, because, following the example of his predecessor, he veiled the position by taking credit for the relief afforded by external assets. He told us that there was a worsening by £308 million in the United Kingdom's balance over the year. He told us that the deficit of the sterling area as a whole showed a worsening of £278 million.

There is a very serious feature in these figures. The Chancellor did not attempt to disguise it; certainly, the Economic Survey does not. This crisis was not, as previous crises since the war have been, because of a worsening of the position of the rest of the sterling area. The fault lay here, at home, in Britain. The remainder of the sterling area, the whole area other than the United Kingdom, had a surplus of £137 million, only £27 million less than in 1954. Indeed, only twice in the last seven years have the rest of the sterling area done better in their balances with the remainder of the world.

The reason for the crisis lay in the United Kingdom where our deficit on current account with the rest of the world worsened from £67 million to £318 million in a single year. I shall not weary the Committee with further details of the balance of payments position, but I hope that the Government will give us a much more revealing account of what is happening in the matter of the oil payments than does the White Paper on the United Kingdom Balance of Payments, or than the Chancellor did yesterday.

However, I must draw attention to a very large concealed item in the figures. Taking the sterling area figures, all items together, our deficit on current account, debt repayment, overseas lending, drawing on sterling balances, and the rest, there is a gap between expenditure and income of £404 million; yet the net outflow of gold and dollars was limited to £229 million, leaving £175 million not accounted for. We should like to know what this was. It is a far larger balancing figure than can be explained in terms of errors or omissions. Perhaps the Chancellor will tell us about this.

My impression is that it is largely accounted for by short-term capital movements not from the rest of the sterling area but from the dollar area and Europe, attracted here by the very high interest rates. These are very mercurial investments. They are highly vulnerable to any change in the confidence in sterling. We must wonder, are we getting into the 1931 position of borrowing short and lending long? Indeed, it may, perhaps, look as if we are borrowing hard and lending soft. Perhaps the Chancellor will say something about that next week.

I turn to investment, about which the Chancellor made the most perfunctory reference in his speech yesterday. It is, at any rate, the brightest feature in the Economic Survey, though the Government do not seem to agree with that. At long last, in 1955, the long hoped for improvement in capital investment in the private sector began to take place. Year after year we on this side have drawn attention to the fact that while investment in public industry was expanding at a highly satisfactory rate private industry was stagnating.

Year after year the Lord Privy Seal stood at that Box wringing his hands and wondering what he should do about it. I will say this for him. He gave industry every incentive known to his philosophy. Thinking that the problem might be lack of funds, he gave industry large tax concessions, though the fall in raw material prices after 1952 gave them large liquid surpluses. In 1954, he introduced the investment allowances and went off to the Tory conference in the autumn of that year to exhort everyone to "Invest in Success."

Then, in 1955, when industry finally and belatedly responds, the Government panic and run away. Their reactions to this remind me of the old story of the Scottish country preacher who was praying for rain and found his prayers suddenly answered with a cloud burst. It burst with a deafening noise over the tin roof of his little church, and he exclaimed, "Lord, I was praying for rain, but this is becoming ridiculous." That, very largely, was the Government's attitude to the increase in investment. They prayed for it for many years. That was all they could do, having no control. When they found their prayers answered, they said, "This is becoming ridiculous, and it must stop." Their panic and efforts to restrain investment we regard as a short-sighted, retrograde step, as we have said not only in this debate but over the past few months.

I am not saying how much of the increased investment is essential. How much of it is frivolous the Government have been coy in revealing. We know the volume of new office building has been trebled in the last year. We know that the Government allowed the motor car manufacturing industry to embark on a £250 million expansion programme, and that in the middle of it the Government decided that the industry was becoming too big and must be forced into a depression. The Economic Survey says: It became clear that a considerable upsurge in the capital expenditure of industry was being superimposed on the buoyant level of consumers' expenditure. Whose fault was it that expenditure was so buoyant? How great is the responsibility of a Chancellor who, a year ago, gave away £150 million in tax concessions on the eve of the Election, a Chancellor whose policy of deliberately increasing the cost of living and of relaxing the restraints on luxury expenditure was a provocative inducement to higher wage claims?

Because consumption was buoyant the Government decided investment had to be cut, so we have had the long, weary tale of cuts in public industry and in the capital programmes of local authorities; and the credit squeeze which hits the small industrialists while leaving the giants largely untouched. We find the shadow of short-time working spreading in one industry after another, while the little man, who responded to the Lord Privy Seal's appeal, to invest in success, finds himself facing the prospect of bankruptcy. I believe that this panic in the face of increasing industrial investment is the worst indictment in the economic as distinct from the social and fiscal record of the Government.

We are a low investment industrial nation and we ought to be a high one. The Economic Commission for Europe has recently published figures showing the record of each country in investment. The figures relate to 1954, before this increase began, and they show net fixed investment as a percentage of net national production. These are the percentages: Norway, 22; Finland, 21; Austria, 15; Western Germany, 15; Switzerland, 14; the Netherlands, 13; Denmark. 13; Italy, 12; Sweden, 11; Greece, 10; Turkey, 9; France, 8; Belgium and the United Kingdom, 6.

That was the position from which the increased investment of last year began, and I am sure that the Committee will agree that it is no exaggeration to say that the whole future of this nation rests on its becoming a high investment Power. I referred in February to the pace of industrial development in the Soviet Union and in the United States. As soon as it began to quicken here the Government ran away from it. Over the past four years the increase in production, with the windfall gained in the terms of trade, gave this country a large dividend in terms of real resources. I have no hesitation whatsoever in saying—and I do not care what political unpopularity is involved in saying this—that far too high a proportion of those resources which became available were spent on consumption and far too little on investment and exports.

While referring to investment, perhaps I might mention here the Chancellor's comments on borrowing by publicly owned industries. Some hon. Gentlemen opposite will perhaps not like the direct assumption by the Treasury of responsibility for meeting those needs. We on this side do not object, though we see no reason for the limitation to two years. When hon. Gentlemen opposite complain about the volume of borrowing by nationalised industries, we must remind them that a great deal of this, in the case of coal and railways, for example, is necessary to make good the deficiencies of a generation of private ownership, whereas in the gas and electricity industries it is needed to meet the demands of an expanding economy for which far too little provision was made in pre-war days.

The Chancellor seemed pleased at the degree of control that he will now be able to exercise over the capital investment programmes of public industry. We thought that he had cut them to the bone already. But even if he abuses this control, as we fear he may, it will serve to recall to us on this side how often we reminded hon. Gentlemen opposite that the public sector can be planned by the Government in a sense that the private sector cannot be planned. It is possible for a Government to distinguish between the essential and the inessential proposals of public boards. The Government have certainly no such control over the oil companies, for example; while he is cutting down essential investment by public boards, at the very same time he is allowing a great deal of inessential and frivolous expenditure by the oil companies.

I must ask the Chancellor this question. How can the Government defend this distinction which they are now making between nationalised industries, on the one hand, and local authorities, on the other? If it is right to bring the nationalised industries in to the Treasury for their borrowing, why was it right to drive the local authorities out into the market?

I want now to examine the relevance of the Budget proposals to the two main problems confronting the country, the import-export gap and inflation, two problems which, though connected, are, in fact, different problems. For instance, it is possible—or it would be possible, with a different Government—to operate on imports and exports directly. This would have some effect on the balance of payments quite independently of inflation, though there might be a need then to take special counter-measures to deal with any resulting monetary pressure.

The Committee has been given the necessary figures with regard to imports and exports. Last year, imports were up by 11½ per cent. We were told in February that that was largely due to basic materials, but I see that the Economic Survey tells us that while basic materials were up by 6 per cent., food, drink and tobacco up by 7 per cent., and fuel up by 21 per cent., manufactured goods were up by 25 per cent. That is very largely, no doubt, the result of the policy of liberalization, especially for the dollar areas.

The Government should look also at the figures of our imports by areas. Imports from the dollar area are up by £223 million in a year, or 36 per cent. Imports from other countries outside the sterling area are up by 17 to 18 per cent.; imports from the rest of the sterling area are up by only 5 per cent. This is an indication of how sterling area trade, especially Commonwealth trade, has fared under Conservative policy. Year by year the links of Commonwealth trade have been weakened, sacrificed to quick profits on the speculative commodity markets, to liberalisation of dollar trade, to doctrinaire experiments in the ending of bulk purchase and long-term contracts for Commonwealth produce.

The Chancellor told us that he expects imports to fall. He may be right. He did not say by how much the expected fall would be due to the using up of strategic stocks which we imported and paid for in 1951. What was paid for then, at a heavy cost to our gold and dollar reserves, is now being drawn on by this Government as a means of saving imports.

I think the Committee will agree that, whatever control may be needed of less essential imports, the main need is to expand exports. On last year's figures, this was just not happening. The Economic Survey showed that we fell a long way behind all our industrial rivals: Japan up by 27 per cent.; Western Germany up by 18 per cent.; United States up by 9 per cent.; and this country up by 7 per cent., or 4½ per cent. on the basis quite rightly adopted by the Board of Trade.

I must draw attention to the failure of our exports to the sterling area. This is what the Survey says: They did not keep pace either with the expansion of sterling area imports or with the rates of increase achieved in sterling area markets by our main competitors". This is a very ominous development. We are losing ground in Commonwealth markets. Goodness knows what the Daily Express, in the days when it used to care about Commonwealth trade, would have said about it. Because of our failure to produce exports, Commonwealth countries are turning more and more to the United States, to Germany and to Japan for their supplies, and our exports to them form a falling proportion of their imports.

I hope that the Government are not going to be complacent on the basis of two months' figures. We have seen too much of that in the past. Last May, the Lord Privy Seal was so excited—admittedly, he was returning from the hustings—that on the basis of one month's trade figures he wrote an article in which he not only said that there was no question of weathering a crisis, but that there had not been a crisis; it was forestalled. We have two months' more favourable figures, but I am sure the President of the Board of Trade will agree that we need to wait a little longer before we start writing home about that. As far as they go, they are an improvement.

Turning to the problem of inflation, all of us are only too well aware of both the symptoms and the main consequences of inflation. I come now to the measures which the Government have proposed for dealing with it. First, of course, the Chancellor, slavishly following his predecessor, as he was instructed to do, relies—and, as we say, over-relies—on the monetary weapon. We have debated this in the past. We have talked about the effect on the National Debt charge, the increased payment of £150 million on overseas interest payments. We have outlined the increased cost of loan charges for housing, the increases on mortgages. Here, I would say to the Chancellor that the new level of stamp duties is not really going to solve the problem of increased mortgage payments. We have discussed, also, the effect on industrial investment.

It is right at this point to draw attention also to the effect on invisible earnings, to which the Chancellor referred yesterday. For example, our acceptance business is more and more being driven abroad, especially to Amsterdam, New York and Zurich. One of the most serious factors is the extent to which the sterling area is being driven to borrow in areas other than London. I doubt whether the sterling area, as we know it as an economic unit, can long survive these high interest rates, because more and more Commonwealth countries are being driven to America and elsewhere for their borrowing. I will say no more about that at the moment. Perhaps there will be another opportunity on the Finance Bill to follow this up. I hope that the Chancellor will then say a little more about the debate on interest rates which has recently come to a head in certain of the financial journals. He contributed less than nothing to that debate by his intervention yesterday.

One serious development is that it would appear to be the case that the classical effects of the Bank Rate are not now working; conditions have changed. It would look as though there is reason to think that the real effect of an increased Bank Rate is an impact effect, a temporary effect, due to a sudden disparity between the Treasury bill rate and the deposit rate at the bank; and that that wears off in time. If that is so, the Chancellor's reliance on the monetary weapon must mean that he may be forced year by year to keep on increasing the Bank Rate once a year or at more frequent intervals, depending upon how often there is a Budget or a crisis speech, and we shall see these interest rates rising to the most disastrous level.

I now come to the second of the Chancellor's weapons—if it can be called a weapon; I refer to this announcement of a cut of £100 million in the estimates at present before the Committee. What an extraordinary procedure this is. It really raises the most dubious constitutional considerations. The Government publish Estimates. We have them before the House. Then we are told that some or all of them will be subject to unspecified cuts in unspecified directions. We are supposed, I take it, to debate these Estimates one by one, not knowing which of them are to be cut, or by how much.

Certainly, all the Government's previous efforts to cut Government expenditure have failed, as the Lord Privy Seal could tell the Chancellor. Despite all the pledges of 1951—I do not see the Minister of Education here—the rate of Government expenditure under this Government has increased at more than double the rate under the Labour Government. Now the new Chancellor, by a wave of the wand, is to cut expenditure by £100 million, and apparently, he says, all his colleagues are very happy about it. They look it.

The former Chancellor said that a substantial cut in Government expenditure could be made only by major changes in policy. If the Chancellor accepts this statement from his right hon. Friend, will he tell us what policies are to be changed? He said nothing about this yesterday. Is this a threat of an attack on the Welfare State? Is it to be a further attack on the housing subsidies? When the Chancellor talked yesterday of increases of £39 million in the Health Service and education, are those only paper estimates which are to be cut under this new procedure, or is it, as I would suspect, that the Government are to follow the dodge that they followed in the last three years, of merely failing to spend for defence purposes? I am coming to suspect, as are a number of us, that the Deferce Estimates are produced and published more with the idea of impressing our allies than to indicate the Government's intentions as to expenditure.

The Government year by year publish impressive Estimates and then underspend them by £90 million or £100 million and say, "Look how we have cut down Government expenditure". I hope that the Chancellor will be much more specific about this reduction. I must ask him this—and I hope we shall get an answer before long: when he talks about reducing the Estimates by £100 million, what allowance is he now making in his Estimates for the German contribution to the cost of troops in Europe? Are they in the Estimates before the £100 million or after? What, in fact, is to happen, or does he not know until Sir Bernard Docker returns from Monaco, we are slowly beginning to see who is to form the new economic general staff?

I turn to the Chancellor's second weapon—the new savings drive. May I right away, on behalf of this side of the Committee, extend our good wishes to what the Chancellor hopes to achieve by, at any rate, the more orthodox part of the savings drive? Whatever we may think of the Government, the drive for National Savings is very vital and of interest to all parties and to the whole nation. Our approach in opposition is certainly not that of the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke). I am bound to say that so far the records of this Government in National Savings, despite all their propaganda, is a rather miserable one.

The Chancellor did not tell us this yesterday, but I have here the figures of total savings outstanding—the net figures after the "ins" and "outs" and that sort of thing. These figures are in millions of pounds. In December, 1951, the total was £6,091.8; in December, 1955, £6,092.2—an increase after four years of Conservative government of £400,000, or 0.006 per cent. on the figures for December, 1951. That is their record so far on National Savings. We heard a lot in the last General Election about how successful the Conservatives were in expanding savings—before the hon. Member for Louth (Mr. Osborne) asks his obvious question, let me inform him that savings under the Labour Government rose by £545.7 million.

The Chancellor in the matter of incentives has done three things. First, he has created a new bond carrying an average interest rate of about 4⅕ per cent. [Interruption.] These are the Government's own figures; I cannot take responsibility for them. The Chancellor will, I think, realise that the success of his appeal depends on his success in stabilising prices. There is little incentive to save at 4⅕ per cent. if prices are rising as they did last year by 4½ per cent.

Secondly, I am a little doubtful about the Chancellor's attitude towards Post Office savings. Instead of raising the Post Office Savings Bank interest rate, which would have been the right thing to do, he has made the first £15 free of Income Tax. I must put this to the Chancellor. This only appeals to those who pay Income Tax. A very large number of people do not, and we assume that he wants them to save, as far as they can under this Government.

Thirdly, he has introduced the Premium Bond scheme—the one thing in this Budget which has hit the headlines. I do not want this debate to be too much distracted from the really serious and important issue of our economic policy by this proposal of the right hon. Gentleman, but I am bound to say: what a commentary it is on the financial stewardship of the party opposite when the Chancellor of the Exchequer has to have recourse to such measures! In 1951, they promised us a "Britain Strong and Free." Now Britain's strength, freedom and solvency apparently depend on the proceeds of a squalid raffle. The Tory Party used to have the slogan, "Land of Hope and Glory". We can recall the right hon. Member for Woodford (Sir W. Churchill) enthusing about it. They will be fighting the next Election on "Honest Charlie always pays."

I say this in all seriousness to the Chancellor. There are hundreds of thousands of people in this country who will be outraged by this proposal. The Committee will recall the feelings aroused in a minority of hon. Members, on both sides of the House, by the very limited proposal in a Private Member's Bill which recently left this House, designed to clarify the law on small lotteries run by charitable and sporting organisations—a Measure which I myself support. But it is one thing to support the legalisation of these small charitable lotteries. It is quite another to erect a great State machine—with goodness knows how many bureaucrats—to use the resources, power and prestige of the State for such a purpose; and I believe that this proposal will affect a great number of our people throughout the country on sincerely-held religious and moral grounds.

I put this to the Chancellor. How many keen voluntary workers in the National Savings movement itself will feel unable to associate themselves with this proposal? I hope that he will give a very clear answer on this point: is the school savings organisation, when the Minister of Education is able to reconstitute it, to be used for this purpose of selling lottery tickets? I suggest to the Chancellor in all seriousness that he should take this out of his financial proposals. It is not a Budget measure. It has nothing to do with the Budget. If he must introduce it, he should include it in the Government's proposed Bill on gambling and betting, and then let the House examine that Measure on its own merits.

Before that is done, I would say to him, "Hold conversations with the Savings movement, with the Churches and other organisations, and then come to a decision." I put it to him that if he then decides to proceed with it, this is eminently the kind of question on which the free opinion of the House should be allowed to express itself, without it being regarded as an integral part of the financial proposals of the Budget.

I now turn to the third of the weapons of the Chancellor in his attack on inflation, namely, the Government's newly started campaign for wage and dividend restraint. Recently, the Government launched an attack on wages, and indeed, dividends. This is a great change from a year ago. A year ago, during the Election, when we pointed out how wantonly the Government had broken their 1951 pledges of the cost of living, their reply was, "Yes, prices have gone up. We admit that, but wages have gone up more, so everything is all right."

The Government said that it did not matter about prices rising if wages went up still more, so when the cost of living continued to rise after the Election, it was natural that wages went up as well, as people all over the country took the Government at their word. For four and a half years, both in their propaganda and in their actions, the Government have been expounding the doctrine of a free for all, grab all you can, let prices find their own level. Indeed, in recent months, they have been making a virtue of saying that prices should always rise to the economic level. This is happening now in the case of potatoes, apparently.

I ask the Government what would happen if we had the economic price for labour in this country in conditions of a sellers' market? There has been a sellers' market for labour ever since the war. The remarkable thing is that with all this Tory propaganda the unions have not responded to the Tory philosophy. The miracle is not that wages have risen, but that they have not risen a great deal more. But higher wages, which, a year ago, were a means of increased votes to the party opposite, have suddenly become the villain of the piece. We have the White Paper on the Economic Implications of Full Employment, and we have the 6d. coloured version. We do not object, indeed we welcome the use of media of communication of this kind, though we would like them to be a little more honest and a little more objective.

In page eight there is a picture of the 10s. note—the 10s. increase in prices. Only one-sixth of that 10s., states this document, is due to the changes in indirect taxes and subsidies. Subsidy cuts—I quote— have had some direct effect on prices but only a small one. They explain only about one-seventh of the rise. Have the Government still not recognised how much of the wage-price spiral increases of the last few years have been due to the push they gave it in 1952? It was a year of falling world prices in which we were presented with a great opportunity to get domestic prices on to a stable basis. But the former Chancellor of the Exchequer, so eager was he to break his Election promises, had the Budget a month earlier, and the main thing he did in that Budget was to slash the food subsidies. Later in the year, of course, the right hon. Gentleman admitted that the price rise was the result of deliberate action in his Budget.

When there is such a wage-price relationship as we have had in a sellers' market, one push may be decisive, even if, to quote the Government's words, "it was only a little one." So it is no use the Government coming along and saying that the cut in the food subsidies accounted for only one-seventh of the price increase. This argument is about as convincing as the defence of a man who gives his wife a gentle push over the cliff and then says that her death was to be explained as to one-seventh push and six-sevenths gravity.

As far as I can see, the Government today are in a state of complete schizophrenia about the wage-price problem. First, we have the fiat earth school, obviously working towards an attempt to persuade prices to remain stationary for long enough to enable the Prime Minister to appeal to the unions for wage stabilisation. The Prime Minister started on these lines until rebuked recently by the Chancellor of the Exchequer. Now, of course, we have the Minister of Transport saying that fares and charges must be pegged despite a rise in costs. That is one school.

Then we have the intellectuals. There is the Postmaster-General, who just cannot wait, on hearing of a wage award, before he rushes to put up his prices. Also, we have the Economic Secretary, the Rasputin of the Treasury, a mystic of little power but enormous influence, sufficient to persuade two Chancellors of the Exchequer of widely different views, even if he could not persuade anybody else, that the way to lower the cost of living is to raise prices so as to mop up some of the increased wages.

The Government would be wise to drop this argument. We are as keen as anyone to see the wage-price spiral stopped, so that wages can rise with productivity. But do not let the Government slide out of their responsibility for the increased cost of living—the subsidies, the Purchase Tax—decontrol, widen margins in distributed profits. For here we have in this Budget, slipped in yesterday very quietly so that the Committee might not notice, a proposal to end the bread subsidy. We condemned the Chancellor when he halved the subsidy in February we condemn him still more today. Does he not yet recognise the effects of these policies on wages? Let the right hon. Gentleman be under no illusion, the 2s. increase in certain family allowances will not meet the additional cost to a large family of the recent Government operations on the cost of living.

Now I turn, finally, to the purely fiscal side of the Budget. Perry and cider, shooting-brakes and the minor changes in the tax code we will leave until we see the Finance Bill. As for tobacco, I understand the temptation presented by the buoyant figures to the Chancellor, but we must warn him that the increase in the tobacco tax will have an effect on the new cost-of-living index. Like my right hon. Friend yesterday. I must condemn the extraordinary meanness of the treatment of old-age pensioners.

I think the Chancellor knew, from the Questions we put to him, that we were expecting him, as part of his savings drive, to accept the principal recommendations of the Millard Tucker Report on superannuation and assurance contributions. The right hon. Gentleman has accepted something between the majority and the minority Reports of that Committee. On the whole, we would have favoured the minority Report. We recog- nise that there is a case here. The self-employed, the professional man or the employee in an industry or firm where there is no superannuation scheme, is at a serious disadvantage compared with the beneficiary of a pension scheme, especially one of the "top hat" variety.

Recently, the Economist contained a useful article showing that an employed man receiving £2,500 a year could get, under a top hat scheme, a net pension of £1,600 a year at the same net cost as would give a self-employed or professional person only £400 a year. There was obvious inequity here. I feel that the Chancellor should have gone some way to bridge the gap not by improving the conditions entirely of the self-employed and the professional, but by clamping down a little on the excess generosity of some of these top hat schemes, as the Royal Commission itself recommended.

While recognising that there is some equity in what the Government have done, we must protest about their sense of priorities. They have introduced this scheme—we do not complain—but what are they to do for those who have already retired, the old-age pensioners, many of whom never were able to save for retirement, not because of inflation, but because of unemployment? The Government's treatment of them remains shabby. Since April, 1952, their basic rate has risen from 35s. to 42s., an increase of 14 per cent. During that time food prices have risen by 21 per cent. and so have fuel prices; and now food prices are to rise still further.

In that sort of illustration we once again see the difference between the two sides of the Committee. To the Tory mind, any concession to the direct taxpayer is justified, because the Tory argues, "It is his money anyway, and we are only giving it back to him." Our philosophy is different. In our view, it is the duty of the Chancellor, by the fiscal system, to remedy some of the injustices of the economic system. All wealth, all income, stems from the community. It is earned because of the community and the first duty of the Chancellor, in considering concessions, is to meet the cases of greatest hardship. In the last year or two we have heard a lot about incentives, but year by year great injustices are being committed in the sacred name of incentive. Whether it is incentive to save or incentive to pro- duce, it is always the same; the poor are not allowed to have any incentive.

The greatest failure of the Chancellor, apart from his failure to hep Britain to become a high investment nation, is his failure to tackle the system of direct taxation root and branch, especially his failure to tackle the question of fiscal privilege. The Government's picture of a weary and over-taxed nation with no margin for tax manoeuvre is unreal. What we have, in fact, is a high super-structure of taxation rates on too narrow a tax basis, just as in local government we have high rates on a base which is artificially narrowed by the derating of industry—although we understand that that distortion is on the way to a removal.

Turning to national taxation again, the Chancellor does not tax spending power or command over goods and services; he taxes part, but only part, of personal income. As the minority Report of the Royal Commission pointed out, the idea of income for tax purposes has never been defined, ever since Pitt first introduced Income Tax in 1799. All we have is the sum of two judicial rulings, the first in 1904 by Lord MacNaghten, who said: Income Tax is a tax on income. In case that was not sufficiently clear, 21 years later it was amplified by another ruling by Lord Wrenbury, who said: As regards the word income, it means such income as is within the Act taxable under the Act. The Chancellor might take us a step or two further in this matter.

There are two problems with which the right hon. Gentleman entirely failed to deal. The first is that of capital gains and the second is that of the growth of avoidance on a menacing scale. I do not need to repeat all the arguments on tax free capital gains. They are familiar to the Committee and we are disappointed that the Chancellor failed to face up to that problem yesterday. They are not only inflationary in themselves, not only provocative to that wide section of the community which does not hold property, but they provide a standing inducement to taxpayers to refurbish taxable income as non-taxable capital and no anti-evasion or anti-avoidance Measure so far introduced has dealt with that.

The second problem is tax avoidance, which, I must warn the Committee, is developing on a major scale in this country. I am not suggesting that it has yet reached the point where one only pays tax if one wants, but some people are getting perilously near to it. When we hear hon. Gentlemen opposite say that the private enterprise system cannot survive present taxation, we are bound to ask whether the system of taxation can survive the present system of private enterprise. Tax avoidance has become a major national industry. If one-tenth of all the energy and ingenuity now going into tax avoidance were applied to the expansion of our export trade, this country would have no balance of payments problem.

I do not want to weary the Committee, but I want to draw the attention of the Government to the sort of thing that is going on. I have recently seen a circular sent round to taxpayers by a group of companies which, I understand, covers the identity of a well-known firm of chartered accountants. It says that it is … in a position to advise interested parties, burdened with heavy present and future taxation liabilities, how to enjoy the undermentioned relief therefrom. I shall not read all the pamphlet, nor its 20 headings. Some call for comment. The first is headed: Elimination of death duties in perpetuity". That would be very handy for some people. The second is: The death of any individual cannot incur any Estate Duty liability at any time". That is quite useful. The third is: Elimination of the necessity to provide for estate duties at any future date". The fourth is rather limited. I commend it to the Chancellor. It is: Limitation and possible elimination of Surtax, irrespective of earnings. I am sorry that hon. Gentlemen cannot have a copy of the leaflet. It goes on to say: The extent to which Surtax can be eliminated or reduced will depend upon the individual circumstances and desires of each client and the members of his family, but it need have no relation whatsoever to the earnings of the entity. It is not possible to be more specific in general terms at this stage, but experience shows that in most cases Surtax can be eliminated or reduced to a negligible liability. I commend that to the Financial Secretary as a "yawning gap". The pamphlet goes on: Reduction of Profits Tax liability. Profits Tax (if any) will be at the rate of 2½ per cent. of assessable profits and never at 22½ per cent. thereof, and in a very great many circumstances it is possible to save the 22½ per cent. tax on a fair proportion of the total profits within the group. Next: Elimination of director control. This tells the Chancellor how this can be achieved … for all legal and revenue purposes and, at the same time, clients, or their nominees, are left with the full practical control which they previously enjoyed.

There are 20 of these interesting proposals. In the tenth, in what is called "reorientation": It is possible to deal with any and every type of asset, including businesses, shares in private and other companies, other Stock Exchange securities, freehold and leasehold properties, furniture, fixtures and fittings, and even jewellery and other personal chattels. I am reassured by item 12, which says: Subject only to the payment of Income Tax (which cannot be avoided) … That, at any rate, is some comfort. So the pamphlet goes on. There is a very interesting item about school fees. I commend this to the Chancellor. I do not know why hon. Gentlemen opposite are pressing for any relief on this question. The pamphlet shows how, under the present system, … a parent paying Surtax at the rate of 10s. in the £, and having to pay school fees … of … £414 p.a. … could be put into the position that whereas he would need £5,520 to pay the said £414, if he were being taxed properly, under "reorientation" the gross earnings need not be more than £720 per annum, a difference of £4,800 per annum.

I will not give the Committee any more of these details. It is interesting to note that "the greater the estate the greater the benefits." At the end, the pamphlet says: This outline has been restricted to a summary of the main points of the advantages involved, although one could perhaps, 'write a book' if one endeavoured to cover the minute details of all possibilities in numerous cases.

Mr. Cyril Osborne (Louth)

Will the right hon. Gentleman say to which of his right hon. Friends was it thought that this could be appropriately sent?

Mr. Wilson

I can understand the hon. Gentleman's excitement about the prospects of this document. In answer to the hon. Gentleman, I would say that the right hon. Gentleman to whom I propose to send this document is the Chancellor of the Exchequer, in the hope that he will take action upon it.

It really is an alarming state of affairs—I say this quite seriously—and a similar degree of privilege exists because of the anomalous and indefensible distinction between Schedule D and Schedule E expenses. The Chancellor is losing tens of millions by this too privileged system. Death duty yield is only a fraction of what it should be. Surtax rates are up by 46 per cent. compared with pre-war and, while net national money income increased threefold, the revenue from Surtax increased only from £59 million in 1938 to £130 million recently—rather more than double. There is a very serious leakage of tax revenue both on Surtax and death duties. It is a major indictment of the Chancellor's Budget that he has not tackled these problems, because I can tell him that if he had begun to tackle them there would be no question of reduction in the bread subsidy and that a great part of his attack on personal consumption would have already succeeded.

Our attack on the Government is not merely on their ways and means or devices—it is on their whole approach to the economic and social problems of the land. What we had yesterday was cynical opportunism in place of leadership, an appeal to cupidity rather than to the moral purpose of the nation. The Government offered a scramble and free-for-all in place of a common effort.

In recent weeks we have seen a welcome tendency—even on the part of Ministers—to praise Sir Stafford Cripps and to recall the appeal that he was able to make to the whole nation eight or nine years ago. This is a wonderful change. In the words of the poet: The hooting mob of yesterday in silent awe return, And glean up the scattered ashes into history's golden urn. Those who wish to have the appeal of a Cripps must have his sense of purpose and sense of moral justice.

Nearly nine years ago this nation faced economic crisis—the crisis of a community devastated by war. We lacked food, shelter and tools. There were those who called on us to consume the seed grain, to sacrifice the future to the present greed of a few. Sir Stafford Cripps stood firm. He insisted that we abstained and invested in the future. [An HON. MEMBER: "He devalued the £."] The £ might have been devalued in 1949 and I would not advise any hon. Member opposite to start crowing about exchange rates at this time. What we saw yesterday was the devaluation of an entire Government.

Now, nine years later, after four years of easier living, in easier conditions, after four years' squandering of the harvest that those measures made possible we are back again—eleven years after the war—facing the same crisis. So, nine years afterwards, the words that Sir Stafford Cripps used in winding up that memorable debate in August, 1947, are still as apposite today. They were: The quality of effort that is needed in the next few years is not such that it can be evoked by mere material considerations or by the intensification of self-interest or competitive self-seeking … It has been truly said that by our faith we can move mountains … it is by our faith in the deep spiritual values that we acknowledge, in our Christian faith, that we shall be enabled and inspired to move the present mountains of our difficulties, and so emerge into that new and fertile plain of prosperity which we shall travel in happiness only as the result of our own efforts and our own vision."—[OFFICIAL REPORT, 7th August, 1947; Vol. 441, c. 1764–6.] It is, in our view, only by such an appeal that this nation can win through. The tragedy is that this Government, by their policies, their cynicism, and their sacrifice of social justice to self-interest, have forfeited the right to make it.

4.36 p.m.

The President of the Board of Trade (Mr. Peter Thorneycroft)

We always welcome a speech by the right hon. Member for Huyton (Mr. H. Wilson), and on this occasion he did not fail us by delivering his remarks with his usual ebullience and, if I may be permitted to say so, sometimes with considerable wit.

He painted, in the concluding passage of his speech, a somewhat glowing picture of the harvest which we inherited. I am bound to say that as we looked at it in 1951 it appeared to be rather close-cropped stubble. For the rest, the right hon. Gentleman devoted a considerable part of his remarks to the record of 1955, to the social justice, or, as he thought it, injustice, of the Government's fiscal proposals and to the lack of what he called the purposeful direction of our economic affairs. I will straight away take up these points.

It is, of course, a fair point to make that in 1955 world trade expanded, and that our share of that world trade declined, although, naturally, the total volume of our exports increased. Everyone in the Committee would share the disappointment that we did not do better in those circumstances. But what the right hon. Gentleman did not say is what would have happened if we had taken the advice of the Opposition in our economic affairs.

After all, it is not the first time that our share of world trade has declined. The big decline took place when that golden harvest, as he described it, was ripening. Between 1950 and 1951 our share of world trade dropped from 25.3 per cent. to 22 per cent.—a bigger drop than in the whole of the subsequent period. Moreover, let us contemplate for one moment what would have happened if we had taken the advice of right hon. and hon. Gentlemen opposite as to the economic courses that we should pursue.

Suppose we had pursued the policy of cheaper money. Suppose we had adopted the advice given only a short time ago by right hon. and hon. Gentlemen for increased Government expenditure or reductions in taxation on tobacco, beer and petrol and in Purchase Tax. It is all very well for the right hon. Gentleman today to say, in sombre terms, that whatever the political implications, so much of our resources should not have been devoted to consumption.

That was not the language of the right hon. Gentleman in 1955. Those were not the recommendations he was making at that stage. He was recommending the various cuts in indirect taxation and, of course, supported the 6d. off the Income Tax proposed by my right hon. Friend the Lord Privy Seal. We may not have done as well as we might have done in 1955, but if hon. and right hon. Gentlemen opposite had been in charge they would have turned 1955 into a 1951.

In the concluding stages of his remarks, the right hon. Gentleman referred to something which he had really said already in an article in the Daily Herald. In that article, he criticised the Conservative Party for what he called sterile, class-conscious policies, and he pursued again today the general theme that too little was done to help the poor and that there should be a far greater distribution of income. Although I realise that arguments of that kind have been part of the common theme of the Socialist Party for a long time, they really fail to face the facts of life as they are today. The fact is that real wages and salaries today stand at 40 per cent. above what they were in 1938 and that during that period the real value of dividends has sunk by 30 per cent. That is even before taxation is taken into account.

Meanwhile, in the higher income ranges, to obtain the purchasing power of a gross income of, say, £2,000 a year in 1938 would require today £12,200; or to obtain the purchasing power of an income of £3,000 a year in 1938 would require an income of £34,600. Again, during the period of the Conservative Administration, 2½ million people, most of them wage earners of the lower income groups, have been removed from Income Tax altogether. Today, if a company wished to distribute £100,000 in profits, no less than £63,000 would be taken by the Chancellor of the Exchequer. One can argue whether that sort of policy is sense or nonsense; but at least it is not the language of the class war.

The right hon. Gentleman then attacked the Premium Bond, which, no doubt, will be debated in greater detail later. He said that we would adopt the slogan of "Honest Charlie always pays". If the right hon. Gentleman meant half of what he said about a capital gains tax, that is at least a slogan which he and his hon. Friends will not be able to adopt at the next Election.

The right hon. Gentleman dealt also with subsidies and obviously disliked the passages in the "potted" Economic Digest which showed that the increase in prices was affected only as to 1s. 6d. by changes in taxes and subsidies. He said that if the subsidies were changed, that would be an incentive to higher wages. If we took the view that wages should be a method of contracting out of the whole of an alteration in a subsidy it might justify 1s. 6d., but it would be hard to justify the full 6s. 6d. which the figures show.

Finally, the right hon. Gentleman said that the greatest wrongs were often being done in the name of incentive. That is an attitude to our economic affairs which we on this side simply cannot accept. We believe that such an attitude must lead inevitably to the stagnation of production.

The Committee will expect me to concentrate some remarks upon the commercial and industrial side of our affairs, what impact the Government measures have upon them and why, in my view, a Budget of this nature is necessary for our commercial health. I would, however, like to clear one issue out of the way to start with, because it is one upon which the right hon. Gentleman laid considerable emphasis. The issue raised by the Budget is not between a planned and an unplanned society, between having controls and having no controls—

Mr. Ellis Smith (Stoke-on-Trent, South)

That should be the issue.

Mr. Thorneycroft

—or between intervention and non-intervention. For a variety of reasons, all Governments are bound to be closely involved in our commercial scene. For one thing, they have a large public responsibility for the nationalised sector. That sector is big, costly and, for a variety of reasons, not particularly profitable. The vast task of providing new capital for it was dealt with by my right hon. Friend in his Budget speech.

In answer to the right hon. Gentleman, one sound reason for distinguishing between the methods of raising capital as between nationalised industries, on the one hand, and local authorities, on the other hand, is that local authorities, or many of them, are in a position to raise the capital on their own credit, which is not the position in the case of the nationalised industries.

Mr. Walter Monslow (Barrow-in-Furness)

What about the Post Office?

Mr. Thorneycroft

That is dealt with quite separately and in a different way from any of the other nationalised industries.

Of course, we must sink the new shafts for coal, adopt the new methods of underground haulage and provide the capital for the electricity and gas industries, but we must recognise, as the Budget recognises, that room for that capital expenditure must be found either by savings or by a substantial Budget surplus, or both.

The public responsibility for commercial policy goes much further than looking after the public sector. In this island, more than in most other countries, we shall always live, under any Government, a precarious existence and the margin between our success and failure will always be a narrow one and will hinge upon the balance on our external account. Other countries are largely self-sufficient; we are not. France, America or Russia can largely feed themselves. We are not self-sufficient in either food or raw materials. We need to export about 20 per cent. of our gross national product. For others, inflation may be a nuisance; for us, it could be an unmitigated disaster.

Such a situation must be the principal preoccupation of any Government at any time. They must use the variety—it is a large variety—of economic devices at their disposal to obtain the necessary balance in their internal and external accounts. Once this has been admitted—it is not a very novel proposition, because it has been generally accepted for a quarter of a century—the issue between control and no control largely disappears.

The question we have to ask is not whether we should influence the economy, but how we should influence it and which methods we should use. It is upon the nature of these methods that much of our discussion will turn. A policy which uses to the full the monetary, fiscal and other devices described by my right hon. Friend yesterday is certainly not a policy of drift. The truth is that credit squeeze and credit relaxation. Budget surplus and Budget deficit, and Government expenditure, whether it is increased or decreased, are all essential features of full employment in a free society. We might stop expressing surprise that they are used and concentrate upon how to use them most effectively.

It is possible to argue, as the right hon. Gentleman did this afternoon, that the controls should be very detailed and should extend to the allocation of materials and to very precise decisions—he instanced the motor industry, for example—as to which industry should expand and which should not. Indeed, from time to time we could argue how appropriate are these matters for Government decision. Hon. Members on this side of the Committee doubt the wisdom of day-to-day intervention in matters which are more appropriately the concern of business management. But none of these measures and none of these detailed controls is in any sense a substitute for the kind of measures which have been pursued by this Government and which are maintained and extended in this Budget.

The Opposition have sometimes urged the wider use of physical controls in the sense of import restrictions and the like. It is an elementary principle in the use of physical controls of that kind—I speak as a member of a Government which has, after all, used physical controls—that you cannot use such restrictions against the main tide of economy. You cannot restrict consumption while pumping new pressures of demand into the system. If physical controls are to be used, at least we should have the prudence to take other measures to swing the tide in our favour and operate with it rather than against it. In doing so, we may well find that the need for using the physical control will disappear altogether.

Another matter upon which I think we might agree is that if Governments are to use the powerful weapons of budgetary and monetary control, with all the impact that they have on levels of demand, consumption and investment, they must be ever more accurately informed about the trends of industrial activity. With the very best statistics and forecasts it is not easy to judge what we are judging—the trend of future human behaviour. But we must have the very best information that we can get.

During the past few years there has been a very considerable advance in this field. I remember a time when there was constant pressure to reduce or eliminate the requests for statistical information.

Mr. Ellis Smith

From the right hon. Gentleman's own side.

Mr. Thorneycroft

From many quarters.

It was claimed that the information was irrelevant and out of date. This attitude of mind has very largely changed and not a little thanks is due to the report of the Committee which sat under Sir Reginald Verdon Smith, comprising a number of eminent industrialists, which examined the censuses of production and distribution and set out why they were essential to the work of Government and administration. Indeed, it is upon these particular statistical examinations, some of which are and must necessarily be out of date in the strict sense of the term, that all the up-to-date statistics, such as the index of production and the like are judged and worked out.

Five years ago our information on these matters was, in my judgment, insufficient. But with the willing co-operation of industry we have been helped to fill the gaps. The trend of expenditure on fixed capital investment, for example, is now available, and information about changes in stocks and work in progress; and new figures will, as the right hon. Gentleman knows, shortly be published on the important subject of hire purchase.

But the need in the future will be, if anything, to get more information and not less. I would say to all interested in this subject that we are not inquisitive just from the point of view of seeking to find out figures for some vague purpose of our own. We ask for these things, because we believe it essential in the interests of good government that full facts and figures should be available. I welcome the co-operation which industry is showing in these matters and the suggestions which have been made for increasing still further the fund of information upon these topics which will be made available to the Government.

Mr. Frederick Lee (Newton)

The right hon. Gentleman will be expelled!

Mr. Thorneycroft

I wish to devote a few moments to the economic situation as we see it and the effect of the measures to be taken under this Budget. The first thing that may be said about our economic situation is that it remains one of almost unexampled prosperity. If for a moment we forget the statistics about which I have been talking—I shall return to them in a moment—and the indices of our overseas account, and judge the situation by the prosperity we see about us in almost every quarter, I do not think that there would be much lack of general satisfaction. Employment is booming. There is a job, indeed rather more than a job for everyone. Wages are up—

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

The right hon. Gentleman's figures are out of date.

Mr. Thorneycroft

They are up to date to this minute. I repeat that there is rather more than a job for everybody.

Mr. William Ross (Kilmarnock)

In England.

Mr. Thorneycroft

Wages are up, and who will deny that high wages are a pleasant thing? Indeed, the economy of this country is, and will remain, a high wage economy.

Not only wages, but social advances have been made in recent years in which we can all take a delight. We can all take pride in the number of new houses which have been built, and my right hon. Friend the Chancellor of the Exchequer played some part in that in the days when he was a "poacher" rather than a "gamekeeper." Not only the houses which have been built, but the number of things which are in those houses—the new automatic washing machines, television sets and refrigerators which have been put into them over the past few years. Whatever else we say, this is not a picture of a nation sunk in the depths of an economic crisis. It is a picture which, at first sight, is one of exuberant prosperity.

However, there are two problems which mar the beauty of that scene. First, the suspicion for which, alas, there is statistical support, that we have been expanding faster, at any rate a little faster, than our real resources will permit. Secondly, there is a section of the community, that rather ill-defined but still recognisable section, which is called the middle-classes, which has not shared in this increased prosperity—indeed, rather the reverse—and has certainly suffered as much, perhaps more, than other classes by the process of inflation.

The difficulty confronting us here is very obvious. It is the fact that we cannot do a lot to solve the second problem of how to help the middle classes until we have solved, or gone a long way towards solving, the first problem of how to deal with the inflation. The middle classes do not live on the sale of capital. Few have much capital left. If any have a few savings left, they readily sell them to support the education of their children. The increase in the value of wages and salaries to which I referred earlier—40 per cent. in real value since 1938—has passed them by, particularly after taxation has taken its toll. The real value of any dividends they receive, has savagely declined, even before taxation. Those who live on small, fixed incomes have, like others in that class, been hard hit by rising prices.

Historically, these people have been associated with thrift and independence. Many have preferred—irrespective of their political opinions, because they fall into all sorts of political opinions—to make their own provision for the future rather than to rely upon State organised arrangements. They miss, in the main, the capital appreciation which goes with inflation or the increased earnings associated with membership of powerful trade unions. Yet it is to this central section of the community to whom we must look in the future, as in the past, for the main contribution towards solving many of our problems. They provide, in large measure, the leaders, the managers, the creators, the technicians, the scientists and the teachers. The solution to their problem is a long-term process. It starts when encouragement to savings can be fortified by incentives to skill and effort.

The proposals which we are considering here make a contribution—albeit a modest one—in direct measures to help in the field of Income Tax allowances for pension schemes for the self-employed. But in another sense the whole Budget and the measures which preceded it—calculated to restrain inflation and encourage savings—directly serve the interests of our middle classes. It is rising prices and the other consequences of inflation which strike with particular harshness at this sector, and the greatest help which can be given to the holder of a small fixed income—the pensioner, the saver and the professional man or woman—is to contain the inflation which threatens us. This is the object of the measures which have been taken not only here, but in recent months.

I want to say a few words about the effect of those measures. It is relevant to our discussion to see how far they are working and how far they may be expected to work in future. In judging the effect of Government policy, it is necessary to make clear what is required. To attain our objective it is not necessary to force a sharp reversal in industrial activity as a whole. It is necessary to moderate or, at times, to halt the increase in demand so that it does not outpace our available resources or leave no room for an increase in exports. Our wealth is our production per head of population. Between 1946 and 1955 we increased production by 30 per cent., and we are that much better off. But we paid ourselves 90 per cent. more money for doing it, and that did not increase our real wealth. It simply meant that prices moved upwards and the pressure upon our resources began to become intolerable.

The latest situation appears to be as follows: so far, clearly, there can have been no dramatic consequences following the measures of last February. Certainly, there are no signs of the development of the dangerous deflationary conditions which have sometimes been supposed to have occurred. There is some evidence of a halt or postponement of private industrial development, in a few cases. There are indications of a more cautious attitude on the part of industry. The very rapid rise in expenditure upon cars and other durable goods has come to an end and, in some cases, given way to an actual but perhaps temporary fall.

At the end of February, for the first time for at least 16 months, order books of steel companies showed a slight falling off. That is important, because they are a reliable indicator in this field. In the first quarter of 1956 there is some sign that consumer expenditure at constant prices has steadied. There is some easing in the labour situation, and a few more vacancies are being filled, but as yet there is no sign of a marked switch into industries which are particularly short of labour. The hire-purchase figures dealing with household goods, which will be published shortly, will show that since October, month by month there has been a steady fall. But I would warn the Committee that October, for various reasons, was an artificially high month, and that that fact should be taken into account in judging these figures.

In the case of motor cars, short time working has decreased to about 7 per cent. and there has been some decline in car production. In most regions there has been a noticeable increase in the inquiries to our regional controllers about export possibilities in various markets, which indicates a possible fairly widespread interest in the need to take up any slack at home in increased exports, which, after all, is the purpose of the measures we have adopted.

To sum up, there is no case whatsoever for dropping or mitigating the measures which we have introduced. It is our belief that they are beginning to work, and we intend that they should do so. If men are to change from one job to another there must at some stage be some redundancy somewhere, and we should not be shocked at our own success in this aspect of economic policy. In truth, long delivery dates are still a large—perhaps the largest—problem for the British export trade, and the men and materials must be made available for them.

This brings me to the question of exports. The test of policy must be seen, to a substantial extent, in its effect upon our external balance and, in particular, upon our exports. No one who studies the figures could doubt the need for the measures which we have adopted to discourage imports and encourage exports. In favourable trading conditions, what was probably a real increase in volume of 4 or 5 per cent. in 1955 over 1954 was insufficient to pay for our increased imports, and, as the right hon. Gentleman very fairly said, must be judged against a fall in the proportion of world trade.

The trade was there to be got. We failed, for a number of reasons, to get it. When one has examined all the reasons—and there are some quite good ones—and has admitted the advantages which others enjoyed; for example, the limited defence expenditure by Germany, and the fact that some who did better started at a lower level—

Mr. J. T. Price (Westhoughton)

Would the Minister care to devote a few sentences to dealing with the effect of the Ottawa Agreement upon Indian com- mercial arrangements with this country, which are throwing Lancashire into confusion and despair at this moment. Will he deal with that point in his speech?

Mr. Thorneycroft

I will deal with it straight away, and couple it with what the right hon. Gentleman said about our Commonwealth trade.

Broadly speaking, our whole policy in relation to our Commonwealth trade is based upon the Ottawa arrangements, and those arrangements are pursued in full agreement with all members of the Commonwealth. I am glad that the hon. Member mentioned this matter because it would be right to say that we should hesitate for a very long time before we upset trading arrangements so mutually advantageous to all sections of the Commonwealth, and, not least, to the United Kingdom.

When one has examined all these matters, one sees that the decline in the proportion of world trade was still to some extent due to a lack of competitive strength. The reasons can be debated, but it is not irrelevant to note that the gap between what we paid ourselves and what we produced appears wider than is the case with most of our competitors. As a community, we tried to take out rather more than we were prepared to put in.

What has happened in the first quarter of 1956 does not provide too bad a picture. I do not want to put too much weight upon a few months' trading figures—I think that the right hon. Gentleman will agree that I have always been as cautious about that as he has—but exports have continued on a rising trend and imports have steadied. Exports of some goods, such as electrical apparatus, aircraft and commercial vehicles, have shown very encouraging increases, but textiles, especially cotton textiles, have declined. There has been an impressive increase in exports to the dollar area and the Middle East, but we did not take advantage of the expanding markets of Western Europe, and our export increases in the main—perhaps very healthily—have been to the non-sterling area.

The trade gap has sunk from £74 million in January to £50 million in February and £46 million in March, but we must undoubtedly do still better if we are to cure the situation which confronts us.

Mr. H. Wilson

I am not sure from the figures which the Minister is giving us whether he is indicating that he now has available to him the March details of individual trade figures. If he has, will he say whether he does not feel that it is possible that imports have to some extent been artificially reduced by the dock strike in Australia, and other strikes in Finland and Denmark? Is it not a fact that steel imports for February and March have been reduced by about £10 million because of these strikes?

Mr. Thorneycroft

Of course, a number of factors are operating both ways on these figures, as nearly always. That is why I said at the outset, "Do not let us draw too big deductions from three months' trading figures". One can fairly say that it is the trend that matters; and it appears to be in the right direction. I am sure that hon. and right hon. Gentlemen on both sides of the Committee, whatever our differences on other matters, are hopeful that the trend will continue in the same direction.

I might, therefore, summarise the position as follows: substantial prosperity at home, but a prosperity which contains within it a number of partly hidden dangers; expanding exports, but not expanding fast enough to maintain or extend our share of world trade or to pay for our necessary imports; signs that the measures taken by the Government are already beginning to work, coupled with a trade gap of rather healthier proportions; no sign yet of anything like the savage deflation which has always been threatened if we took any satisfactory measures to deal with inflation; recognition that the investment which is needed at home and abroad and in the public and private sectors of the economy is only possible if room is made for it by the necessary savings.

These considerations appear to be the overwhelming justification for the budgetary or other proposals recently taken by my right hon. Friend the Chancellor of the Exchequer. Savings by the people are encouraged in a number of sometimes novel ways and savings by the Government are proposed to the extent of £100 million. A substantial Budget surplus is provided and is fortified by new direct and indirect taxation This is, in my submission, a solid and imaginative Budget. It is designed to do a solid job in securing our external balance and it deserves, and I hope it will receive, the support of the Committee.

5.13 p.m.

Mr. F. H. Hayman (Falmouth and Camborne)

The President of the Board of Trade will hardly expect me to follow him into all the intricacies of the statistics he has presented, but I would take him up on a statement at the beginning of his speech when he spoke about the "harvest we inherited".

He claimed that our share of world trade had fallen from 25 per cent. to 22½ per cent. in 1950–51. Surely the right hon. Gentleman knows by this time that the Korean war broke out in June, 1950, and continued right through 1950–51 and 1951–52, and that it was responsible for a huge increase in the world prices of staple commodities in those years; so much so that many of us are inclined to consider very carefully indeed whether we ought to support again an intervention of that kind. We thought it was desirable in 1950 and 1951 in Korea, but it was a terrible price to pay.

The right hon. Gentleman ought to know, and indeed does know, that the productive effort of this country was diverted in those years to rearmament. He knows, too, that the countries whom we were fighting during the war were by then beginning to become our competitors in world markets again.

I regard the refusal of the Chancellor of the Exchequer to give the tobacco concession to old-age pensioners as contemptible treatment of the old-age pensioners, especially now that the remainder of the bread subsidy is to be removed. I understand that the standard 1¾ 1b. loaf will go up to 10d., the highest price ever known in Britain for a loaf of that weight. That increase will hit the lower ranges of incomes particularly hard, especially where there are dependants. The Budget will not help millions of people who are still below the poverty line.

The Chancellor of the Exchequer has made a further concession in family allowances. He told us that the Budget was directed to savings; I would refer to a case which I handled recently in which a small professional man accumulated family allowances for more than six months in order to help to pay for his family's holiday only to find that owing to the expiry of that period he lost the whole of those savings. I hope that the Chancellor will take this point into consideration, because there are many people who might reasonably feel that this, too, was a form of savings which the Government should recognise.

On post-war credits, may I ask the Government what has happened to the resolution passed at the Conservative Conference, two or three years ago, that the post-war credit situation should be finally cleared up? I addressed a Question to the Chancellor a week or two ago on whether he would agree to pay post-war credits to disabled people at the age of 55, but the Financial Secretary gave the stereotyped reply that I must wait for the Budget. There is nothing about it in the Budget.

I said then that I had received letters on this subject from two of my constituents. One of them, who suffered from silicosis, is now dead. Surely the Government can do something about repaying post-war credits to disabled people, both ex-Service men and civilians, very much earlier than they are doing now. If they accepted my suggestion of the age of 55 it would not cost them very much.

I find that the cost of the Ministry of Pensions in the coming year will be half a million pounds less than it was last year, when it cost £88 million. This is a cost harder than any of the other Ministries. The Ministry is governed by experts who seem to be dehumanised. They look at everything from such an expert point of view when assessing the percentage of disability that their calculations have become incomprehensible to the ordinary person.

Mr. James Simmons (Brierley Hill)

Does my hon. Friend refer to the Ministry of Pensions or to the War Pensions Department of the Ministry of Insurance? At what time did this tendency become apparent?

Mr. Hayman

It is nearly five years since we have had a Labour Government. I am speaking of the Ministry of Pensions as I find it today. I hope that we shall consider very carefully not only the experts who advise the Minister of Pensions but experts in any other field, who ought to use common sense and sympathy sometimes. In one case two men who had contracted disability partly as the result of war service died. One of them, who was in the 1914–18 war, had a disability pension for injuries to his legs. He lost both legs, and still only got a 30 per cent. pension.

I believe that the Government suffered a defeat on the Industrial Rating Bill in Standing Committee this morning. I hope that the Bill will be carried through to the end and will become an Act of Parliament. Many of us feel that industry is not paying its fair share of the commitments of local authorities. Four industries in the area of one urban district council in my constituency were rated previously at £6,000. Under the new system they would pay on £13,000, which is one quarter of the total value of £52,000. At a rate of 18s. in the £, the advantage to the local authority if the Industrial Rating Bill became law would be not less than £35,000, or the equivalent of a 3d. rate.

My right hon. Friend the Member for Huyton (Mr. H. Wilson) has referred to the effect upon the Chancellor of Sir Bernard Docker's campaign. The Chancellor had the audacity to say to the Committee yesterday in an off-hand way that he expected to save £100 million. He knows perfectly well that that cannot be done. The right hon. Gentleman has either supported estimates which were grossly inflated or, if he proposes to save £100 million with the price of goods rising as we have seen announced in the newspapers today, there will have to be severe cuts somewhere, particularly since £50 million will have to be found outside the figures in the Budget to pay for our forces in Germany.

The Chancellor referred yesterday to oil companies. He was speaking of the balance of payments when he said: It is true that much of the fall in the invisible surplus was due to exceptional circumstances, such as the sudden expansion of oil companies' expenditure. All the same, the position as a whole is disappointing and unsatisfactory."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 851.] All of us will agree that the position of the balance of payments is unsatisfactory.

I hope that the Chancellor will do something about the oil companies, because they are pursuing a policy of expansion into the distributive trade of the oil industry which seems very near monopolistic practice. There seems to be an excessive number of petrol stations, there is a waste of land on which they are built, and they add to the dangers on the road. The oil companies seek to crush the independence of many small business people. They are worse than Shylock.

The Budget does very little for agriculture, and in the South-West of England, as the Minister of Agriculture knows, the farmers are in deep revolt. I feel that the agricultural industry is being sacrificed at the present time.

The interest on and management of the National Debt this year will cost £670 million, that is £70 million more than last year and no less than £200 million more than in the last complete year of the Labour Government, 1950–51. We are now paying nearly £13 million a week interest on the National Debt. How the party opposite spoke out about the £30 million lost on the Groundnuts Scheme! Here is a loss of £200 million, and apparently a recurring expenditure. It is expenditure for unproductive purposes. It is an example of the Government's folly since it came into office in 1951.

This is not the full story. The local authorities are paying immensely greater sums in the service of their debts, and the owner-occupiers, for whom the Government appear to think they alone stand, are paying inordinately increased sums in mortgage interest. The Chancellor's speech was stale, flat and unprofitable.

Mr. Douglas Marshall (Bodmin)

At the beginning of his speech the hon. Member mentioned that he thought he and certain other hon. Members might not, given the same conditions today, have supported the United Nations decision with regard to Korea. Did I get that correctly? Was that what he meant to say?

Mr. Hayman

In considering a problem of that sort coming before the House today, I should have to consider it in the light of the experience of this country during 1950–51, which has been exploited so much by the Conservative Party.

5.25 p.m.

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

We have had a very controversial speech from the hon. Member for Falmouth and Camborne (Mr. Hayman), which made one or two party points, but I think that there would be general agreement on both sides of the Committee that today the Government must be responsible for the condition of the economy of the country to a degree that was quite unknown before the war.

The difference, as I see it, between the two sides of the Committee is that hon. Members opposite think that the State ought to plan what we make and where we make it, whereas we on this side of the Committee believe that no Government in this country can be so infallible in its judgment as to be able to protect demand sufficiently to plan production without disaster. In a totalitarian State, of course, where labour can be directed and consumption controlled, it is easy to do it. But I am sure that on this side of the Committee we agree that it is the responsibility of Government to maintain the economy of the country in a condition in which there is neither disastrous inflation nor serious unemployment.

We think that it should be done by an overall plan to give a proper balance between the national money income of the country and the real resources of the country. The policy of this Government, and indeed of their predecessors, has been to maintain a very high demand indeed for goods. That has had two great advantages. We have had 99 per cent. employment, and there has been an incentive to industry to install labour saving devices and to modernise machinery. The disadvantage is that if the economy of the country is run at such a high speed, it is very vulnerable to any unforeseen or perhaps unforeseeable changes of even quite a small order.

The right hon. Member for Huyton (Mr. H. Wilson) appeared to think—or I suppose that it was his job to say—that the country was in a disastrous state due to the blunders of this Government, but in fact, in the present situation, the Government have not made any major miscalculation on production or on consumption. They have, as I think with the approval of the whole House, done all they could to encourage industrial investment. But I think that it is fair to say that they had not foreseen the rapidity with which that expansion would take place. To put it in other words, the Government have not quite foreseen the extent to which industrialists would recover confidence as a result of the Election. There is no doubt that there are conditions of inflation today, which means there is an excess of demand over supply.

Mr. Ede (South Shields)

Is the hon. Gentleman trying to say that the Government did not expect the industrialists to take them at their face value?

Mr. Spearman

No, what I am saying is that they confidently expected an expansion in industrial investment but that the rate at which it has taken place has taken most people by surprise. I think that no Government need to be very worried about making that miscalculation.

When I was interrupted I was trying to say that excessive demand today has led to an increase in wages, which, of course, is good in itself, provided that it is not in excess of the increase in production. In fact, wages have been going up far more than production. Hon. Gentlemen opposite often tell us that this is due to the increase in the cost of living, but I believe that a far more important factor than that is the fact that employers know that when demand is so great they can always put an increase in wages on to their prices, and therefore give increases in wages when they are not justified.

But there is another serious disadvantage in this excessive demand, and it is that manufacturers find selling at home so much easier than selling abroad and are not striving all they can to export. The result of this could, I believe, lead to unemployment and to shortages far more serious than any we have had before the war. It is the prime task of Government to get a measure of stability into prices and to take advantage of the present world situation, which may not last forever, to build up our reserves from their present perilously low level. If they are to do that, then I think it is clear that there either has to be a cut in industrial investment, which would be damaging in the future; a cut in consumption, and, with the present distribution of income in this country, this must hit not the few rich, but the masses; or, a cut in national and local government expenditure. I think that clearly the last is by far the most agreeable, and if it is practical it is by far the best.

I therefore thought that the most important part of the statement of my right hon. Friend the Chancellor yesterday was his announcement that, although the Estimates had been passed, the Government are going to review expenditure, and that, in that review, they would include military expenditure. After all, Government expenditure takes about one-third of the national income of the country, and military expenditure takes about one-third of Government expenditure. Moreover, if there could be cuts in military expenditure, it would release the forces that are most urgently required—scientists, engineering skill, machine tools and steel. Therefore, I am particularly glad that my right hon. Friend expressed confidence yesterday that such economies could be made in this direction.

I think I could say that everyone in this House, even the hon. Member for South Ayrshire (Mr. Emrys Hughes), would agree that if the strength of the Armed Forces does prevent war, it is a good thing. I suppose most of us on both sides of this Committee, though not the hon. Member for South Ayrshire, would agree that a degree of armed strength in the West makes war less likely. Therefore, as I see it, the question we have to ask ourselves is whether it would be possible to get the same strength with less money.

I think it is rather a surprising thing that, with these revolutionary weapons that are now being made, the different Service Departments should still be taking something approaching an equal slice of the amount of money allocated to defence. Is my right hon. Friend really satisfied that a stern Minister of Defence has ruthlessly allocated priorities according to a plan made by the Cabinet and not too much influenced by the Service Chiefs? I do not think that suspicions were entirely allayed in the Estimates Debates that something of this sort is what sometimes happens; different Departments put forward demands for equal slices, and a compromise is effected.

In the White Paper on Defence, it is stated: The forces required to support our present strategy must make a contribution to the allied deterrents commensurate with our standing as a World Power. The leading article in The Times of 9th March commented on this by saying: This means, if words have any meaning, that the criterion for our contribution is to be British prestige rather than military necessity. For a very long time, our wealth in this country was much greater than that of other countries. Our bankers financed a large part of the world, our industrialists equipped a large part of the world, and our Navy maintained the peace by controlling the seas. Our Navy can no longer do that, because other things than ships can cross the sea. Our national income today is so different that we cannot carry out these projects. The national income of this country is about £16,000 million. The national income of the United States of America is £107,000 million, about seven times as much, and the increases in that country are going up far faster than here. I do not know what the national income of the Soviet Union is, but I would guess that it is of the order of three times our own.

Under these circumstances, it seems to me that, disagreeable though it may be, we have to face the fact that we are no longer able to produce a large range of modern weapons, comparable to those of the two other countries; to try to do that in order to maintain prestige seems to me to be just about as sensible as it would be for a man to try to get prestige by buying for himself a house far beyond his means and going bust in the process.

I am hoping that perhaps this review of civil and military expenditure which has been promised by the Chancellor may come to the conclusion that what we want to do is, first of all, to provide forces for the carrying out of the sort of police operations which this country must do on its own; and, secondly, to make that contribution to the combined defence of the West which could be considered to be our fair share by the other countries. Quite clearly, America must bear the chief burden, but she cannot be expected to carry it alone. If that were done, the cost to this country could be considerably less than £1,500 million a year. Then it would be clearly possible for us to increase our industrial investment, and then we could reduce taxation and so increase incentives, and thereby production.

What would be the price? It would be said that we should then be dependent in a major war on the United States. Surely we are that in any case. Who can imagine that we could wage a major war without the United States, or that if a major war occurred we could keep out of it? It might be said that we should have less influence to deflect the United States from a policy with which we did not agree. How could the fact that we had five or six guided missiles to every hundred that the United States has possibly divert her from the course she wished to take?

I should have thought that if we could have had a real division of labour between the United States and this country, and if we could specialise on a smaller range of production, then indeed we might be able to importantly supplement, instead of rather vainly duplicating, the production of the United States. The result of that might well be that at a smaller cost we should make a bigger contribution to the combined strength, and, by so doing, have a greater influence on United States policy. It is my belief that if we are to avoid inflation or a really crippling taxation we have just got to co-operate much more closely with the United States in the production of weapons.

I should, very diffidently, like to make this suggestion. The summer of 1956 may well not be the appropriate time, but would it not be possible later on for the Minister of Defence to go to Washington for several months with the object of arranging a partnership in the production of weapons which would be so close that each country would be much more concerned with the combined result than with its own individual contribution?

It is a disagreeable fact to face that our national income and, therefore, our resources are so much smaller in relation to other countries than they used to be. But, as that is a fact, the sooner we act accordingly and try to co-operate not merely as independent allies, but as close partners with the United States, the greater opportunity there will be for us to build up a strong defence against war.

5.44 p.m.

Mr. C. R. Hobson (Keighley)

I find myself very much in agreement with what has been said by the hon. Member for Scarborough and Whitby (Mr. Spearman) vis-à-vis disarmament, particularly with regard to the multiplicity of types of missiles which are in production among the North Atlantic Treaty Organisation Powers. On the other hand, my comments in that direction would have to be balanced against the obvious need in any successful British policy to have strength in order to acquire elbow-room between the two giants, the U.S.S.R. and the U.S.A. We must have strength if we are to have any influence in either of those camps.

I was particularly interested in the speech of the President of the Board of Trade. As usual, in his opening remarks he thoroughly enjoyed himself. The metaphors rolled from his tongue. He has not yet stepped up into equal rank with the Chancellor of the Exchequer, but in view of the close association that there will inevitably be between the two right hon. Gentlemen he is certainly au premier rang.

The right hon. Gentleman referred to the harvest of stubble that had been gleaned by the present Government when they assumed power. He knows that not to be true. What took place in the field of reconstruction in very difficult circumstances under the admirable leadership of the late Sir Stafford Cripps, my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) and the late Mr. Ernest Bevin was stupendous. About 38 new power stations were built. For the first time in our history, I believe, we had sufficient oil refinery equipment. There was the increase in the number of gas works. Development took place not only in the national sphere of our economy but also in private enterprise, and it was terrific. Having regard to the difficult circumstances at the end of the war, we did a fine job. The harvest that he reaped was one of real value to the present Government.

The Government are in a dilemma because they are trying to maintain full employment in a free economy without Government controls and the direction of scarce raw materials, and at the same time they are trying to curb inflation and to ensure that the balance of payments situation is not aggravated and developed in such a way as ultimately to make us bankrupt or more and more dependent on American charity and colonial "tick."

My view is that the Government cannot possibly bring this country out of its present difficulties without reimposing more physical controls and ensuring direction of essential raw materials. What have the Government actions been up to date? Their chief actions have been to use the financial weapon, namely, the increase in the Bank Rate. The Bank Rate at present stands at an almost all-time high of 5½ per cent. What has been the effect of this?

Mr. Spearman

What physical controls is the hon. Gentleman suggesting?

Mr. Hobson

If the hon. Gentleman will wait, he will find that I shall suggest a number. One is direction of steel, particularly in regard to shipbuilding.

Take the floating debt, the figure for which is £5,109 million. The interest rate at April, 1955, was 3¾ per cent. In October, 1951, it was ½ per cent. Thus, there was a Budget burden of no less than 3¼ per cent. in interest rates, making the total cost to the British Treasury £165 million, equivalent to an Income Tax rate of 7d. Is not that in itself inflationary in that it has the effect of making people pay more for essential loans? Not only local government is affected. Not only are the nationalised industries affected. The private sector of industry is also affected by these high interest rates.

Is there an alternative? If there was no alternative, there might be reason for the Government's action, but there is the alternative of having very rigid controls of investment at a low rate of interest. That would inevitably save thousands of pounds, not only to the Exchequer but on commodity prices. It has already been stated by the electricity and gas boards that as a direct result of the dear money policy the price per unit and per therm has had to be increased. It is something which ought to be stopped.

The Government are pursuing this policy purely and simply because of their doctrinaire approach to the problem. With the country in its present position, both parties would be well advised to put doctrine on one side and put to the test their ideas in relation to the needs of the country. What has been the Government's action on price stabilisation? With all respect to hon. Gentlemen opposite, it has been nil. The subsidies have been cut, and there have been increases in food prices as a result. That has only added to an increase in the level of the cost of living. It has led the trade anions, quite rightly, in defence of the interests of their members, to pursue a policy of increased wage demands. As all trade unionists know, the fact is that wages rise after prices and in the time-lag between the two, as we used to say in the old days, the bosses recoup themselves to a certain extent.

If hon. Members opposite are looking for subsidies to cut, I suggest the farm subsidies. I am not against the 1947 Act—in fact, I have a number of farmers in my constituency who, regrettably, do not all vote for me—but surely it is wrong to pay the same subsidies to somebody farming, say, 1,000 acres in the Isle of Ely, in Cambridgeshire, as we pay to somebody who is farming on the less rich soil in parts of Yorkshire. Surely there should be a change of method in the allocation of subsidies to farmers.

Major H. Legge-Bourke (Isle of Ely)

The hon. Member has referred to my constituency. Surely he will not forget that my county has as many smallholders as any other county in England.

Mr. Hobson

I am sure that that is true. I do not quote the words of my hon. Friend the Member for Wednesbury (Mr. S. N. Evans) and suggest that they are featherbedded, but in my opinion they are doing very well indeed. The hon. and gallant Member only proves my point, for the farmers on the rich soil of the Isle of Ely, in Cambridgeshire, are doing far better than those in the West Riding of Yorkshire, for whom the subsidy is the same. I am asking for a change in the method of the subsidy.

What about the subsidies for the aviation industry? Regrettable though their failure with the Comet has been, I was appalled to read that de Havillands are in the position in one year, without the production of any new aircraft, of being able to pay a considerable dividend. This is something which must be looked at closely by the Minister of Supply.

To what extent is subsidy being paid to the manufacturers of the Viscount? There might be justification for subsidy when a prototype or new military aircraft is being developed, but when much of the research for this industry is done with the help of the R.A.E., at Farnborough, continued subsidy by the Government puts the industry in a very different category to other industries.

The Chancellor of the Exchequer and hon. Members opposite speak as though the balance of payments problem is something new. Of course, it is nothing of the kind. In referring to the figures for 1938–39, which was a very good year indeed, we find that imports amounted to £835 million and exports £533 million, representing a deficit of £302 million, of which invisibles accounted for £294 million, leaving a net deficit of £8 million. That was the story for many years before the war. Indeed, from 1931 to the outbreak of war, taking the whole of the balance of payments, there was a net deficit of no less than £127 million. The reason we were not then in need of American aid was that we had the gold and securities to sell to balance our accounts.

The President of the Board of Trade will, I am sure, agree that it is equally important to expand our invisible exports. We had grim news yesterday concerning oil, on which there is to be an expenditure of £148 million. One can only hope that this expenditure results in the production of further oil which can be sold in dollar areas. Once more, I must pay tribute to the previous Government, for whereas, before the war, we were not in a position to refine our oil, as a result of the building of wharves and refineries we are now able to effect a saving in dollars by refining the oil at home instead of in dollar countries.

The greatest potential development of our invisible exports lies in shipping. I was sorry to hear the Chancellor say yesterday that last year we had to hire more ships which were not flying the British flag. The fact is that we have not yet recovered our former position in the number of ships of over 1,600 tons. In 1939 the number of these ships was 13,079, whereas today it is 12,392. This, therefore, is an industry which should be developed.

Further tax concessions should be given to the owners of ships with a view to the replacement of older vessels I would impose that condition for two reasons: first, so that the ships produced were competitive, and, secondly, in case it should happen, which I hope it will not, that we are faced with another war. It is necessary to have a cargo fleet which is capable of moving quickly. We know that during the last war it was the ships with the higher speeds which often escaped the torpedoes. There must, therefore, be the allocation of capital to the shipping industry. There are two sound economic reasons for this. The first is that we can build ships and sail them like no other country, and the second is to ensure that we have a modern and up-to-date fleet to save foreign currency.

That brings me to the intervention by the hon. Member for Scarborough and Whitby concerning controls and the allocation of materials. I suggest that a definite case has been made for the allocation of steel. Hon. Members on both sides have refereed at various times to the shortage of steel for shipbuilding. A case certainly has been proved for the allocation of steelplate—and British steel-plate at that—to the shipyards, because our steel is cheaper than any other. When visiting the Ruhr, some weeks ago, I was interested to notice that 7,000 tons of steel plate for shipbuilding was being made there for Canada.

I am one who believes that there should be direction of materials and capital in the interests of the British economy. As far as the other invisible exports are concerned, notably insurance and banking, I would suggest that companies who succeed in obtaining business in hard currency areas should be given tax concessions.

It is of interest to note that in 1914 four-fifths of the cost of our food was covered by our invisible exports. In 1951, however, the cost of importing our food was over £1,000 million. One of the quickest ways in which we can improve our balance of payments, therefore, is by an expansion of our invisible exports on the lines I have indicated.

On the overall position of exports, I was largely in agreement with the suggestion made yesterday by my hon. Friend the Member for Stockton-on-Tees (Mr. Chetwynd) that manufacturers who succeed in exporting their motor cars to foreign countries should be allowed to sell some of their products on the home market with a reduced rate of Purchase Tax. I believe that that is a feasible scheme to work out.

In a general plan for exports we have to concentrate on those goods which we make better than any other country in the world, including electrical apparatus from turbines to electronics, ships, and the products of heavy engineering. Among the textile industries, wool is the one which ought to receive attention, but any capital allocation to the woollen textile manufacturers should be made only on condition that those manufacturers undertake the necessary steps to modernise their plants.

I view the national lottery with disdain. It has been referred to as sordid and squalid. I have too high an appreciation of the quality and dignity of this great country of ours to think that it cannot get out of its difficulties without running a lottery. The Government are reducing the country to the level of a South American Republic. In saying this I do not speak as one with an attenuated Nonconformist conscience, who thinks that raffles are wrong and that one ought not to buy a raffle ticket, but when the Government undertake this sort of thing I find it difficult adequately to express my indignation. The Government started on the slippery slope of betting when they gave us prior information that they were considering the installation of betting shops. I suppose it naturally follows that they should engage in some form of national lottery.

Of course, I agree that savings are necessary. I am sure that if proper appeals were made the savings would be forthcoming, but it is no good hon. and right hon. Gentlemen opposite asking their constituents to save when people know that 20s. in 1956 will be worth only 18s. in 1957. People will not save in those conditions. If there is a difference of only 1s. in the purchasing power of the £, in other words, a 5 per cent. rise in the cost of living, people will not save. If this continues it will mean that a person beginning to save at the age of 40 will find every £100 he saves by the time he is 60 worth precisely nothing. Therefore, if the Government want people to take the savings campaign really seriously they must take the necessary steps to avoid inflation. They will not do that by their laissez-faire policy. It can be done only by the acceptance of some physical controls and the direction of raw materials.

On both sides of the Committee we agree that we must have increased production. No country owes this country a living. We must earn it ourselves. We shall not get increased production unless we ensure that the workers in industry get a fair crack of the whip. At the present time they see unlimited rises of profits and dividends, with increasing prices, and the future of their employment suffers a malaise. If we tell the workers the economic facts, and given a Government who will ensure a fair distribution of the national income, the workers will give us not only a 2 per cent. increase in production, but a 4 per cent., a 5 per cent. or a 7 per cent. increase in production. They will not do so as long as we have the economic policy which has been characteristic of hon. and right hon. Members opposite since they came to office.

6.5 p.m.

Mr. Geoffrey Stevens (Portsmouth, Langstone)

I am not a betting type. Whether that is a virtue or not, I do not know. Despite that, I disagree with the hon. Member for Keighley (Mr. Hobson), in that I very much like the Chancellor's proposals for Premium Bonds. It is quite ridiculous to bury one's head in the sand like an ostrich and pretend there is no such thing as a gambling instinct amongst the people of this country. Since tens of millions of pounds go to Little-woods and other pools—and I see no harm in it—it seems to me to be sound to take advantage of that natural instinct of gambling for the benefit of the Treasury. It cannot do any harm, and it may do good.

I am glad to have this opportunity so early in this debate on the Budget of saying that, with three reservations, I like the Budget, and that I am going to give it my vigorous support. There are two major factors in the inflation from which we have suffered since the war. The first is insufficient saving, and the second is excessive Government expenditure. The Chancellor has tackled both those problems boldly.

The right hon. Member for Leeds, South (Mr. Gaitskell), the Leader of the Opposition, in his brief and valedictory remarks yesterday, chided my right hon. Friend with not having reviewed 1955. I think the President of the Board of Trade dealt fairly fully with 1955 in his remarks today, and I do not want to add to that except to point out once again that in 1955 most of the people of this country enjoyed the highest standard of living in our history. That fact—and it is a fact—is a tribute to the financial policies pursued for four years by the Lord Privy Seal when he was Chancellor of the Exchequer.

The right hon. Member for Huyton (Mr. G. Wilson) did not seem to agree with that. He wrote an article which was published in the Daily Herald yesterday, and I want to quote from it. I shall quote the paragraph so that I may not be accused of taking words out of their context. He said: For over four years we have seen the Tory Government fritter away the solid gains that resulted from Socialist policies after the war. Just for a moment I want to look at some of those solid gains.

In that statement is the suggestion, which the hon. Member for Keighley made also just now, that without rigid controls and the absence of a planned economy we are bound to have trouble, but that on the other hand if we have physical controls and import licences and things of that sort everything in the garden will be lovely and we shall go on having those solid gains. The quick answer to that has already been given—the dollar crisis and devaluation in September, 1949. I want to take the matter a little further.

Among solid gains the most important are savings, without which we cannot live or progress.

Mr. Hobson

If it was necessary during the war to have allocations of essential war materials to vital industries, does the hon. Gentleman not think that in the present serious situation, in which it is necessary to develop certain industries, we should likewise have controls?

Mr. Stevens

This is new Socialist philosophy. I have not heard before that we must have a siege economy for all time. In wartime industry is turned to the production of wartime consumption and capital goods, and from peacetime consumption and capital goods. The conditions are completely different from the conditions which we have now.

Solid gains must surely be achieved from a great upsurge in savings. I turned to last year's Preliminary Estimates of National Income and Expenditure, 1948 to 1954. We can see there the solid gain in savings which was achieved during the heyday of the Labour Government. We find in Table 6, page 8, that personal savings, before providing for depreciation and stock appreciation, were running at the rate of £109 million in 1948, £147 million in 1949, and £132 million in 1950.

Now let us turn to the time when the Conservative Party had given up these controls, without which these solid gains, so we are told, cannot be achieved. Let us look at the equivalent table in the White Paper, Preliminary Estimates of National Income and Expenditure, 1950 to 1955. We find that in 1953, 1954 and 1955 personal savings are not running at the rate of £130 million or £140 million a year. In those three years the figures were as follows: 1953, £935 million, 1954, £892 million, 1955, £962 million. Those figures are seven times as great as were previously achieved.

We are often told, and I think we have heard it today, that the Tory Government are having an easy time, that the terms of trade are in our favour, world export trade is expanding, and we have not had to face any real difficulties.

Mr. Arthur Moyle (Oldbury and Halesowen)

I am sure the hon. Gentleman wishes to be perfectly fair, but in using those statistics to which he has just referred he must realise that during the war and in post-war years the majority of people were seeking to re-equip their homes, which they had not been able to do during the war years. It was not until 1949 that there was any real opportunity of doing any personal saving.

Mr. Stevens

That may well be true. Perhaps it is a pity that the hon. Gentleman did not mention that point to his right hon. Friend before he wrote that article in the Daily Herald. The argument might have been a little different.

Of course, the Labour Government had very substantial advantages as well. I have turned up the Economic Survey for 1950, which, historically, deals with 1949. In page 9 I find this: Of all United Kingdom imports in 1949, over 13 per cent. were financed by Marshall Aid, representing 2½ per cent. of total resources available. This paragraph is not a long one and may conveniently be read in full: Large items paid for in this way included one-third of all wheat and flour, including home production, one-third of sugar, one-fifth of cheese, one-tenth of bacon, one-quarter of petroleum, just over one-quarter of copper, one-third of zinc, four-fifths of virgin aluminium, one-sixth of lead, two-fifths of raw cotton, and one-half of tobacco. That paragraph seems to indicate a very solid and substantial advantage, yet we had a very serious balance of payments problem then. But, when all is said and done, when these solid gains were being achieved, were the people happy?

Mr. A. G. Bottomley (Rochester and Chatham)

The hon. Gentleman is trying to be as fair as he can; that is appreciated on this side of the Committee. But would he also now state what the present Government is receiving in the form of defence aid and dollars received as a result of American troops stationed in this country?

Mr. Stevens

Certainly; about 1 per cent., as against 13 per cent. in the other case.

Were the people happy? Let us look at the preceding page: Although prices rose on the average"— that is a familiar note— some prices were reduced. As supplies of other goods increased, consumers offset increased expenditure on these by reducing their expenditure on drink, tobacco and entertainments. In other words, people had to go without their pictures, their drinks, and their smokes in order to pay for these solid gains of Socialist policy.

That has not happened under the Conservative Government, when prices have been rising. In point of fact, if one looks at the current White Paper, one sees that expenditure on entertainments, drink and tobacco have continued to rise, along with other items. The people of this country have not had to cut down their smoking or visits to the pictures in order to pay for the policy of the Government of the day. Those figures that I have given are historically and factually true. The implications are clear.

Of course, in 1955 prices did indeed rise too fast. The clue to that is given in the same White Paper, in the second table, where it shows that wages and salaries between 1952 and 1955 increased by 23 per cent., whereas the gross national product increased by only 19.5 per cent.

My right hon. Friend the President of the Board of Trade was good enough to say something about the middle classes. In that connection, I would like to refer him to that same table, where it can be seen that professional earnings, so far from rising by 23 per cent. in that period, rose by 18 per cent. only. In other words, the professional classes are falling further and further behind year by year. I hope that he will bear that in mind.

What is the cause of inflation? Why has it happened? Who is the sinner? Some of my hon. Friends and others not members of this Committee say that the cause is excessive wage demands by the trade unions. Other hon. Members say it is due to high and rising prices of food. Some say it is due to greedy capitalists who are trying to make profits which are too high.

All those people are mistaking effect for cause. Those things are the effect of inflation, not the cause. The cause of inflation is, first and foremost, excessive Government expenditure. The Government and local authorities between them spend nearly £8,000 million, in other words, nearly half the gross national product. By so doing they have, in the last year or two, created a seller's market for labour. It seems to me that any trade union or trade union leader who takes an unreasonable advantage of a seller's market for labour is just as unworthy of respect by his fellow citizens as a producer or manufacturer who takes advantage of a seller's market for his goods and charges an unreasonably high price.

In the last twelve months my right hon. Friend the Lord Privy Seal, and now my right hon. Friend the Chancellor, have made a start along the road that I and some colleagues of mine have long urged them to travel the road towards reduced Government expenditure. Government spending on capital account is being slowed down, as is that of the nationalised industries. On current account, bread subsidies are now to be abolished altogether; and the milk subsidies have been halved.

In times of full employment and high wages, there is, in my view no reason or justification whatsoever for either of those two subsidies. Where is the sense in deliberately making cheap an item which has a high dollar content, namely wheat, and thus expanding its market, and in that way releasing a greater amount of spending power for goods like television sets which are wholly manufactured here and find a ready market overseas? It seems to me to be absolutely wrong.

I am bound to say also that I do not see any economic difference in principle between subsidised bread and milk and subsidised council house rents. In that connection, as I and most of my hon. Friends know, there has been a good deal of fresh thinking by hon. Members opposite. We find differential rent schemes being introduced by Socialist-controlled councils; and we shall see more of them in the future.

To reduce Government expenditure will lessen excess demand for labour and thus excessive wage demands. The credit squeeze and hire-purchase restrictions will reduce demands on production. In those ways demands on production will be brought into equilibrium with goods and services produced, and the answer to that will be the answer that we are all seeking—namely, stability of the currency.

I want to mention three reservations with regard to the Budget to which I referred at the beginning of my speech. I think that my right hon. Friend has made a mistake in passing on to the old-age pensioners the 2d. increase on twenty cigarettes. I should like to see the concession to old-age pensioners withdrawn altogether and the old-age pension increased. Many old-age pensioners are not smokers, but eat sweets. It seems to me that the normal justification for that concession is very poor indeed. But at the same time, it exists, and so long as it does, I should find it exceedingly hard to explain to old-age pensioners why they have none the less to pay the increase in price. It is bad psychologically, and I hope that my right hon. Friend will reconsider his decision.

On behalf of all professional men, I offer my warmest thanks to the Chancellor for undertaking to implement the recommendations of the second Tucker Committee Report. I am particularly delighted that he has accepted in principle the scheme as a whole. It is to embrace the city accountant and the village grocer, and I am delighted.

I would, however, make two reservations. Why is there to be no provision for commutation of part of an annuity when it falls in? In similar schemes which are in operation at present there is power of commutation, the power to take a lump sum not exceeding perhaps a quarter of the capital value of the annuity. A good many professional and other self-employed men, in the course of their working lives, are unable to build up large, or possibly even any, capital resources, and the ability to take one-quarter of the capital value of the pension when they retire might enable them to buy a cottage in which to live or to set up a son in business. I ask my right hon. Friend to look at that matter again. The Tucker Committee recommended adequate safeguards, and I see no reason why there should not be this power of commutation.

Secondly, the Chancellor did not refer to late entries—old gentleman like myself coming in well over fifty years of age and with only a few years to run before being turned out to grass. Under some schemes there is provision for past-service payments, and I hope that we shall hear about something of that kind from my right hon. Friend.

My last reservation on the Budget is by far the largest one. I shall find it very hard indeed to support the increased differential between the Profits Tax on distributed and undistributed profits. The arguments against are very strong indeed, and in that respect I do not think I can do better than quote the Report of the Royal Commission on the Taxation of Profits and Income. Paragraph 535 says: … given that profits are in fact retained or are ploughed back, there is no safe inference that this is less inflationary in its effect than the distribution of a corresponding amount by way of dividend. Some part of a larger distribution may be saved, even by an individual receiver; on the other hand, it does not follow that smaller contributions will reduce consumptive demand. The conclusion, in paragraph 540, says: The use of differential rates may have been of some value in the immediate post-war years but the arguments against such a tax structure increase with the years and in the end must prove decisive. We recommend that the differential rates should be brought to an end. I shall find it very hard indeed to support my right hon. Friend in his proposals in this respect, I am bound to say that on the whole, as it seems to me, this is a lively and imaginative Budget. [Laughter.] It seems a pity that so many hon. Members have not read the Budget statement yet. Clearly, they were not here yesterday. Whatever else one may say about the Budget, it is most certainly lively and imaginative. It is a Budget which, by reducing Government expenditure and encouraging saving, should go a long way to bring the result that we all want—stability of the currency. The country has been looking for a lead. The Chancellor has given us a lead with strength and courage, and, I believe, in the right direction.

6.26 p.m.

Mr. J. Grimond (Orkney and Shetland)

I wish I could believe that the hon. Member for Langstone (Mr. Stevens) was right in his last remarks. All other speakers on this side of the Committee are trying to persuade the Government to plan a Socialist State. That is an uphill task. From my point of view, I am only anxious that they should do more planning for a free enterprise State. I agree with what was said by the hon. Member for Scarborough and Whitby (Mr. Spearman) that free enterprise involves a certain amount of planning.

The chosen instrument of the Government and of those who believe in the system of free enterprise is monetary control. But the Government seem to deny that they have any control. They try to pass the responsibility for inflation on to all sorts of other people. I must confess that I think their popular booklet on full employment is lamentable. It is no use saying that inflation falls like dew from Heaven or that it is everybody's fault, because as soon as one says that something is everybody's fault no one thinks it is his fault.

It is obvious, in the first place, that it is the Government's responsibility. There were perhaps signs in the Budget statement that the Chancellor was beginning to take a little more responsibility. But we have to examine the Budget statement with the whole economic policy of the Government not only to see how far it is going to achieve the negative task of stopping inflation at this moment but also whether there are any further signs of a positive and creative approach to our future problems. I am afraid that the discussions during the last two days and the statements made by the Government will mask the difficulties. I doubt whether people realise how serious they are. The serious matter is not only our position at home, but the fact that in a boom year we have failed entirely to build up reserves to support our trade—far less to create a surplus to invest in our Empire or in the free world in general.

The Chancellor yesterday said very little about the present effect of the credit squeeze, the high Bank Rate, and the policy of driving the local authorities into the market. He did mention that the dearer money policy had increased our liabilities to creditors at home and abroad. To my mind, the creditors abroad are extremely important, and I hope that the Government will tell us how much this liability to pay interest to overseas holders has increased and also how much of the money that has been attracted to London is what is called hot money and is likely to go out again if the Bank Rate is brought down.

The Chancellor mentioned a significant figure when he said that there is a decrease of £143 million on that part of the National Debt covered by Treasury bills. It is also true that as a result of this dear money policy, the rate of industrial building has slowed down considerably. That is important because it was the upset in industrial building which was one of the most noticeable features of the inflationary situation which grew up last year.

It also seems that the local authorities have raised £17 million in the open market and about £135 million on mortgage. I do not know what estimate the Chancellor has made of the effect of his new savings drive on that kind of operation. I should have thought that one effect of it would be merely to divert savings from one place to another.

Now we do not know whether the right hon. Gentleman is satisfied on the whole with the result of the credit squeeze. I do not know whether he feels that its effects, on, say, factory building are too much or too little. Personally, I should have thought it would be considerable and that the time may be approaching when it will be dangerous to cut down any further productive investment in this country.

None of us wants to compell the Chancellor to become an astrologer as well as a croupier, and the right hon. Gentleman made it clear yesterday that he did not want to make any precise forecast about the future. Yet, if we are to discuss sensibly the affairs of the nation we must know a little more about the current effects of the general monetary policy of the Government than we know at present. We must have some estimate, too, of what increase in private saving is expected. Then, nothing was said about that important branch of spending, hire purchase. This may be because there are so few statistics, but it is fair to ask the Economic Secretary to say a word about the Government view of the effect of their restrictions on hire purchase.

The Chancellor objected to various suggestions made, for instance, that he should alter or fix the liquidity ratios. I was one of a deputation which went to see the right hon. Gentleman about that and about one or two other matters and he was, of course, courteous and gave us a sympathetic hearing. I admit that it is not a matter which can be examined by a committee sitting for years and years, chewing over the situation. However, I believe that not only is the statistical information available to the Government inadequate but that it is vital to review the whole of the financial machinery at the disposal of the Government. I say that because, clearly, the creation of the sterling area, our obligations to it, the finance of the nationalised industries and the great weight of Government expenditure have altered the situation out of all knowledge since the days of the late Lord Keynes.

That brings me to the question of the nationalised industries I have always taken an interest in the means of financing their capital requirements, and I am glad that the Government are now to attend to that. Obviously, the finding by the nationalised industries of large sums of money by short-term borrowing has be-devilled the anti-inflation campaign of the Government. It is a prominent example of the inconsistencies of much of the Government's policy to see them encouraging the Transport Board to increase its deficits further and further. That is directly inflationary.

On the other hand, the Government are turning to the butcher, the baker, the candlestick-maker and the small farmer and saying, "Now, my boy, you must get rid of your overdraft of £300 or £400 at your local bank." It is not understood in the country why it is a good thing to push transport down the primrose path of inflation and yet to tell every small businessman and farmer that he must reduce his overdraft or go bankrupt.

Some important questions seem to have been left unanswered about the new policy by which these industries will be financed directly by the Treasury. I hope that the Chancellor is sincere when he says that it is his intention that at least some of them should finance their capital requirements in the ordinary commercial manner. I do not see why, in the case of electricity, the right hon. Gentleman thinks that that cannot come about reasonably soon. We all, however, agree that special arrangements must be made for at least some of the others.

In answer to a Question, I was told yesterday that there was £89 million owing to the banks from nationalised industry and £267 million to the Treasury. My understanding of the new policy is that the industries will continue to borrow from the banks. So it is their long-term borrowing which will be affected primarily, and this new policy will enable funding or the issue of loans to be carried through at moments convenient to the Government. Again, I think we should have more intimation from the Government about what is intended.

If it is simply an alteration in timing, there will be no alteration in the inflationary or deflationary effect; indeed, it will continue to be extremely inflationary. Again, is it intended to exercise more control over these industries? Will they be brought under ministerial control more on the model of the Post Office? If they are, we should be told, then, at what rate of interest the Treasury will lend them money? That is extremely important.

Mr. Ellis Smith

Before the hon. Member leaves that point, which is an important one—and I have been reading the OFFICIAL REPORT in order to get a thorough understanding of it—may I interpolate that if his interpretation is correct it means that those industries will be subject to interrogation in this House, which is something that some of us have wanted for a long time?

Mr. Grimond

That might be no bad thing.

We should be told, however, more about this new policy and its effects. Furthermore, so far as the vital fuel industries are concerned, if we are to make any assessment of the amount of money going into them, we should be able to relate them one to another. As has been mentioned in the debate, we cannot at present relate the capital accounts of the oil industry to those of the other types of fuel and power. I presume that this method will also be used to finance atomic energy. I presume also that most Government undertakings, such as airports, will be brought into the same system. If more information can be given in this respect, it would be of great value to hon. Members.

Naturally, I welcome the proposal to cut down public expenditure, but it brought a slightly cynical smile to my lips. One would think that the Government had just been elected, instead of having been in office for four or five years. The party opposite has promised for ten years that it would make enormous cuts in Government expenditure. Are we to assume that £100 million has been wasted year by year and that only now that is to be eliminated by the new Chancellor of the Exchequer?

Again, it is pertinent to ask what is to be eliminated. Like previous speakers, I strongly suspect that what will happen is that, as usual, the defence requirements have been over-estimated and that the Government will say at the end of the year that they have underspent by £100 million, and that, therefore, they have saved it. I do not know. I hope that some further indication will be given as to whether this is a purely administrative matter. If so, we should be told why the Government could not have done it before or whether it means a change of policy.

I recommend to the Government the advice given by the hon. Member for Scarborough and Whitby. The hon. Gentleman cannot be accused of being a Socialist or of being anti-American or a pacifist. I agree that there is a horrible suspicion that he is a crypto-Liberal but, apart from that, his views on defence expenditure should recommend themselves to the Chancellor.

Regarding what I would call negative steps against inflation, I think that they may in time be fairly effective. There remains the serious criticism of the Budget that it gives little positive creative thrust to the economy. For instance, it has been suggested in the Scotsman that the ordinary reaction to this Budget will be that it is an encouragement to the sort of man who, when he finds his family running into bankruptcy, thinks he can recover the situation by having a bit on the 3.30 race. I do not go quite so far as that, but I think there is a tendency in that direction.

If we are to infuse dynamism into our affairs we must have savings. I do not deny that the proposal for Premium Bonds is an imaginative one, but the need for a lottery is the result of inflation. It is only because no one has any faith in the value of money that we have to have this scheme, and its introduction is to some extent a surrender to inflation.

Mr. Stevens

Is the hon. Member suggesting that all the other countries in Europe which run State lotteries have only introduced them because of the inflationary pressure?

Mr. Grimond

I think that that is true of the Latin countries. I do not know about the Scandinavian countries: I am not an expert on their economies. But surely everyone will agree that if we could maintain the value of money it would be much less necessary to have this scheme.

I believe that what the economy most lacks is a firm indication of the real view of the Government as to the kind of economy and society which they want to create. There are many economic Baldwins in the Conservative Party. There is a tendency to try to achieve a peaceful co-existence with Socialism, with free trade, with free enterprise, with Protection and, at the same time, with the traditional paternalist view of the party. Economic Baldwinism is never far away. That is seen from speeches on the Restrictive Trade Practices Bill. The Bill is sometimes defended on the ground that it will create free competition. But it is sometimes defended by Tories on the ground that it will not do so. One hears Conservative speakers promise that it will not make very much difference in the end.

Surely there are certain fundamentals of a free economy which have to be tackled very soon if they are to be tackled at all. First, the Government must ensure that they have at their disposal adequate means of financial control if financial control is to be their main method of directing the economy. That includes economical control of their own affairs.

Secondly, in spite of all the words which have been said about the importance of the middle classes, precious little has been done for them; the hon. Member for Langstone will bear me out in that assertion. These middle classes are professional men, managers and technicians, upon whom the dynamism of our economy depends. The reason for reducing to some extent the taxation upon them is not a class interest on their behalf. It is because unless we use these people to the full, every wage-earner and every old-age pensioner in the country, and indeed in our Commonwealth, will suffer. The whole hope of the future is very largely dependent upon calling out the utmost skill of these people. I am not talking about the rich people. I am talking about skilled workers, the managers, and so on. I agree that many of them might be called working class, but they extend through the middle classes.

We welcome what the Government have done for self-employed men, but it is very little, and, particularly, very little after four or five years of Conservative Government.

Thirdly, it is, I believe, in theory, Conservative policy to spread ownership, and ownership in industry, but nothing is ever done about it. The admitted tax drawbacks to giving shares to workers are never removed. No proposal is ever enacted that companies should be encouraged to give shares to their workers by getting some remission in company taxation. I recommend that to the Chancellor for consideration in accordance with his own philosophy.

Indeed, I should have thought that as part of the savings movement it would have been extremely useful to have some campaign to get workers to take shares in trust companies so that they spread their holding in industry and get some share in the wealth of the country. What is wrong today is that ownership is concentrated in far too few hands. I should not even mind further taxation of unearned or inherited wealth if we could ensure that the ordinary people of the country had a better chance of getting some share in the ownership of the means of production.

Fourthly, I should have thought that it was more than ever necessary, if the Western world is to survive—our Budget discussions have some effect on that—that we should press on towards international collaboration. It seems to me that these recurrent crises between the dollar and non-dollar areas must be tackled in a rather more radical manner than has so far been attempted. We need a common policy for the free world for the development and, in some cases, the conservation of our resources and the increase of our trade.

Before the Budget, many people said it must be a tough Budget. In some respects I agreed with them. But the people with whom the Government have to get tough are themselves. Only by their acts, and not only by their words, can they convince the people that they know where they are going and have faith in the direction in which they are travelling. If they cannot show that by acts, no amount of words will persuade the people of Britain that their future is assured.

6.44 p.m.

Mr. John Biggs-Davison (Chigwell)

Early in his remarks, the hon. Member for Orkney and Shetland (Mr. Grimond) referred to the suggestion that has been made by some of us on both sides of the Committee that there should be an inquiry into the country's financial and economic system rather on the lines of the Macmillan Committee which did such useful work in the very different days before the war, days not of inflation but of deflation and depression.

I was grateful to the Chancellor for his considerate and, I thought, not entirely unhopeful reference to that suggestion, made from both sides of the Committee. If I might add a further suggestion, I would remind my right hon. Friend and the Committee that a monetary commission has been sitting in New Zealand and that a somewhat similar inquiry is being held in Canada. It might be possible to learn something from the experience of those partner-countries.

I was surprised at the indignation generated, or I hope not—simulated, by the right hon. Member for Huyton (Mr. H. Wilson), the hon. Member for Keighley (Mr. Hobson) and other hon. Members opposite about my right hon. Friend's proposal for a Premium Bond. My right hon. Friend made it clear that it is not to be a lottery. Even if it were a lottery, there is very good precedent for it in the history of our country. By an Act of 1753 Parliament purchased for £20,000 the library and collection of Sir Hans Sloane and incorporated with it the library of Sir Robert Cotton. That was the basis of the British Museum. The money was raised through a national lottery. The managers and trustees of the lottery included the Speaker of the House of Commons. Another was the Lord Chancellor. The third—this is relevant in view of the opinions which are sometimes expressed on religious grounds—was the Archbishop of Canterbury.

My right hon. Friend's theme was that this was a savings Budget. That being so, I should say that it is a good Budget. I should have welcomed a proposal which would have allowed the small investor at home to play his personal part in the development of Commonwealth resources and the consolidation of United Kingdom markets and the sources of supply in the realms and territories overseas.

Various schemes for a Commonwealth savings campaign have been put forward from different quarters. I dare say there are technical and practical objections to those schemes. There always are practical and technical objections to any new schemes put forward. I have no doubt that there were many practical and technical objections put forward to the novel proposal of a Premium Bond. However, I feel that there are many people in this country—perhaps more than many of us imagine—who would respond to an expansion of the National Savings campaign into a Commonwealth savings campaign, people who believe in the Commonwealth not only as the source of British greatness but as the justification for it.

I was very glad that the Chancellor said yesterday: One of the most important tasks before us today is to ensure that … we should lose no opportunity of taking a lead in strengthening the economic ties between this country and the Commonwealth and between this country and Europe. The Chancellor went on: For this, our position at home must be strong."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 874.] However, there seems to be a difficulty, and it is rather like the difficulty: "Which comes first—the chicken or the egg?" In this congested island, drawing from abroad perhaps half its food and nearly all its raw materials, if we cannot depend upon steady markets we shall not be able to build up our reserves or secure the increase in productivity which steady markets can make possible.

The Economic Survey has placed before the nation some brutal facts. It is clear—it is no secret—that our share of the world's export trade is on the decline or has been on the decline. It is very disturbing to learn that, in the last two years, although out exports to the United States increased by 15 per cent., our imports from the United States increased by 66 per cent. It seems to me that we in this country are in danger of being crushed between, on the one hand, the two giants of whom the hon. Member for Keighley spoke—two giants which have highly protected and largely self-sufficient economies—and, on the other, those low-cost producers in Asia and elsewhere who have low standards of living and no welfare State.

The logic of that seems to me inescapable, and I believe that the country will in time insist that we must return to policies of discrimination in our trading. Reference was made on the other side of the Committee to the Ottawa system, and I had sympathy with the hon. Member who showed how the Ottawa system is at the moment working to our disadvantage. The Ottawa system was good in its day but it was only the first instalment of something which should be revised and carried forward.

The time has come for reconsideration of the fashionable idea that the aim of our policy must be a non-discriminatory trading world. We must, I believe, use our focal position as the leading Commonwealth nation, as the centre of the sterling area and as the greatest of the free European nations, to constitute and to insulate an economic area of the world so endowed with raw materials, with food, with markets and with fields of investment that all who adhere to it will be able to stand erect and free.

6.52 p.m.

Mr. James Simmons (Brierley Hill)

I always enter into these financial and economic debates with a great deal of modesty because I know that clever people get to their feet from time to time. My fears were somewhat relieved when I read in the OFFICIAL. REPORT some of the claptrap which comes from the mouths of the so-called economic experts. For instance, yesterday one of them delivered himself of this dictum: that Governments never spend wisely. Did one ever hear such absolute "tripe" and nonsense? As a matter of fact, Governments, local authorities and publicly-owned bodies spend far more wisely and far more effectively than does private enterprise. It may be said that this Government never spend wisely, but I would not say that that is so of all the Governments that this country has ever had.

A Budget debate gives opportunity to hon. Members in many directions. Yesterday we had an attack on the miners from an hon. Member below the Gangway. We had complaints about the high wages enjoyed by the generality of the working class. We heard another hon. Member speaking in favour of some form of industrial development which was purely a matter for his own constituency. I suppose that is all permissible. We have had this afternoon a speech from the chairman of the Income Tax payers' defence association, the hon. Member for Langstone (Mr. Stevens). For what are they banded together?—so that they shall pay Income Tax or so that they shall avoid paying it? It would be very interesting to know from the hon. Member for Langstone what has been the object of the organisation of which he is chairman.

Mr. Osborne

During my hon. Friend's absence, it is fair to say that, like any other group of citizens, they are banded together to look after their own interests, which is quite legitimate within the law.

Mr. Simmons

Perhaps we should look on it as being like the Poujade movement. At all events, the economics of the hon. Member were fairly muddled. He told us that controls were all right in war-time, but that they were all wrong in peacetime. Where is the ground for such an assertion? If controls were effective in getting the best production out of the nation, if they were effective in seeing that the nation's resources were sent to the right places at the right time to produce the right kind of things for war, is not it just as essential that the same thing should be done for the purposes of peace?

Ought we not to be fighting, with all our guns firing, with every means at our control to defeat the enemies in our gates—inflation and poverty and the various other evils which face the nation? Ought we not to fight them as effectively as we can? Hon. Members opposite say, "Controls are all right when we have a war, but when the war is over for goodness' sake take the controls off. Let the people who supply the nation's needs, get as big profits as they can and never mind what the effect is on the lives of the ordinary members of the community."

It is interesting to follow some of the remarks made. I was particularly interested to hear the speech of one hon. Member on the other side of the Committee who said that the Chancellor's speech was part of a theme. That is just what it is not. There is no continuous theme. That is the trouble with the Government. They have no theme; they have just got a "wobble" and that is all.

Mr. Biggs-Davison

Would not the hon. Gentleman agree that the theme of savings dominated the Chancellor's Budget?

Mr. Simmons

The hon. Gentleman the Member for Bodmin (Mr. D. Marshall), to whom I was referring, said that it was a theme carried out throughout the whole of the period of office of the Government. He talked about the Chancellor in connection with the theme song. That was a little ungracious. One imagined him as a pale shadow of Henry Irving posturing on Drury Lane stage but hardly as Dickie Valentine crooning into the Coliseum mike. The suggestion that the Chancellor is crooning a theme song suggests other possibilities. He may be the hero of a detective story entitled, "Prosperity mislaid, Mr. Butler suspected," with the blurb, "Mac tells who done it," in his usual flowery style.

The titbit of the Budget—the thing that it was hoped would distract public attention from what really matters—was the little bit of gambling which is to go on. So we may imagine the Chancellor in the rôle of a fairground barker, shouting, "Roll up, roll up, come and invest in my Premium Bonds club—the more you lay down the more you pick up."

But when one considers the erratic economic behaviour of the Government—restraint, spending spree, confusion, indecision—we can see the Chancellor as the driver of an old crock trying to steer along the middle of the road. His £100 million saving, in my opinion, is the most sinister and dangerous part of his Budget proposals. As hon. Members on both sides of the Committee have said, no one knows how that £100 million will be saved. The hon. Member for Scarborough and Whitby (Mr. Spearman) suggested that it might be saved on defence. As has been pointed out by numerous hon. Members, and as those of us who take part in debates on defence and the Army Estimates know, the Government always overestimate in defence matters, and then, when not all is spent, point out what has been saved.

The economies will be made at the expense of education, health, pensions, hospitals and roads. There is an enormous shortage of hospitals. Some colleagues and I visited mental hospitals in the West Midlands, and we found conditions which could be compared only with Belsen—and I use that word deliberately—and yet nothing can be done to improve them. The Government have not even given old-age pensioners a concession to match the increase in the duty on tobacco. Local authorities are compelled to economise because of Government policies. The hon. and gallant Member for Worthing (Brigadier Prior-Palmer) admitted in the House last night that economies would possibly come in health and education.

The hon. and gallant Member for Ilford, South (Squadron Leader Cooper) was the hon. Member who said that Governments never spend wisely. We may ask whether this Premium Bond stunt is designed to divert attention from other nefarious activities which may be going on under cover of the £100 million economy. Is the Chancellor of the Exchequer in effect saying to the proletariat, "Do not trouble about the rich Dockers who try to do some gate crashing at a wedding: buy Premium Bonds and do some gate crashing yourself."

So long as we have the Dockers—I mean the Dudley Dockers, the gold-plated Dockers—and what they represent, the Government cannot expect to get the co-operation of ordinary people in improving the economy of the country.

Mr. Ellis Smith

Who are they?

Mr. Simmons

They are people who have made money out of the sweat and toil of workers in Birmingham and who are squandering that money, not even in this country, but in Monaco—and here is one of their pals.

Mr. R. Gresham Cooke (Twickenham)

Dudley Docker has been dead for very many years.

Mr. Simmons

That was the father. I am talking about Bernard.

I regard the Premium Bond as a record low for any statesman of stature in this country. It is an appeal to the least desirable instinct in the community, the instinct of getting something for nothing. I have no doubt that it will be popular, just as the slogan, "Mend the hole in your purse" was popular, and just as fraudulent. To my hon. Friends I say that this party was built up not by doing the popular things, but by appealing to ideals and the high aspirations of our people. Better years in the political wilderness than power achieved by putting popularity before principle.

Speaking as a convinced Socialist, I say that it is entirely anti-Socialist and entirely anti-Christian to appeal to those lower instincts for getting something for oneself at the expense of the rest of the community. The basic principle of Socialism is service before self. This Premium Bond is the very opposite of that.

The hon. and gallant Member for Ilford, South, said that we should go back to Cripps. It is curious how hon. Members opposite are always appealing to Cripps, like some Communist appealing to Karl Marx, and quoting Cripps as if he were the author of the Bible and that quotations from him were to be regarded as Holy Writ. I do not understand this new-found fondness for the late Sir Stafford Cripps shown on the other side of the Committee. I remember hon. Members opposite snarling at him. I remember the insults they cast at him when, as Chancellor of the Exchequer, he was fighting to maintain the country's stability. I remember the jokes they made about him. They called him a desiccated—what did they call him?

Mr. Ede

That was the right hon. Member for Ebbw Vale (Mr. Bevan).

Mr. Simmons

I think it was a desiccated adding machine.

Mr. Douglas Glover (Ormskirk)

Surely the hon. Member is wrong. His present Leader is the desiccated calculating machine.

Mr. Simmons

I also wish to quote Cripps. On 27th September, 1949, he said: It is time for us finally to renounce and to denounce that easy-going get-rich-quick attitude to life that in all levels of society has found its post-war devotees and which prides itself on the smallness of its own effort and the largeness of its personal gain."—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, c. 32.] We shall destroy that spirit by introducing Premium Bonds, and we shall not touch greatness as a nation again until we apply that doctrine to our economic and social life.

Once wars are over, those who fought them, unless they are field marshals or generals, are usually forgotten. The British Legion and B.L.E.S.M.A. and other ex-Service organisations have put before the Government claims which are entirely ignored by the Budget. The figure of 90s. as a basic war pension demanded by the British Legion may not be generally acceptable, but there can be no doubt that, in the light of the present economic burdens borne by those with fixed incomes, some increase is necessary.

I was very surprised that the Chancellor of the Exchequer had no word to say about the position of our disabled war pensioners. The B.L.E.S.M.A. claim for the ageing limbless has received overwhelming support in the House and outside. An all-party meeting of hon. Members, held upstairs last November and attended by two or three hundred members, gave unanimous support to B.L.E.S.M.A.'s demand. Deputations were sent to successive Ministers of Pensions and to the Chancellor of the Exchequer, for whom the Financial Secretary deputised. Hopes sprang eternal and light flickered through five intervening months. The Budget has extinguished that flicker, but I can tell the Chancellor that he will never extinguish the flame of determination which burns in the breasts of these war veterans.

On 8th February, 1956, a gallant and moving procession went from the Cenotaph at Whitehall to Church House, Westminster, consisting of men walking on crutches or with the aid of sticks, and they slowly moved along, led by their president, Cyril Stephens, whose indomitable courage in braving the journey to London and the march, against doctor's orders, was an inspiration to all his limbless colleagues. He is with us no more. He is numbered among the thousand of 1914–18 war disabled who die every year, but I had hoped that, as a memorial to his service and sacrifice, the Government would have found it in their hearts to give some help to the diminishing number of these limbless men of the 1914–18 war.

They volunteered to serve their country at 1s. a day, and when they came home they returned to unemployment, poor pensions, and no allowances for the wives they married or for children born after they were wounded. They found no Welfare State; no comprehensive social services or supplementary allowances. Amongst our ex-Service men these are the one section which has had the rawest deal of all.

Mr. Ellis Smith

Cruel administration.

Mr. Simmons

I agree. During the debate I intervened when one of my hon. Friends spoke about the stony-hearted administration. I do not think that is true today. I think that it has altered, but there was a time when it was stony-hearted.

I base my claim for these men not upon purely actuarial grounds but, frankly, upon sentimental grounds. And, good gracious—do not let us be afraid of sentiment. So long as sentiments are good they carry much goodness in their train. But for sentiment we should not have patriotism or service. Some men gave their lives and this section of the men who survived gave their limbs, much of their health and a lot of their comfort, in the service of the country.

I speak of them from personal experience. I am not a very good advocate for them, because I do not show, as many of them show, the ravages of time. I have been fortunate. I have always done jobs that I liked doing, and have always been able to give vent to self-expression. In spite of their artificial limbs, many of these men have had to do hard and laborious work. Today, the medical profession cannot put a name to their suffering, or measure it, but it is there, and because it is there I appeal to the Chancellor to refer to the Financial Secretary to the Treasury, who met these men, in order to see if he cannot find some room in his heart, during the passage of the Finance Bill through the House, to give some little recognition to these veterans of the First World War in respect of their suffering and their service, so that they may enjoy, in the remaining years of their lives, a little more comfort and happiness than they otherwise would.

7.15 p.m.

Mr. Denzil Freeth (Basingstoke)

Much has been said tonight about the causes of the inflation from which we have been suffering for the last eighteen months. I think we should all agree that it has really been caused by a large and unforeseen investment boom, superimposed upon a large boom in consumer goods, together with rising wages which enabled the people to purchase those goods. Many of us do not wish the investment boom to be severely checked. We do not want to argue whether the Government are responsible for the position which we now occupy, and the percentage of our national products which we devote to investment, but it is noteworthy that the only substantial post-war increase by private industry has come during the term of office of this Government.

If we are going to be able to pay for this boom and also for the rising standard of living which we all desire, it is essential that industry should not be put into a position in which goods are sucked into an easy home market at the expense of export markets. Up to the last few months the home market has been far too easy, with the result that in many cases wages demands have been granted without more than a token show of resistance.

I do not object to wage demands. I have never taken the view that it is the duty of trade unions not to press for wage demands. It is their duty to press for them, just as it is the duty of the Income Tax payers' society to press for reductions in Income Tax—and it is essentially the duty of the Government to control our economy in such a way that those wage demands can or cannot be granted by the employers. It is especially the duty of the Government to control the volume of money which exists in the country at the present time, so that these wage demands cannot be granted too easily.

Mr. Douglas Houghton (Sowerby)

Will the hon. Member tell us what is the duty of the employer?

Mr. Freeth

The employer's duty is to co-operate with the trade unions representing his workers, so that they produce the greatest volume relative to his competitors, and with the greatest efficiency, and economy of effort and of raw materials. I do not want to be led away on that line. I was trying to put the onus of responsibility on the Government. For controlling the volume of money the essential thing which the Government must do is to establish far greater control, or to use far more the control which it already has, over the size of the floating debt.

In the last few months I have been rather disappointed by the attitude of my right hon. and hon. Friends on the Treasury Bench towards the size of the floating debt, and especially towards Treasury bills. That is why I was very glad, when I read the speech of my right hon. Friend the Chancellor, to see that he spoke of the harm which was done to the credit squeeze as a result of the Government having to support, in the market, issues made by the nationalised industries, and having to finance its support by issuing the necessary Treasury bills. He said: This, of course, impedes the whole operation of our monetary control. It kicks the ball, as one might say, through one's own goal."—[OFFICIAL REPORT. 17th April, 1956 Vol. 551, c. 864.] I regard the recognition of that fact by the Government as one of the most important events in the last few months, because it is a basic fact of our economy that the size of the floating debt—and, in particular, the size of the Treasury Bill issue—has a direct bearing upon the degree of slackness or tautness in the economy. We shall never get manufac- turers to stop manufacturing goods which are a luxury, inessential or unexportable so long as the distributors will take them from the manufacturers. So long as short-term credit can be easily obtained the distributors will not stop taking goods from manufacturers.

Last summer my right hon. Friend the Lord Privy Seal requested the banks to restrict credit. That credit squeeze is reasonable and can be very effective. A person should not, however, be put by Government action into a position where his private interest conflicts with his public duty; but that happened last year. During the second part of the year the liquidity ratio of the banks rose from 30.1 per cent. to 37.4 per cent.; in other words, the lendable funds of the banks were being increased at a time when the Government were asking the banks to cut advances.

Would it not have been better if the Treasury had been willing to undertake a funding operation in order that the banks might be in a position not merely of not wanting to lend the money because the Chancellor had asked them not to, but of not being able to do so because their liquidity ratio was down to nearly 30 per cent.? It is most important to note that the very large increase in liquid assets of the clearance banks increased by £509 million in the second half of last year. That was very largely due to the action of the Treasury during the autumn of lending long and borrowing short. The local authorities were borrowing money from the Government through the Public Works Loan Board at an increasing rate and the Government, in order to finance those loans, owing to the high rate of interest—not as high as now, but high relative to previous years—and in order to avoid having to pay too high a rate of interest for five, fifteen, or twenty-five years, were issuing large numbers of Treasury bills.

These figures are interesting. At the end of January, 1955, the Treasury bills outstanding were £409.6 million more than a year before. By the end of June, the figure was £490 million more than the year previous. By the end of September last year, Treasury bills in issue were £625.8 million more than in September, 1954. That position, and the corresponding increase in the size of the liquid assets of the banks, has made the operation of the credit squeeze very much more difficult than it might otherwise have been. By the end of September the increase in Treasury bills in issue had been reduced from £625.8 to £339.2 million. Indeed, the Chancellor of the Exchequer said yesterday that during 1955 the total amount of Treasury bills outstanding had been reduced by £143 million.

If we are to make money scarce and to be in the position in which people cannot get short-term finance to help them over difficulties and thereby impede the whole of the Government plan for the redeployment of labour, it is essential that we should try further to reduce the size of the Government's floating debt. Quite a lot has been said about the rates of interest that we have to pay upon the National Debt, and on the floating debt in particular. When we are trying to take first-aid measures it is very reasonable that the increase in the Bank Rate should result in an increase in the rate of interest on Treasury bills and short-term Government loans. That can never be the ideal once one has got over the immediate first-aid measures.

I hope that my right hon. Friend and the Economic Secretary to the Treasury have read the extraordinarily interesting article in Lloyds Bank Review for April, and noted particularly the point which is brought out of the essential difficulty of trying to fund the floating debt at a time when short-term interest rates are higher than long-term interest rates. By every rule of desirability it ought to be the other way round. The interest we get by lending to the Government long should be a sufficient inducement to make us wish to sacrifice our own liquidity, but at the present time if we go out of Government shorts and into Government longs, not only do we sacrifice liquidity but sacrifice about ½ per cent. in yield.

The essential aim of the Government should be to try, by bringing down the Bank Rate at the earliest opportunity, to reduce the rate of interest on the Government's short-term debt and they should couple that with the anti-inflationary measure of a substantial funding issue of Treasury bills, which will then become an operation much easier for the Government and much more attractive to the holder of Treasury bills. The Government would thereby be able to retain a sharper and very much more effective control over credit. It might even be possible to do without directives to the banks about lending such as were issued last summer.

In his Budget speech my right hon. Friend mentioned that savings were the best means of reducing the floating debt and getting rid of Treasury bills. He said: The National Savings movement will carry out a funding operation of the most effective and beneficial kind, and will prove itself a powerful ally in the battle against inflation."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 873.] I agree fully. I welcome very much indeed the proposals for putting into operation the recommendations of the second Millard Tucker Report, although I may be affected personally by them.

I would put a question to which I hope it may be possible for the Minister to reply. It is on a matter which is causing uncertainty in the City, and particularly in institutions which deal with various forms of pensions and annuities. Are the changes, which the Chancellor's proposals for Income Tax and Surtax relating to contributions to a superannuation fund for self-employed persons, included in his proposals if the superannuation fund is not reinsured with a life office, and is the investment income of such funds to be relieved of tax on lines similar to those funds approved under Section 379 of the Income Tax Act, 1952? It would be unfair if it were not so.

At present, there are proposals in the Budget—excellent proposals—that insurance companies operating life annuity funds are to be given a tax remission to bring them into line with pension funds. It would be unfair if new anomalies were created by insurance companies being given a remission under the second Millard Tucker proposals while pension funds were not.

Mr. William Shepherd (Cheadle)

Surely it is a fact that at the present time interest on these funds is tax free and the interest on external funds held by life offices is taxed. The Government are putting the external funds on the same basis as the pension funds.

Mr. Freeth

That is true. The question has arisen in connection with superannuation funds which are not insured with a life office. That is why I raised the point.

I should like to reiterate the regret expressed by my hon. Friend the Member for Langstone (Mr. Stevens) that a further increase has been made in the Profits Tax. In Committee on the Autumn Finance Bill I was lucky enough to catch your eye, Sir Charles, and to make certain remarks on the subject. I did not consider an increase of that tax to be desirable. Nothing has happened in the interim to lead me to change my opinion, and I express again my regret that the Chancellor has disappointed us in this respect.

We must all agree that Government saving must play an essential part. A sum of £100 million is to be raised by Government economies—we know not where—but I think there is always throughout any large concern—and the Government is a very large one—economies which can be made. There are economies of a few thousand pounds or a few hundred thousand pounds from case to case, and over the whole realm of the Civil Service that can be fairly large. It is very difficult to compare the Civil Service today with the Civil Service of before the war, when the need for economy and not being extravagant was looked up to very much indeed. The Civil Service of those days was one which went in for economy in a way in which the Civil Service of today does not.

There is one department under the Treasury in which one can make a complete comparison between today and before the war. Unlike the Ministry of Food, it has not had its functions increased. It was in existence and its functures, so far from increasing, have decreased. I refer to the Estate Duty office. Before the war, Estate Duty was chargeable on any estate over £100, and that meant that a very large number of estates came within the purview of the office. I have had some slight connection with this office in the sense that my father spent his working life within it, but the information I am about to give is easily obtainable from Questions asked in the House and from details contained in previous Finance Acts.

Before the war, Estate Duty was leviable on estates of over £100. A very large number of very small estates was dealt with by one man merely signing the probate registry when it came along. The late Sir Stafford Cripps, about whom so much has been said today, did one thing of which I heartily approve. He increased the limit on Estate Duty to £2,000. The present Lord Privy Seal increased the limit again to £3,000.

Mr. Douglas Jay (Battersea, North)

We should give credit where it is due. It was my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) who made the first increase, and not Sir Stafford Cripps.

Mr. Freeth

I would not cause any dissension for one moment between the right hon. Member for Bishop Auckland and the shade of Sir Stafford Cripps. At any rate, let us say that it was the party opposite.

This increase, naturally, had a considerable effect upon the number of cases with which the Estate Duty office actually deals. In 1939, it dealt with 153,000 estates. In 1954–55, it dealt with 70,000. In other words, the number of estates upon which it levies duty has decreased by half. Not only has the number of estates decreased, but the number of duties leviable on these estates has decreased. Before the war, in addition to Estate Duty there was a Legacy Duty and a Succession Duty. All the legal, difficult and troublesome work was on the Legacy and Succession Duties. Therefore, we have now the position where the office is doing one half of its former work, dealing with half the former number of cases and levying upon estates one-third the previous number of taxes.

What has happened to the number of people doing this work? At the top of the office there is a Controller. In 1938 he was supported by one Deputy-Controller. Today, he is supported by two Deputy-Controllers. He was also supported in 1938 by two Assistant Controllers. Now, for some extraordinary reason, he needs nine Assistant Controllers. These gentlemen live in a rather rarefied atmosphere and the immediate administration of the office comes under a rank known as Chief Examiner. Before the war there were 19 of these. Today, apparently, the office needs 50. Before the war, there were 95 senior examiners, and for some reason which I cannot discover there are apparently only 119 today. I should very much like to know what these gentlemen and ladies spend their time doing.

I willingly admit that before the war they were overworked, and they were certainly under-paid. I think that they are under-paid today. Obviously, they are either drinking tea, which I do not think they are, or they are exceptionally busy and taking work home every weekend. If that is the case, the work must be done on a thoroughly inefficient basis. We need some kind of efficiency expert to go through the office—if I may say so—like a dose of salts. The result should be to get rid of people who at present are occupying positions in which I do not believe there would be jobs for them to do if the office were efficiently managed.

Mr. Houghton

Is the hon. Member aware that the Estate Duty office is working five hours a week longer now than it did before the war, and has been doing so for the last ten years? Is he also aware that the Inland Revenue Department has probably the most efficient organisation and methods division of any Department in the Civil Service?

Mr. Freeth

The second point I can honestly dispute by means of the hon. Member's first point, because if all these people are working longer hours today than they did pre-war and are producing less result, there must be inefficiency. I should like to know how much extra checking and rechecking they do as compared with what was done pre-war.

I am told by a solicitor friend of mine—and I am not a solicitor—that Sir Stafford Cripps suggested to the Inland Revenue Department, and particularly to the Estate Duty office, that the Department should "make the pips squeak." I am told that so keen are these people on getting the utmost farthing from the estate of a deceased person that very often correspondence on the value of a picture or a chair will drag on until the time and energy expended on each side of the business is far in excess of the duty leviable on that asset.

If we are having this kind of situation throughout the Civil Service in which two men are needed to do what one man did before the war, or 50 men to do what 19 did previously, it is high time that we got down to the problem of business efficiency. I cannot help thinking that on these lines, if not on any other, significant economies can be made in Government expenditure.

7.40 p.m.

Mr. Tom Brown (Ince)

I wish to refer to some remarks made by the hon. and gallant Member for Ilford, South (Squadron Leader Cooper) yesterday, when he made a statement which has already had its effect upon certain classes of workers. I think it is just as well that we should get the facts on record, rather than allow that statement to gain a wider currency than it has done already. I think we should arrest the damage which that statement has caused.

For the purpose of greater accuracy, which is a statement often heard in the House, I have obtained a copy of the statement made by the hon. and gallant Member, and I am going to quote what he said as reported in c. 944 of yester day's OFFICIAL REPORT. I was here when the statement was made, and this is what the hon. and gallant Member said; I am sorry that he is not in his place now. I quote: The plain fact is that the coal industry has let us down. It is the one industry which has shown no increase in productivity since the end of the war, notwithstanding the fact that vast sums of money have been poured into it for re-equipment."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 944.] My hon. Friend the Member for Cardiff, West (Mr. G. Thomas) then interjected to say that that statement was not true.

I want to submit that, when a body of men in any industry is emerging from the past and trying to live down the bitterness, the turmoil and the strife which has existed in the industry for more than a century, it is damaging for any statement to be made on either side of this House to interfere with what is taking place. Therefore, I want to submit to the hon. and gallant Member that he ought not to have made that statement in the manner in which he made it, but that he ought to have acquainted himself with the facts concerning the mining industry since vesting day. Whatever our political philosophies may be, we are all anxious that there should be success in the mining industry. We are all anxious that there should be an improvement in coal output, but when statements like that are made by responsible Members on the Government side of this House, they have a bad effect upon the men in the industry.

The hon. and gallant Member went so far as to say that his statement was one of fact. He had not taken the trouble to find out whether what he classified as facts were correct or not. I desire to put the facts as they appear in the 1954 Report of the National Coal Board on the working of the industry since vesting day in 1947, and to show quite clearly that there has been a continual and gradual increase in the output of coal since vesting day on 1st January, 1947.

What are the facts? In 1947, when the industry was nationalised, the total output of coal in Great Britain was 187.2 million tons, which was the lowest figure ever recorded since 1913. In 1948, twelve months later, it was 197.6 million tons. In 1949, it had gone up to 202.7 million tons, and in 1950 it was 204.1 million tons. In 1951, it was 211.9 million tons; in 1952, 214.3 million tons and in 1953, 212 million tons. We know the reason why there was a slight reduction in that year. In 1954, and these are the latest available figures, it had gone up to 214 million tons. There are the facts, showing that there was a gradual and continual increase in the output of coal in this country since vesting day in 1947.

Mr. Julian Ridsdale (Harwich)

I am obliged to the hon. Gentleman for giving way. Is it not a fact that since 1951 wages in the coal industry have gone up by 29 per cent., that capital has been invested in the industry to the extent of £200 million and that production since 1951 has gone up by ½ per cent.?

Mr. Brown

It is quite true that there has been great capital investment in the industry. It was admitted by the Government that there was need for fresh capital to be sunk in the industry, and the hon. Gentleman knows full well that the reason why that investment had to be so great was because of the neglect of the past. When the Government took over the mines of this country, we had to take over a lot of junk. Junk is the word. Yes, it is true to say that what we had to take over was nothing but a lot of junk. Therefore, it was of paramount importance that capital investment should be undertaken to the greatest possible extent to remedy the neglect of the past.

What are the facts regarding output per man-shift at the coal face? The statement made by the hon. and gallant Member for Ilford, South is damaging to the mining industry, and nobody wants to undermine the good will that is now prevailing in the industry. I will give the facts regarding output per man-shift at the coal face. In 1947, it was 2.85 tons; in 1948, 2.92 tons; in 1949, it was over 3 tons per man; in 1950, 3.11 tons; in 1951, 3.17 tons; in 1952, 3.14 tons: in 1953, 3.21 tons and in 1954 it had risen to 3.25 tons. There are the facts, as assembled in the Report of the National Coal Board for 1954. I hope that what I have now stated will give the lie direct to the statement which came from the hon and gallant Member for Ilford, South yesterday.

Let me say that there is nothing more damaging and more unsettling to men who are playing their part in the daily round and common task of industry than to have statements like those made yesterday by the hon. and gallant Gentleman. I care not where the hon. and gallant Gentleman looks, he will find that there is no other industry which has volunteered to work extra time in order to help to solve the economic difficulties of this country. Where is there another industry in which the men have volunteered to work an extra shift? They have not done so for one week or a year; they have been doing it for eight years. It is reviewed at the end of every twelve months, and with the constant and continuous application of their minds to the position of this nation, the miners have always renewed that arrangement. For the past eight years in succession they have renewed their promise to work a voluntary shift, and the nation should be proud of them.

What does that mean? The working of a voluntary shift in the mining industry week after week and year after year means that every year 12 million tons of coal are produced, which is a great benefit to this country. The miners have worked 400 extra shifts since 1948, and then the hon. and gallant Member for Ilford, South has the audacity, the cheek, the impudence to come to this House and say that the mining industry has let us down. There is no truth in it at all, and I hope that what I have said will clear the air so far as that statement is concerned.

Mr. Ellis Smith

Is my hon. Friend aware that at a mineworkers' conference held in Stoke this week prominent and responsible members of the union stated that when the men worked extra shifts they also ran a greater risk of industrial disease, and particularly of pneumoconiosis?

Mr. Brown

I quite agree. I know that there is that difficulty, and it is not always understood by people of the non-mining fraternity.

It is not my intention to develop all the aspects of the extra shift question, but it has its effects on coal production. We know that the maintenance of machines is extremely difficult in mining because the machines are working six days a week. These machines are not like the machines in a factory, because, to a very large degree, in the mines the operator cannot see what he is doing, or should I say he has great difficulty in doing his job.

I want to direct one or two criticisms at the Budget. I listened all day yesterday to the debate and have done so today, and it seems to me that we have been rambling round the sterling area and the dollar area; we have travelled from Chile to Peru and to places on the Continent. I want to bring the Committee a little nearer home. The effect which the Budget will have upon the old-age pensioners and lower-income groups will be tremendous, and it would reflect the failure of the Government to consider the economic and social conditions of the old people.

I do not know whether the Chancellor gave any thought to what has been happening in the last few weeks. I do not know whether his information bureau has been telling him what has been taking place. The hon. Member for Louth (Mr. Osborne) knows very well, because he has told me about this. There have been meetings in his constituency within recent months calling the Government's attention to the inadequacy of the basic pension, which has been undermined by the rising prices of food, coal and light. A few weeks ago there was a large national conference in the Central Hall, London, and since then two influential and responsible deputations have met the Minister of Pensions and National Insurance to point out to him the effect which rising prices have had on old-age pensioners and those in the lower-income groups.

The first deputation was on 16th March and the second was on 11th April. Both deputations desired to draw the Government's attention to the economic and social conditions prevailing in the homes of the old-age pensioners and people in the lower-income groups. They were promised that sympathetic consideration would be given to the points which they had raised.

If I desired to detain the Committee I could go through the budgets which I have here, showing the effect which the high cost of living is having upon the old-age pensioners. Before the Budget they were called upon to meet the increased cost of bread consequent upon the removal of part of the bread subsidy. In September, they will again he called upon to pay more for bread, because the Chancellor yesterday announced the removal of the remaining £12 million of the bread subsidy. Furthermore, they will have to meet the increased cost of milk, the price of which will rise in July. That will be three increases within a few months—on bread, on milk, and then again on bread. In September, the price of a loaf will be the highest ever recorded in this country.

The argument may be advanced from the Government Front Bench that wages have increased, and I quite agree that industrial workers are able to put forward strong and logical arguments why their wages should be increased. But has it dawned upon the Government that old-age pensioners cannot do that? What a tragedy it is that in the twentieth century old folk who have served their day and generation and have given of their best to industry, commerce and the vocation in which their lot was cast should find, in the eventide of life, that they have to organise themselves to try to secure from the Government what the Government should give them with a generous hand. I cannot develop that argument now, as time will not permit.

I want to plead with the Government at least to give some consideration to the tobacco concession. I have used these arguments before and I use them again. I understand that the increase in the price of tobacco will be 2d. or 2¼d. per ounce for the lower grade tobacco, and that the increase in the price of a packet of cigarettes will also be 2d. No one, whatever his politics may be and whatever his studies of economics may be, will deny the old-age pensioner or someone in the lower-income group the right to a smoke. Men, and women too, have been enjoying that right for many years, and who will deny them that right?

The Government's attitude on this subject in the Budget has, as we would say in Lancashire, just about "put the tin hat on it." That is what we say when we are reaching the limit. I think that the Chancellor would be well advised, in the interests of goodwill towards these old folk, to increase the value of the 2s. 4d. coupon which the old folk get for one ounce of tobacco and cigarettes a week and make it 2s. 6d. One hon. Member opposite suggested something like that.

Mr. Osborne

Does the hon. Member not agree that in fairness to those old folk who do not smoke it would be better to do away with the tobacco allowance and give everybody its worth in money?

Mr. Brown

I should welcome that wholeheartedly. If I could wipe out all these little amenities and concessions and give the old folks an adequate pension commensurate with a decent standard of life, I should take that step, because the present system operates unfairly.

Let us examine what the tobacco concession costs. The concession was given to the old folk in October, 1947. It was a; result of the Report stage of the Finance Bill that year, when a new Clause was put down. After long discussions and pleadings from both sides of the House, it was agreed that the concession should be made by the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton).

How much does it cost? In 1953–54 there were 2.24 million people receiving it, and in 1955 the number had risen to 2.38 million. There was naturally an increase in the cost of this concession because of the increased number of people on retirement pensions. The total cost has been about £13.8 million. In 1954–55 it was £14.6 million.

What would it cost to concede the extra 2d. and make the voucher value 2s. 6d. instead of 2s. 4d.? It would cost £1 million a year. The Government say—and I hope they succeed—that they will set out to save £100 million in Government expenditure. We have had that promise before. I hope they succeed on this occasion, and I further hope that they will produce to the House the actual savings which they have accomplished. If they save £100 million on the administrative expenses of Government Departments, are we not entitled to ask that £1 million of that £100 million should be conceded to the old-age pensioners in the form of an increase in the value of the tobacco voucher from 2s. 4d. to 2s. 6d.? That is not asking too much.

I welcome also the promise, which I hope will be fulfilled, and the hope that less coal will be imported in the ensuing year. This is a step in the right direction. Hitherto, we have been forced by economic circumstances, together with the needs of industry and other factors, to import coal. We are a coal-producing nation, and I have always regarded it as a tragedy that it has been necessary for us to import coal from abroad, but many factors have been responsible for that being done.

Let it be remembered that the Government have not borne the expense of the imported coal but that it has had to be carried by the National Coal Board, which, in my judgment, is manifestly unfair. We welcome the news that the reduced imports this year will save £6 or £7 million. Not only do I hope that we succeed in the proposal to reduce the imports of coal, but I hope that we shall work all out to increase the production of deep mined coal, so that we may help to solve the financial and economic difficulties of the nation.

Great play has been made of the proposals to stimulate savings. If we are British, we have done our share in the Savings movements of the past. There has not been a single Savings campaign in which I have not been engaged, and I will do it again, not for the sake of myself or of those who save, but because anyone who can contribute in that way to achieve the financial and economic stability of the country has a duty to do so. We shall have our criticism of the Budget and of the Finance Bill, but I hope that over and above our criticisms will stand out the fact that we belong to England and that England belongs to the people, and work for it we must.

8.2 p.m.

Dame Irene Ward (Tynemouth)

I do not want to enter the controversy between the hon. Member for Ince (Mr. T. Brown) and my hon. and gallant Friend the Member for Ilford, South (Squadron Leader Cooper) concerning coal. I am bound to say that in the old days before the war the country got its coal far too cheaply and that there was a great deal to be said on the side of the miners. The question that really puzzles the country concerns the productive capacity of the mining industry and production in the "bull" week just before Christmas.

Coming from Tyneside and having been Member of Parliament for Wall-send for 14 years, with a large number of mining constituents with whom I was on very good terms, although, I regret to say, they did not vote for me, I know something about the mining industry. I know full well that under no circumstances could one expect miners to maintain the "bull" week output week after week. That is clear to anyone with a knowledge of mining. At the same time, however, there is generally a great discrepancy between the "bull" week output and the weekly output of the industry. That is the question that the country wants answered, and I put it because it is important.

There is another point I should like to take up with the hon. Member for Ince. I agree that on vesting day the National Coal Board acquired a large number of unproductive pits which were in course of being worked out. I cannot, however, let it go unchallenged that vesting day saw the National Coal Board taking over nothing but junk in the shape of mines.

Although I have a fair knowledge of the mining industry in Northumberland and Durham, I know something of it also in the M.A.D., and I should like to say a word of support for one of the country's great collieries, the Bolsover colliery. I am proud to be able to point out that even today the Meco-Moore power loaders developed by the Bolsover Company under private enterprise are still largely used by the National Coal Board after nearly ten years of nationalisation.

I suggest that we might now call off this controversy, for each side has put its point of view. Our main object is to get a happy and contented mining industry and to obtain the largest productive capacity in the interest of the country. As I have already said, while I grant that before the war there were good, bad, and indifferent miners, there were also good, bad, and indifferent colliery owners. That puts the position fairly clearly.

I want to make my small contribution to the debate with as little rancour as possible although, after quite a long time in the House of Commons, I feel more frustrated and disappointed by this Budget than perhaps by any other Budget. I will give my view on the Budget quite clearly. Before making my criticisms, however, I have one or two things to say in complimenting my right hon. Friend the Chancellor of the Exchequer.

Like many other hon. Members, I am very glad that the Government have accepted the recommendations of the Second Report of the Millard Tucker Committee. That is a great step forward. It was long overdue, and we are all very glad. But I was also pleased to read in the Press today that my views concerning small fixed income groups and people nearing retirement age who have not been able to provide for their old age are shared by Sir James Millard Tucker, who considers that the Chancellor of the Exchequer has not paid due attention to providing for them. I am pleased that my hon. Friend the Member for Langstone (Mr. Stevens) referred to what he called the late entrants into the Millard Tucker Scheme. In viewing the future stability of the country, it is of tremendous importance to give to every man and woman an opportunity of providing, by their own efforts, possibly assisted by the Government, for a good pension so that they may have a happy and well deserved retirement.

There are two other points upon which I congratulate my right hon. Friend. I am pleased that he has at last accepted excavation and tunnelling as processes which can attract certain allowances, although unfortunately, as so often happens in this rather difficult world, the concession has come somewhat too late for those very enterprising and productive companies which have already created the new enterprises which match up with modern development. I am referring here to Smiths Docks in my own constituency, a company which has a reputation for ship repairing second to none in the world. That company has set its house in order; it has built its new docks in order to meet the repairing requirements of the new modern tankers. I am afraid they will have missed the value of this concession. However, I try not to carp unduly; I am pleased that those who undertake new enterprises in the future will receive this assistance from the Treasury.

I am very glad also to hear about the reduction in Stamp Duty for owner-occupiers. That is a step towards helping people to acquire their own homes, and, in accordance with my view of life, I like people to be in a position to buy and own their own houses. I therefore think that that is a valuable, though small, concession, and I welcome it.

As I understand it, my right hon. Friend has laid great emphasis, quite rightly, as the whole Committee agrees, on the need for savings. He outlined a variety of schemes which he hopes will add to the total reserve of savings in this country. I am bound to point out that, in all the suggestions which were either explicit or implicit in his Budget statement, he implied that people had the money to save.

I can quite see that a large number of people in this country will enjoy the excitement of the Premium Bonds; but, after all, they must have money to be able to play with them. No one can take a £1 share in Premium Bonds without interest unless he has money to put into it; nor can he increase his purchase of National Savings certificates unless he has the money to purchase them, or buy a better issue of Defence Bonds unless he has the money available. In general, of course, all the suggestions put forward by the Chancellor did assume, quite rightly, that a very large section of the community has money to spare. I wish my right hon. Friend all success in his imaginative schemes.

I come now to what has caused me very great regret and disappointment. Indeed, I felt so angry yesterday that it was perhaps a good thing I was not fortunate in catching your eye, Sir Charles. I am referring to the plight of the small fixed income groups. On this subject of lack of reserves, it is said that we gave—as indeed we did—our strength, our manpower and our money in order to win the last war. That, of course, is true; but what my right hon. Friend has not seemed to appreciate is that those reserves which were available for us to draw upon in this way had to a very large extent been created by the thrift of those who are today counted among those receiving small fixed incomes.

If I were to write to the Prime Minister or to the Chancellor of the Exchequer, or if the Financial Secretary to the Treasury or the Economic Secretary were to answer my speech tonight, I would not mind having a bet in Premium Bonds that the statement made from the Front Bench would be that the greatest service we can do to help the small fixed income groups is to stop inflation. Of course, that is a truism. Nevertheless, I do want my right hon. Friend the Chancellor, and those associated with him, to accept this, that if inflation were stopped tomorrow, very, very few of these people to whom I am referring—those on small fixed incomes of pre-war vintage—would benefit at all.

Of course, the general increase in the cost of living presumably would cease, though it is not going to happen for some considerable time; but the fact is that the cost of living has steadily risen since the beginning of the war, and these people have used up all their resources and are now in a very serious financial plight. Anything done towards stopping inflation will bring about an increase in the standard of living for those who are working today, but those poor, unfortunate people who are now living on small fixed incomes will receive virtually no amelioration of their hardships at all.

I should like to read one letter, from among the many hundreds I have received, which puts the case very clearly. I hope that members of my own Government who are connected with forming financial policy will not close their ears to what this letter states, because sometimes I would like to take a wooden hammer and hit their heads good and hard. This is what the letter says: I decided to write to you partly to thank you, and partly because the facts of my own case may help you as representative of thousands of others. I should like to point out that I am not complaining because I have a small income, but because of the unimaginative way the Government has treated a class of people who have in the past in the main been its loyal supporters, but who, like myself, are beginning to feel a deep sense of frustration and impatience. That is what I feel as a Member of Parliament, but I really do not know whether the Government are aware of it. I have had an expensive education, for which my father paid, at a boarding-school and later at Newnham. Yet, as a retired schoolmistress, I now have a pension of £271 gross. Yet, because I retired in 1954, I cannot claim any increase under the new pensions plan. I have had to abandon smoking—probably an advantage—and now my book club, because of increased postal charges, which also affect my exchange of books from Boots Library. All books have to come here by post. She writes from very near the Border. A telephone is almost a necessity in this remote spot, though the charges are fast becoming prohibitive. Rates are terrific, and urgent house repairs swallow up the rest of my small income. Even a slight reduction of Income Tax for people similarly situated would, I am sure, be an enormous relief. With many apologies for trespassing on your valuable time.

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

May I ask the hon. Lady to write to her correspondent and say that if she is a schoolteacher who retired in 1954 she will unquestionably have her pension increased under the Government's proposals for pensions increases which were recently before the House?

Dame Irene Ward

I am delighted to hear it.

That brings me to my next point. I was not using that letter as a criticism against the last Pensions (Increase) Measure which, as my right hon. Friend, knows, I very much welcome. What I wanted to point out was that if inflation were to stop tomorrow, in six months' time or in a year's time should we have reduced postal charges on books? Should we have reduced charges for telephones? It is possible, of course, that we may have a reduced Tobacco Duty; but, if I may be cynical, I doubt very much, unless it is just before an Election, whether we would have any reduction in that tax. I am only pointing out that the charges of life have risen so considerably, due a great deal to increased salaries and wages which, quite rightly, are not going to be reduced. Therefore, people living on small fixed incomes will not benefit much if inflation is reduced, except in so far as financial stability is imperative for our survival.

I come to my right hon. Friend's comment on the Pensions (Increase) Bill. I am delighted to know that the writer of this letter is going to get a little comfort, and I shall have great pleasure in sending her a copy of HANSARD containing my right hon. Friend's intervention.

A great many of us on both sides of the House asked for a new Pensions (Increase) Bill. We were also fortunate in persuading the Minister of Transport to make some suggestions, which I am glad to say were accepted, to the Chairman of the British Transport Commission in relation to railway superannuitants, and, also, we have got some concession with regard to the pre-Oaksey police widows. But I was under the impression, as were many other people, that we were not going to stop there. It is quite clear to everyone that, unfortunately, we cannot insulate everybody living on a small fixed income against the general rise in the cost of living, but we can insulate a great many more groups than apparently the Chancellor is willing to accept.

I say this very firmly indeed. When the Treasury accepted responsibility for the spending of £12 million on the Pensions (Increase) Bill and the increases in respect of the Services, which will be embodied in the Royal Warrant, as well as the other concessions which we all gladly welcome, that has got to be paid by the general public. To refrain from going further in this Budget and giving some concession in Income Tax relief to people like the writer of this letter is a most dastardly thing, and I say that avowedly because it makes me so angry that I can hardly bear to talk about it.

Mr. George Wigg (Dudley)

The hon. Lady is not finding much difficulty in doing so.

Dame Irene Ward

All these concessions to encourage small savings, even the prizes for the Premium Bonds have got to be met out of general taxation, out of the Treasury funds. Therefore, I consider that it is most unfair that my right hon. Friend has not done something for those gallant and thrifty people to whom he and everybody else owe so much.

I have made my own suggestions. I do not expect that they will necessarily be acceptable. I have been in this House long enough to know that one keeps on making suggestions and keeps hoping that one will sow a few seeds even on stony ground—though, my goodness, it is very stony. It would be a tribute to these people living on small fixed incomes if the Chancellor could have found it in his heart to have relieved single people of all Income Tax on incomes up to £300 a year and married couples up to £400, starting at the age of 60, 65 or 70—I do not mind which. I have been advocating this, and so have many other people, for about four years, but still we have had no result from the Treasury.

I want to make two other points. Last year the Chancellor made some alterations in the standard rate of Income Tax, and he increased the level at which Income Tax should start, following the recommendations of the Royal Commission on Taxation. The present Lord Privy Seal said that he had had to put forward the concessions which he had given in a great hurry because he had not had time to study in detail the Report of the Royal Commission on Taxation. I generally accept what is said from the Treasury Bench in good faith. If something is said. I usually expect it will be carried out, but I do not feel that way now. The Lord Privy Seal said that he hoped that by another year he would be in a position to deal with the recommendations of the Royal Commission on Taxation.

But the new Chancellor—not a bit of it. He goes up quite a different primrose path, and once again all these people are thrown to the winds. One of the meaner tricks played by the Lord Privy Seal in the last Budget was when he raised the level at which people started to pay tax. Great emphasis was laid on the fact that this was in accordance with the recommendations of the Royal Commission on Taxation. My right hon. Friend then altered the band of Income Tax relief at which the graduated rates of Income Tax are payable. He said that this was in accordance with the recommendations of the Royal Commission, and that it was to prevent people with high incomes benefiting from starting their Income Tax payments at a higher level.

What he should have done—and I say this with great temerity because I do not like arguing with the Treasury—was to put a ceiling on the income and to leave the bands of graduated Income Tax relief intact for the smaller income groups. That would have helped the people with incomes of between £300 and £400 a year, and it would have ensured that the people who had higher incomes would not get the benefit of the increased personal allowance. But what happened was that the people in the lower income groups received very little benefit. I am not speaking here of the very low income groups but of those people with between £300 and £600. They received very little benefit because they lost some of the benefits they had received under previous Finance Acts. The higher income groups did not mind that small alteration because they received the increase of the reduction in the standard rate of Income Tax over a much wider field.

So those people were all right and the very low income groups were all right, but the great band of people, represented by the school teacher whose letter I have read, received very little benefit. I thought that was one of the meanest things that any Chancellor of the Exchequer could do.

I was prepared to accept the statement that this had to be done in a great hurry because the Royal Commission on Taxation had just reported. So I waited. In fact, I should have gone on Monday with my colleagues in Germany to Berlin and I gave one hon. Gentleman opposite a pair which I shall maintain. However, so certain was I of the integrity of the Treasury that I returned from Berlin all ready to make a speech of thanks for something having been done for those with small fixed incomes. It is as barren and abominable a Budget so far as they are concerned which it has ever been my bad fortune to hear.

It is difficult to find an opportunity to talk freely here without being called to order by the Chair. Of course, finance in this House is strictly controlled, and so we rarely have a chance of saying what we would like to say. So, whilst I am on my feet, I want to speak about the Service widows.

The Minister of Defence, when Minister of Labour, quite rightly took great pride in increasing the prosperity of the industrial workers. We are all proud of that and we are glad that the standard of life has increased so greatly. My colleagues read out figures from Blue Books and everyone is continually talking about the number of television sets bought, the amount of beer consumed, the quantity of tobacco smoked, the number of washing machines that are bought. There is constant reference to all the things that make life so much more pleasant and which we all welcome.

That is all right, and we all supported the Minister of Defence when he was Minister of Labour. In fact, he never failed to stimulate increases when it was a matter of negotiation between employers and employed, and so the merry round went on. When, however, the Minister of Defence has to battle with the Treasury, he is of no more use than a bending palm tree, because he cannot stand up—

Mr. Wigg

On a point of order, Sir Charles. Surely the hon. Lady is not in order to refer to a Member of the Front Bench as a bending palm tree? Is that not unparliamentary language?

Dame Irene Ward

If I may say so, bending palm trees can be very attractive—

Mr. Rhodes

How does the hon. Lady know?

Dame Irene Ward

But I am not concerned with attraction. I am concerned with action. On the other hand, we have had no trouble with my right hon. Friend on the Treasury Bench, the Financial Secretary to the Treasury. When one of my colleagues, the hon. Member for Burton (Mr. Jennings), moved an Amendment during the Committee stage of the Pensions (Increase) Bill to increase pensions from 6 per cent. to 10 per cent., my right hon. Friend accepted that Amendment in the most charming way. He said that it would create some anomalies, but that this would not matter. We did not even have to argue the case.

My right hon. Friend the Financial Secretary evidently knows how to deal with Treasury officials. The same, I think, applied to the pensions increases which will be announced in the Royal Warrant. I do not mind saying to my right hon. Friend that I have written a letter to the noble Lord who will speak soon on this matter in another place, telling him to make the Government as uncomfortable as he possibly can.

My point is that everybody else will get a 10 per cent. increase except the non-attributable Service widows. The reason, as given by the Minister of Defence in his charming way, with all the fronds of the palm tree a-flicker, was that they had received an increase of pension and that some of their pensions had even been doubled in 1952. My right hon. and learned Friend did not tell us, of course, that the basic pension of these wretched Service widows had not been increased for 100 years. So when I asked for the statistics to be set out in the OFFICIAL REPORT I found out that the widow of a lieutenant and the widow of a captain, in spite of the fact that there has been an increase of 255 per cent., has only now reached the figure of £115.

That means that after their pension has been increased in 1952 and 1956 by 255 per cent., those widows can still apply for National Assistance. If one receives less than £156 a year one does not need to pay contributions to the National Insurance Fund, for that is considered a very low income. When the Minister of Transport was making his speech about the railway superannuitants he went out of his way to point out that, with Sir Brian Robertson, he had limited the income below which railway superannuitants would get benefits to £250. He specifically emphasised that that would deal only with the people in the greatest distress.

I hope the Financial Secretary will have another battle with the Treasury and perhaps will lend a little support to the Minister of Defence. What is the justification for taking a few—it could not have been very many—Service widows and depriving them of this 5 per cent.? I think it is a very mean trick indeed.

Mr. H. Brooke

Perhaps we can get this right. Those Service widows are receiving 5 per cent. increase on their pension, which was fixed in December, 1952. No one else under the Pensions (Increase) Bill or under the proposed Royal Warrant, whose pension rate was fixed as recently as December, 1952, will receive 10 per cent. increase.

Dame Irene Ward

Can my right hon. Friend finish his sentence and tell me how many people under the Royal Warrant have not had their basic pension altered for 100 years? I am waiting for an answer. Perhaps I had better finsh what I was saying. This is the meanest decision that the Treasury or the Ministry of Defence has ever taken. I thought yesterday, "What is the good of going on battling with such a stubborn lot of Front Bench Ministers? They do not seem to understand about the small fixed income groups at all." That is what it amounts to. I thought yesterday, "I have battled for four years on this subject; I have had a lot of support in the House; my correspondence has cheered me a lot. Why go on?" And then I recalled that I come from the North country, and I am jolly well not going to be beaten by these people. If I can find a way of embarrassing the Government or making myself unpleasant to Front Bench Ministers, I give full warning that until the position of the small fixed income group is satisfactorily settled, the Government can look for a Border lass going out to mow them down on this issue as much as she possibly can.

8.38 p.m.

Mr. John Cronin (Loughborough)

I listened to the speech of the hon. Lady the Member for Tynemouth (Dame Irene Ward) with the greatest pleasure, and I am sure that most of my hon. Friends will agree with much of what she said. I would not go as far as to say that I have ever shared her wish to strike the Members of the Government on the Front Bench on the head with a wooden hammer. My experience is that that causes considerable mental deterioration on the part of the recipient.

Mr. Cyril Bence (Dunbartonshire, East)

And deterioration to the hammer.

Mr. Cronin

The prospect of further intellectual impairment on the Government Front Bench would be too alarming.

I would disagree with the hon. Lady about her reference to the coal industry. I well understand that this is a controversial matter. How much further productivity on the part of coal miners can be increased is certainly controversial. I and many hon. Members on this side of the Committee feel that it cannot be increased much more. I am sure that the hon. Member will agree, however, that if the mining force at present cannot produce enough coal, the simplest answer is to have more coal miners. The way to achieve that in competition with the demands on the labour forces of the rest of industry is by giving them higher wages, better conditions of work and a better standard of living altogether. I do not think that that is perhaps generally accepted on the other side of the Committee.

I listened with very great interest to the well-informed speech of the hon. Member for Basingstoke (Mr. Freeth). He drew attention in the prima facie case which he made to some inefficiency on the part of a Government Department. We on this side of the Committee did not regard that with any great surprise. We have had numerous instances of that, for example, with regard to the question of public disposals of surplus stocks which is frequently raised at Question Time. I should like the hon. Member to realise that the fault is not on the part of the civil servants themselves but on the part of the Government. He suggested that a business efficiency expert should get to work on the Department. He used a somewhat homely metaphor. I suggest that that business efficiency expert should get to work on the hon. Gentleman's own Front Bench.

The hon. Member for Basingstoke mentioned that during the last quarter of last year there was a decrease in the floating debt and a decrease in Treasury bills. I am sure that the Financial Secretary will agree with me that that decrease is not entirely due to the Government. There is a very simple mechanism which forms an important part of that decrease. If our gold and dollar reserves are going down, the decrease in the debt is automatic. To illustrate what I mean I would point out that if our gold and dollar reserves go up and we are obtaining gold or dollars, they have to be bought from the successful exporter by the Government with sterling. As a result, the Government have to get further into debt to pay for them. So a fall in the floating debt, as I think the Financial Secretary will agree, is quite often an indication of a severe drop in the gold and dollar reserves, and the Government cannot take any particular credit for it. The more catastrophic the position is from the point of view of our reserves, the lower is the floating debt.

I think that most Members of the Committee will agree that this Budget has a few attractive features. I think that we all agree that the increase in family allowances is desirable, that giving help to annuitants and self-employed persons in providing for their future is also desirable, and if there is any one on the Committee who has strong views about the consumption of cider or perry of high alcohol content, he must feel some sense of gratification at the Government's action.

When one considers the Budget, however, one must first think of the economic background to the Budget. The economic background, I think that hon. Members on both sides of the Committee will agree, is verging on disaster. We had last year a £103 million deficit in our balance of payments, which made a deterioration of £308 million, and we also had a drop of one-quarter of our total gold and dollar reserves in one year. That is even worse than it sounds. As hon. Members realise, gold and dollar reserves drop more rapidly as we approach the bottom of the barrel because there is loss of confidence. We are on the edge of disaster.

I should like the Committee to consider what are the qualities of the Budget. Is it the really bold and decisive Budget needed to meet the very dangerous position that we are in? I think that hon. Members will recollect that the Emperor Nero is reputed to have fiddled while Rome was burning. I think that, compared with the Chancellor, Nero was a man of action. I would not suggest that the word "fiddle" should be applied in any colloquial sense to the Chancellor's Budget. I would not perhaps completely exclude that word in regard to the Budget just before the Election last year.

I think that we ought to consider what are our basic economic difficulties and who is to blame. They go back long before last year. Whose fault is it that we are in this rather difficult situation? It is not that of the working man.

Between 1951 and 1954 there was an increase in the national product of £1,300 million due to increased production. It cannot be attributed to bad luck, because between 1951 and 1954 there was a windfall, an accumulation, of £500 million as a result of an improvement in the terms of trade. In other words, we got £500 million worth more of imports for roughly the same amount as before in terms of production. From 1951 to 1954 there was a tremendous increase in the amount of productive activity available. It was squandered on greatly increased consumption brought about by lower taxation, lowered controls, and general encouragement to extravagance. As a result, the nation's resources were frittered away and in 1955 we found ourselves in severe difficulties.

One of the attractive features of the Budget is that it does not increase Income Tax. Hon. Members opposite probably feel that they can regard themselves to a certain extent as the champions of the Income Tax payer, because they reduced Income Tax last year and have not increased it this year. I should like the Committee to look into what happens when we have inflation—and this is something which should be brought home to the general public.

In answer to a Question on Monday, the Financial Secretary said that the £ worth 20s. in 1951, was worth 17s. 9d. in February this year. That simply means that everyone who had 20s. to spend this year had 2s. 3d. worth less in exchange this year. A tax is simply a removal of a part of one's spending power without any definite quid pro quo given in exchange. This fall in the purchasing power of the £ is substantially the equivalent of a tax. The whole country, in addition to paying normal taxation, is being taxed at 2s. 3d. in the £.

That is a most regressive form of tax, because there are no personal allowances, no family allowances, and no earned income allowances. That has come about directly as a result of the right hon. Gentleman's administration.

Mr. Osborne

The hon. Member for Loughborough (Mr. Cronin) must be aware that in the years when he was not a Member, but when his party was in power, a greater depreciation took place over which his party had no control.

Mr. Cronin

I am not entirely surprised at the hon. Member's intervention, because I have heard some of his previous interventions. When there was a Labour Government, all world prices were going up and it was only as a result of the extreme fiscal skill of the Labour Chancellor of the Exchequer that prices in this country were kept as low as possible. I should like the Committee to appreciate the Government's record. Inflation under the Labour Governments occurred when the whole world was inflating. What happened when a Conservative Government came into power?

I have some figures which appeared in the last Westminster Bank Review, and which give the rise in the average cost of living between any month in 1951 and the third quarter of 1955. We find that during the period of Conservative Government the cost of living has gone up by 2.1 per cent. in Western Germany; 2.8 per cent. in Canada, and 3 per cent. in the United States, but Great Britain tops the record magnificently by achieving an increase of 20 per cent.—nearly seven times as much as the United States, the next highest figure I have given.

The Chancellor is seeking to cope with this situation very largely by encouraging savings. That is not a very fruitful way of coping with our difficulties. It is generally accepted that individual savings are not the most important part of the country's savings. I admit that they have their desirability, but the vast majority of saving in any advanced civilised country is done by public institutions, in the form of undistributed profits of companies, surpluses of Governments, sinking funds of boards and local authorities and similar forms of public saving. Individual saving is always much less important than public saving, so hon. Gentlemen opposite are being rather sanguine if they expect an increase in individual saving to solve our problems. Individual saving is frequently largely cancelled out by dis-saving.

I should like the Committee to realise what an enormous amount of dis-saving has gone on in the last few years, and the amount of excessive consumption which has taken place out of capital and savings. There is a lot of leeway to make up.

The extent to which we can induce the public to save is a psychological problem, depending very largely upon the attitudes of individuals who are multitudinous in their variety.

The first essential is that everyone must be confident that what he saves will retain its value; people have had very little cause for confidence so far. The final psychological blow which the Government have dealt the desire to save is this Premium Bond. If there is one thing which we should seek to avoid it is to encourage people to profit by gambling. This rather unsavoury lottery is doing nothing else. It is certainly not inculcating a spirit of real thrift.

The Chancellor of the Exchequer, supported by the Financial and Economic Secretaries, has a strong penchant for monetary policy as a weapon to deal with our economic difficulties. I venture to suggest that the policy which he is using is a rather old-fashioned weapon. This is a very different age from that of about twenty-five years ago. This is an age in which enormous advances have taken place in the science of economics, and the financial and trade structure of the world has completely changed. The Chancellor is facing the disastrous cataclysm which is upon us with the bow and arrow of the Bank Rate. If there is one outmoded form of dealing with our difficulties it is the Bank Rate.

We have heard many arguments against it. It increases the cost of the National Debt and is cushioned to a large extent by high taxation. Twenty-five years ago the average businessman would have been seriously upset if he had had to pay a greatly increased interest charge, but now a large part of that increase is cancelled by taxation, and it does not upset him at all. We must realise that a rise in the Bank Rate does not very much affect the attitude of banks. Twenty-five years ago half a bank's assets were private liabilities. Now, most of them are Government liabilities, and the Government are not seriously affected by their own increased Bank Rate.

I want to make some positive suggestions, and which could be brought into effect by the Chancellor. First, he must use some measure of control—not in any indiscriminate sense but in specific ways for instance in relation to building. Fixed capital development could be kept under some sort of control by using a system of building licences. There could be a more detailed control of the structure of banking.

The next suggestion is a further tax on luxuries. The President of the Board of Trade said this afternoon that we could not afford capital expenditure while there was such a large amount of consumption; one of the best ways for the Government to reduce consumption is by taxing luxuries. There is some amount of room for increased taxes here.

Mr. H. Brooke

Would the hon. Member elaborate what he has in mind in this connection? May I remind him that the Government increased the rate of Purchase Tax on luxury goods last year from 75 per cent. to 90 per cent., and that his party opposed it?

Mr. Cronin

The right hon. Gentleman and I probably differ in our definition of luxury goods. I would say that it is all luxurious and inessential expenditure. Direct taxation could be collected much more efficiently. I think the Financial Secretary will agree that there is room for great improvement in that matter.

I refer, for example, to the question of expenses allowed to businessmen. We all sympathise with mildly convivial habits but there are extremes, and I do not see why they should be subsidised by the Treasury. A large amount of luxury consumption is going on in luxury restaurants and night clubs, presumably for the purpose of entertaining special customers. There seems to be no reason why it should continue to be subsidised by the Treasury.

There is also much scope for an increased product from Estate Duty. The present period over which gifts are invalidate is too short. I would commend also to the Chancellor the suggestion of the economist, Rignano. His suggestion was that death duties should increase as a fortune is passed on to each generation. For example, a man would pay much more death duty on money which came from his grandfather than upon money which he received from his father. I commend that suggestion to the Financial Secretary.

I note, however, that time is pressing and that my hon. Friend the Member for Stechford (Mr. Roy Jenkins) is waiting to wind up the debate. Leaving aside such further points of detail, I will conclude by saying that the Chancellor of the Exchequer has not faced up to the realities of the situation. The time is ripe for vigorous direct action to decrease consumption and so increase capital expenditure. In the context of the general economic situation the Budget is entirely irrelevant.

9.0 p.m.

Mr. Geoffrey Hirst (Shipley)

The hon. Member for Loughborough (Mr. Cronin) and other hon. Members opposite spent a good deal of time talking about the Budget of last April. It is a feather in the cap of my right hon. Friend the Chancellor of the Exchequer that so much criticism has belonged to the past and not to the proposals which he put before the House yesterday. The hon. Member for Loughborough said that we were verging on disaster. The hon. Member for Keighley (Mr. Hobson), with whom I sometimes join on nonpolitical occasions in the Chamber, said that he objected to my right hon. Friend the President of the Board of Trade saying in reference to 1951 that we had inherited a harvest of stubble. If it was what the hon. Member for Keighley tried to make it out to be—a thoroughly luscious crop—why the dickens did not the Party opposite stay to reap the harvest?

The hon. Member for Loughborough referred to the Bank Rate, which he thought was a very bad instrument for dealing with the present situation. I suppose that he had in mind the use of various forms of physical control. Has the hon. Member thought of what would have happened in the last few years, in the conditions in which we have been placed, if that indeed had been the method? It is the very flexibility of our policy as a Conservative Party that has saved us a great deal of trouble, particularly in the matter of stocks, as I am sure many of my hon. Friends will bear out.

My hon. Friend the Member for Langstone (Mr. Stevens) was quite right when he said that the Budget was imaginative and thoughtful. I should have liked something more of retrenchment and a little more of reform, but that does not alter the fact that no one could say that this Budget is not an imaginative effort.

I see that the Financial Secretary is kindly listening to me and I should like to say a few words about the credit squeeze. I have been investigating it recently. It is honestly the case that it is unduly heavy on the smaller man. I know that this does not lie entirely in the hands of the Government. The Bank of England sends out circulars to start the ball rolling, and now it will send out some more. But the squeeze is hitting men like the greengrocer, and particularly the small farmer, who is refused a temporary loan for stocking—a loan which is known year after year to be only temporary, and is refused.

I do not think that that is the spirit of the credit squeeze which we on this side of the Committee wish to see applied and which I support. It appears to be the case that it is a little easier to go to the smaller man and "put the wind up" him than it is to go to the bigger man. I am sire that hon. Members on both sides of the Committee will agree that the squeeze has acted a little harshly on the smaller man. I am sure that that could be corrected with a certain amount of good will.

Saving is the keynote of the Budget. I and many of my hon. Friends have pressed very strongly for the introduction of certain of the reforms, particularly those referring to retirement pensions, which were prominent in the recommendations of the Second Millard Tucker Report. We are grateful to the Chancellor for these and also for other proposals to help saving.

Unlike several hon. and right hon. Members, I do not think that the idea of Premium Bonds is shocking. It is a jolly good idea, and there is nothing wrong about it. It is not actually gambling, in the sense of a football pool, and, in any case, it is no use riding too high a horse in this matter. There is a sporting instinct in our people that likes to have a little bit of a go, and we shall not stop it by talking about it or by sending postcards to Members of Parliament. If it is not going to go for the benefit of the Government, then it will go to the benefit of the pool promoters or somebody else. I do not see anything morally wrong about it. I think it is the sort of thing which will rather appeal to people. I know that the few people to whom I have spoken since last night all thought that it was a first-class idea.

To suggest that it is just one of the things which South American States went in for, not altogether with great benefit to those who held the bonds, is ridiculous, because their credit was not always as good as ours. I happen to have some of these bonds from my father, and they are not much good, though some other countries like Sweden have gone in for them and made it a first-class idea. Personally, I think it is a good idea, and I see nothing wrong about it.

Apart from the recapitulations of the economics of the right hon. Member for Huyton (Mr. H. Wilson), the speeches of hon. Gentlemen opposite seem to be devoted to this theme, and if that is the main line of criticism from them, this must be an exceptionally fine Budget which my right hon. Friend has introduced. That does not mean to say that it actually covers all the ground that some of us, including myself, would like to have seen covered. I have, and not for the first time, preached a rather greater degree of retrenchment and reform, but, before coming to deal with that, I have one point to make concerning the Profits Tax.

I feel that, as has been stated earlier in the debate today, there was great substance in the view of the Royal Commission that we cannot literally divide profits into two classes and say that all profits that are distributed are inflationary and that all profits put to reserve are not at all inflationary. That is an oversimplification, for the obvious reasons that have already been expressed. Even if we do accept that line of argument, and I do not think that any thoughtful person really does, there could be no case for increasing the margin on profits put to reserve. There is an element of appeasement here, and I have never been very fond of appeasement. I feel that there is no case for increasing the margin on profits put to reserve following so rapidly upon the increase last October.

Nor do I feel that there is a case in sound economics for this institution. How much better it would have been if we had grasped the nettle, as the Royal Commission advocated, and had introduced a flat rate corporation tax, as the Report suggested. Since I am the first to recognise the logic of the fact that one cannot pump out a lot of extra money at this time, I should not have been critical if that had been done; in other words, if the Treasury got actually the same amount as they get now.

Coming to the question of taxes on individuals, I must refer to the speech of the hon. Member for Loughborough on Estate Duty. Really, it is becoming quite fantastic to suggest, as the hon. Member did, that Estate Duty should be geared up to higher rates for following generations, on the basis that it would encourage savings.

Mr. H. Wilson

There is nothing new about it. It is a question which has been in the forum of public discussion for over 40 years, and I am surprised that the hon. Gentleman has not heard of it before.

Mr. Hirst

I am not suggesting that I have not heard of it. I am only saying that it is still fantastic. The more times I hear of it and the more times the right hon. Gentleman asks me about it, the more fantastic I still think it to be.

Mr. Nigel Fisher (Surbiton)

Particularly in the context of savings.

Mr. Hirst

That is what I said—in the context of savings.

Mr. Cronin

Surely, it must cause saving, because if a man knows that on what he saves in his lifetime he will pay less Estate Duty, he will save more.

Mr. Hirst

Some people have thought for their children, and they will not be impressed very much if they think that their children and grandchildren will be mulcted more and more, and they will not be encouraged to save. I do not think that the hon. Gentleman has the vaguest idea of how to encourage savings. Hon. Members opposite want to distribute everything on a flat and uniform system. I do not know whether Mr. Keynes would like that. The fact is that we do not like it. Let us beg to differ.

I consider that present Estate Duty is stifling and that there is room for an immediate reform at least in one small respect—the valuation basis of director-controlled companies, where a very small concession would be extremely valuable in ensuring a great amount of savings. Today it does not interest a man to continue to put money back into his factory in order to improve it as he gets older, because he knows that it will only increase the amount of Estate Duty he will ultimately have to pay. That is because of the valuation basis of such companies which, as most hon. Members know, is on a basis of assets plus a figure for goodwill. To put that anomaly right would have been a small matter and would have cost only about £3 million.

I come, quite unashamedly, to the question of Surtax, and I will tell hon. Members why. The present Surtax begins at an income of £2,000. That is quite absurd. My hon. Friend the Member for Wycombe (Mr. John Hall) asked a Question in the House on 9th February which brought this answer: a senior executive earning £2,000 a year before the war requires today £12,000 to give him the same purchasing power If he earned £3,000 before the war he needs £34,000 now—ten times as much. That is fantastic. It is a disincentive.

We shall not get the senior technicians we require for the fulfilment of British interests in the years to come unless they are given greater incentive. Moreover, the present rate of tax increases the problems facing the Government. When they come to consider—as they must very soon consider—the salaries of higher civil servants, who have had to wait a long time for this review, the same thing will happen as happens around many board room tables today. Someone says, "I think we ought to give so-and-so approximately £300 a year more, available to him to spend or to save. What do we have to give him in gross salary to see that he gets £300?" The fact is that the salary of the senior civil servants will have to be raised. I should not like to mention a figure because I do not know it, but they will have to be raised by very considerable sums indeed, largely because of the absurd and out-dated starting rate of Surtax.

Mr. J. T. Price

Are these remarks directed solely to earned income? Does the hon. Gentleman not realise that by far the higher proportion of incomes from £3,000 to £5,000 and upwards are not earned incomes at all?

Mr. Hirst

We often hear of the need to encourage scientists, technicians and business executives, and, indeed, the top ranks of the Civil Service—because nobody will dispute the need to have the best brains possible in the top ranks of the Civil Service. All these people receive earned incomes. In addition they do not get the full advantage they deserve of earned income relief, so that there is a fault in the earned income relief limits as well as in the Surtax starting point.

I turn to the question of Government expenditure, which has interested me very much. I applaud my right hon. Friend's statement that he intends to secure a saving of £100 million. Like other hon. Members, I have heard all sorts of promises, from both parties, about Government expenditure. We all know that they are rather difficult to keep. Here I will be a little critical. Frankly, I do not think this saving is enough, nor do I think it can be achieved without machinery for the purpose.

This is no new subject for me. I apologise for quoting, but in the Budget debate on 16th April, 1953, I said: What I am going to say now is not likely to be very popular, but I think it is important to reinforce the internal Government drive for economy, which I know is going on, in suitable instances by investigations into Government expenditure."—[OFFICIAL REPORT, 16th April, 1953; Vol. 514, c. 415.] In 1954 I followed that up by saying: I regard the rate of expenditure … as a national tragedy. We must do something about it … I think that a Minister of Cabinet rank must be charged with the job, with the assistance of a Cabinet committee, to go into this problem on a full-time basis, or that we must have some form of independent committee to inquire into the administration of the various Departments."—[OFFICIAL REPORT, 7th April, 1954; Vol. 526, c. 468.] I hope that the Chancellor's promised cut will be successful and I am confident that with the proper machinery we could do even better. I agree that the question of policy is closely connected.

I was impressed by the speech of my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) concerning defence allocations. He made an extremely sound argument. I would go only one stage further and say that in present conditions we must make even greater economies than my hon. Friend mentioned but that, on the other hand, some of the saving should be used to develop psychological warfare, in which direction we are to a great extent unprepared.

Although I realise the difficulties, I am sorry that no relief is being given in Entertainments Duty. Some of us, on both sides, consider the present level to be a great burden on, for example, the live theatre. Tax is by no means the main factor that is causing difficulty nowadays, but at least it is a contributory factor. There is no doubt that it is a burden upon the cinema industry, and some of us who have seen the case presented to my right hon. Friend the Chancellor of the Exchquer by the film industry have by and large been impressed by it. The House has, I think been impressed by the fact that the industry has now got together with a joint policy and is no longer squabbling about the spoils. In any proposals which could be made, there would be a rebate system to assist particularly the smaller cinema. The bigger cinemas are able to look after themselves.

A concession of that nature would not be inflationary. None of the representations made to my right hon. Friend has suggested a reduction in the admission charges paid by the public but merely that more use should be made of the money paid by the public, to ensure a healthy industry, which, after all, is important. In a small way it is a dollar earner, and in a very large way, since the public demands this form of entertainment, it is undeniably a dollar saver.

My final point, which is not new to the House, concerns the discrimination in Purchase Tax against wool cloth. Whilst made-up garments, whatever the material, are liable to 5 per cent. Purchase Tax, cloth sold as piece goods, if made of wool, carries Purchase Tax at 10 per cent., while all other fabrics are free. This problem dates back to April, 1955. The Wholesale Textile Delegation has made representation after representation in the Treasury and to the Board of Trade. It is a powerful body, including eight well-known associations.

Mr. Hugh Dalton (Bishop Auckland)

Hear, hear.

Mr. Hirst

The right hon. Gentleman will, I think, agree that there is no argument for wool being taxed when non-wool fabrics are not. That is the simple case which I make. I have stressed it very strongly and I want to stress it again tonight. In fact, with the help of 36 other hon. Members, I have tabled a Motion which is now on the Order Paper, drawing attention to this matter—

[That this House views with increasing concern the unjust discrimination against wool cloth consequent upon the removal of purchase tax on non-wool fabrics, and calls upon Her Majesty's Government to remove the tax on wool cloth and thus redress the existing disparity so that fair competition is maintained.]

"Unjust"; it is inexplicable; and it is without a shadow of sense.

I have spoken strongly on this subject before, and I wish to take a strong line again tonight. I have never heard an argument for its retention which holds water at all. The only satisfaction I received, in reply to the detailed speech I made, on this matter in Committee on the Finance Bill in 1955, was this—and I quote from the words of my right hon. Friend the Lord Privy Seal, then Chancellor of the Exchequer: … we find a complete difference between the cotton and the wool situation, owing to the numerous small tailors who make up the wool cloth."—[OFFICIAL REPORT, 16th November, 1955; Vol. 546, c. 623.] Why should no account be taken of tailors making up non-wool cloth? There are not many men who have private tailors; there are far more women who have them for other forms of fabrics. If he was willing to take a calculated risk in the case of non-wool textiles, then I think he should have taken it in the case of wool, too.

If it is not blind prejudice—and I do not like that—then it is one of the worst examples of bowing to administrative convenience that I have ever come across. For whatever reason, it is a sin and shame, and in the name of justice and fair-do's, it should be corrected. I agree that is a strong comment, but it does touch my constituency and the constituencies of many hon. Members. Those working and fighting hard in the industry, which is a great dollar earner, should have some better reason for that impost than they have at present.

Having made that somewhat parochial, constituency point, I repeat my personal view that I have not heard any really worthwhile criticism of my right hon. Friend the Chancellor's Budget. It would have been possible to go a little further both ways, but hon. Gentlemen opposite would not have liked it any better on that account. There might have been a greater reduction in expenditure along the lines I mentioned earlier, and by reason of that reduction, particularly on the defence programme, there would have been a capacity then to give a little more reward and incentive to the country as a whole. That is merely a matter of emphasis. The aim which he has set us at the present time is a sound aim and one which the country must applaud.

9.23 p.m.

Mr. Roy Jenkins (Birmingham, Stechford)

I find myself in an unusual and, for me, slightly intimidating position from which to address the Committee, but I am encouraged by the fact that the Committee is not perhaps as full as we have sometimes seen it, and that most of the faces here are fairly familiar to those in previous Budget and Finance Bill debates.

The hon. Gentleman the Member for Shipley (Mr. Hirst) gave rather lugubrious support to the Budget, though I thought that at the conclusion of his speech he was perhaps unnecessarily modest about what he had said. After launching into what appeared to be at least four attacks upon his right hon. Friend's Budget, he then informed the Committee that he had heard nothing worth while said against it in the course of a two-day debate.

He commented upon the speech of my hon. Friend the Member for Loughborough (Mr. Cronin) wherein he mentioned the well known Rignano death duty scheme, about which my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) has certainly written and spoken a great deal in the past. The hon. Member for Shipley appeared very anxious to dismiss this proposal as being totally fantastic and of no importance at all, but he appeared to have a rather imperfect understanding of the details of it and an imperfect understanding of what my hon. Friend the Member for Loughborough had said in its support. The hon. Member for Shipley also had a good deal to say about Surtax and the need for incentives to members of the salaried middle classes. I should like, in connection with some remarks which the President of the Board of Trade made this afternoon on this same subject, to return to that point later in my speech.

I think it is difficult for us in this debate to congratulate the Chancellor of the Exchequer on the form of his Budget speech. He referred to his right hon. Friend the Member for Woodford (Sir W. Churchill), and said how many Budget debates he had heard. I have heard fewer Budget debates than the Chancellor of the Exchequer. I have heard about nine Budget statements, and I thought that the Chancellor's statement was the most muddled and least clear Budget statement I have heard in the course of those nine years. What we heard from the Chancellor was, first, a general arrangement which followed no very clear pattern, and then the constant raising of issues which reached no conclusion at all. An economic general staff, the liquidity ratios of the banks, were all in this category. Nor did we have any hard, logical analysis either of the past year or of the prospects for the future year.

I must say, since there is a good deal of comparison between the right hon. Gentleman and his predecessor, that so far as form of presentation is concerned I prefer the Lord Privy Seal to the Chancellor of the Exchequer. Even so far as substance is concerned, I am by no means convinced that the right hon. Gentleman is any improvement on his predecessor. It is true, of course, that he did not in this Budget repeat the sins of the Budget of last April, though we should hardly have expected even the Lord Privy Seal himself to do that again had he still been Chancellor. For one thing, there is no Election impending at the moment. For another thing, I think the Lord Privy Seal has probably learned something from the political experience through which he has gone in the past year.

Therefore, I would not wish to draw too sharp a distinction between the present Chancellor and his predecessor. I can well understand that hon. Members opposite are anxious to build up the new Chancellor as much as they can. After all, as the Spectator said a few weeks ago, support for the present Chancellor of the Exchequer is based more on desperate hope than on well-founded fact. After the Budget I think that one could still not dissent from that judgment of the Spectator, though there are other judgments in the Spectator from which I would dissent.

It is also clear that the Chancellor of the Exchequer is very anxious, in his statements, to dissociate himself from his predecessor. I thought that was clear in his speech yesterday, when almost the only reference he made to the Economic Survey was to read out almost verbatim those passages in it which were most bitterly critical of the Lord Privy Seal. Again, in his broadcast last night we heard some barbed references to Chancellors of the Exchequer who fall for the temptation of giving taxation concessions when they ought not to do so.

I thought the most barbed of all the comments which the Chancellor made on his predecessor was one which he was reported in The Times as making some weeks ago when he left for Paris to attend the meeting of O.E.E.C., and said that he would as his first duty pay a tribute to his predecessor whose reputation, he added, in Europe, was still very high. I am bound to say that I do not think this attitude becomes the present Chancellor. We have not yet seen from him any indication either that he can introduce a decisively better Budget than the Lord Privy Seal, or, perhaps more important, that he can provide any firm, clear economic leadership to the nation. As far as I can see at the present time, the main difference between the two right hon. Gentlemen is that, whilst the metaphors of the Lord Privy Seal may be more cloudy, he at least presents his facts in a more logical order than does the present Chancellor of the Exchequer.

I thought that in the course of the Chancellor's speech there were some strange passages about the National Debt, particularly when considered in conjunction with other references to public savings through a Budget surplus which the Chancellor made. The right hon. Gentleman drew our attention to the present great size of the National Debt and said what a heavy burden this was upon us. Clearly, the point of that passage was to tell us how great this burden was, how careful we should be not to increase it, and how valuable it would be if we could reduce it.

Then the right hon. Gentleman made a curiously bitter attack upon the whole principle of public saving through a Budget surplus which he referred to as being a semi-totalitarian weapon which it was essential that we should leave behind us as we moved away from a war-time siege economy. I am bound to ask myself how one can hope ever to reduce the National Debt, how can one prevent it from rising, unless there is a good deal of public saving through a Budget surplus? How else can one possibly hope to get rid of this heavy burden which lies upon us?

Mr. Dalton

Repudiate it.

Mr. Jenkins

Under this Government, what we have had is a position in which the public sector as a whole, including the nationalised industries, has been getting increasingly into debt to the private sector of this country to a far greater extent than was the case under a Labour Government. I am glad, therefore, of at least one provision in the Budget, namely, the provision for the new means of financing the nationalised industries. I do not know how strong are the technical arguments to which the Chancellor referred, but it is desirable to do it in this way in order that we may see whether the public sector is getting into debt to the private sector or not. Even this year, although there is an improvement in this respect, the amount of debt from the public to the private sector will increase by nearly £350 million.

I know that hon. and right hon. Gentlemen opposite are very sensitive about profit-making in nationalised industries. There is no doubt that there are some nationalised industries at present which, if they were free to charge a market price, could make a very high rate of profit indeed.

Mr. John Rodgers (Sevenoaks)

All monopolies can.

Mr. Jenkins

Maybe they can, most do. That is the difference. But so long as nationalised industries, which could do so are not allowed to make these monopoly profits, then it is desirable that there should be a good degree of public saving, unless there is to be an increasing amount of public debt to the private sector.

The other thing which the Chancellor said about the National Debt yesterday which I shall mention was that the burden was so great that it was important for this reason alone—and no doubt also for other reasons—that we should not return to a deflationary situation which, for this purpose, he defined as a situation which would increase the burden of the National Debt as a proportion of the national income. But can it have escaped the Chancellor that in the last year, under the policy which he is pursuing, we have had from a National Debt point of view all the disadvantages, precisely as he defines it, of a deflationary situation without any of the advantages of falling prices? Because, owing to the monetary policy which he has pursued, we have in the past year, despite an inflationary situation and despite rising prices, had the real burden of the National Debt increased substantially.

It is clear from the Financial Statement that the above the line cost of servicing the National Debt was, in the last financial year, over 12 per cent. greater than in the previous financial year. That was in a situation in which the gross national income product went up by about 5½ per cent. Therefore, under the ineffective credit restriction, dear money policy—ineffective from the point of view or curbing inflation—which the Government have pursued, we have from the National Debt point of view had all the disadvantages which the Chancellor said he was determined to avoid without any of the advantages which we might regard as being a normal accompaniment of it.

I want to revert for a short time to a point which my right hon. Friend the Member for Huyton (Mr. H. Wilson) developed to some extent this afternoon. It is the question of the broadening of the basis on which direct taxes—Income Tax, Surtax, Estate Duty—are levied in this country. My right hon. Friend referred to fiscal privilege in a very apt phrase in this connection. I also thought that to judge from the earlier part of the speech of the President of the Board of Trade, my right hon. Friend might never have delivered that part of his speech. Certainly, the President of the Board of Trade made no attempt to refute the argument which my right hon. Friend put forward. Equally, he behaved as if no one for one moment questioned but that the present nominally very high rates of Surtax were paid by all people who ought to pay them.

The right hon. Gentleman went on to say "Look how heavy Surtax is." This refers to the point made by the hon. Member for Shipley. The right hon. Gentleman said that in order to enjoy today the standard of living that he would have got with a gross income of £2,000 a year before 1939, a man now needed a gross income of £12,000. Indeed, he went further than that and said that in order to enjoy the standard of living that could have been obtained with £3,000 a year gross income before the war, a man would today need a gross income of £34,000.

I thought that those figures, which the President of the Board of Trade presumably thought helped his case, or he would not have used them, were a great reinforcement of the case which my right hon. Friend had previously made. Does the President of the Board of Trade suggest that there are not many people today enjoying a standard of living equivalent to that which a gross income of £2,000 or £3,000 a year before the war would have produced? Surely he is not going to deny that that happens in the case of very many people. Does he suggest that the people who today enjoy such a standard of living declare to the Inland Revenue gross incomes of over £12,000 in one case and of £34,000 in the other? I am absolutely sure that that is not the case. There is no doubt at all that there is a great deal of tax avoidance going on in this way.

The President of the Board of Trade went on to say that the middle class in general were very hard hit by the tax system today. He even went so far as to say that the middle classes have not shared in our recent prosperity. If the statement is put in terms as general as that, I do not believe for one moment that it can be true, or that even the President would, on consideration, believe it to be true. There are, of course, within the broad social category of the middle class many people who are enjoying precisely the fiscal privilege about which my right hon. Friend was talking this afternoon. It is most important that the Chancellor, even more than the President of the Board of Trade, should devote himself to the question of this fiscal privilege.

In the first place, there is a very clear case made in the minority Report of the Royal Commission about the two classes of Income Tax payers. There are, first, those who are assessed under Schedule E, the majority of ordinary salary earners, who have to prove that their expenses were necessarily incurred in the course of earning their incomes, and there are those assessed under Schedule D, who have to show that their expenses were wholly and exclusively incurred, but not necessarily so incurred. There is an enormous difference there.

There is the question of capital gains, which has been dealt with at some length and into which I do not wish to go any further, except to mention it. There is the question of seven-year covenants of one sort and another, and there is the question of the arrangements of person's affairs in such a way that they manage to enjoy a very high standard of living with a very small income under what the Inland Revenue regards as income. There is no doubt that this happens to a large extent. At least some members of the Government Front Bench will be acquainted with Mr. Nicholos Kaldor's book on "An Expenditure Tax."

I wish to refer to only one set of figures, but a very striking and important set of figures, which he produced. They were figures which were designed to show, and did show very conclusively, that the bigger the estate, the bigger the aggregation of property, the smaller the yield as declared for Surtax purposes from that estate. If we take the 20,000 biggest estates over £100,000 in size, the average yield from them is not more than 2¾ per cent. per annum. As we go further down to those between £50,000 and £100,000, the yield rises to 3¾ per cent. Both yields, I would say, are artificially low and there is a great deal of tax avoidance in both groups, but more so the higher up the scale.

These are very important figures which suggest that there is a good deal of avoidance—avoidance, I stress, not evasion. There is an important difference between evasion and avoidance. Evasion sends one to prison if caught out, but avoidance is an arrangement of our affairs, with the best possible professional advice, so that one pays as little tax as possible. There is a very important difference between the two.

I would say that there are two important things which are wrong with our tax system at the present time. The first is that by allowing this degree of avoidance, by allowing loopholes of this size, what we have, in fact, done is to make the possession of property relatively more desirable than the obtaining of earnings. This seems to me to be a most undesirable slip from the point of view of both sides of the Committee. To take an example, in 1914 a man with £50,000 in capital and a moderately successful barrister or doctor, earning £2,000 or £3,000 a year, a member of the sort of professional middle-class which hon. Members opposite are always talking about, were almost equally well off in every respect. Today, under the way in which the tax system has developed, there is no doubt at all that the man with £50,000 capital is far better off than the man with no property but with an income equivalent to that which £50,000 would normally produce.

The second thing from this point of view which is wrong, and seriously wrong, with our tax system is that we are engaged, all of us to some extent, in a subtle form of moral deceit whereby we have very high nominal rates of tax to which members of the Government can point but in which we have glaring loopholes through which supporters of the Government can escape. That seems very undesirable. By perpetuating this system the Chancellor of the Exchequer is in fact the real enemy of that section of the middle class, with no expenses to charge and perhaps with large families to educate, which really has a case for showing that they are hardly treated, because it would be intolerable from the point of view of hon. Members on this side of the Committee to assist even those comparatively worthy people at the expense of people lower down the scale who were still less well off. But it would be reasonable to assist them at the expense of those people who live on fiscal privilege, to use the phrase of my right hon. Friend the Member for Huyton. I think that by not tackling this problem the Chancellor has missed a very great opportunity indeed in this Budget.

Mr. Shepherd

Would the hon. Gentleman say what he feels to be the measure of this avoidance and evasion, since he talks about broadening the basis of taxation and bringing consequent relief to the middle class?

Mr. Jenkins

When one is dealing with these complicated Inland Revenue figures, it is very foolish to give an off-the-cuff answer. I will say this: the present yield from Surtax, £130 million a year, on the assumption of what has happened to the national income and rates of Surtax since 1931, should be not £130 million but slightly more than £500 million a year. I am not saying that all of that should come in. There may have been some change in the distribution of incomes at source. We do not know precisely. But it is clear from those figures, even if one accepts only a fraction of the amount as representing the amount of tax avoidance, that one has a figure which is in no way negligible. The Chancellor missed a great opportunity in this respect. It is not the only opportunity he has missed, nor the only thing of major importance which he has failed to do in the Budget.

My right hon. Friend the Member for Huyton also dealt with investment in this country. What are the Chancellor's plans for turning the country's economy from a low to a high investment economy? That is vital and urgently necessary. The rate of growth of the Soviet economy, on almost any assumptions which one can reasonably make, can hardly be less than three times the present rate of growth of the British economy. If one pushes forward these different figures, the prospect is indeed disturbing.

To what can we look forward? Everything that bears on investment is still very discouraging: investment allowances have gone and credit restrictions continue. The dangerous thing about that is that just as it takes a long time to get investment to grow—as the Lord Privy Seal found after 1953 and which, I am sure, he will admit—so the danger of clamping down on investment is that the measures become fully effective only when one is out of the crisis for which the measures were taken. That is the danger of the Chancellor's measures. They will become fully effective where investment is concerned in 1957 or 1958 and we shall continue to be on a low investment economy.

The other object for which one would clearly look in the Budget is a halt to inflation. It is clear, while we have had inflation in the sense of rising prices at an equally rapid rate at times in the past, that we have never had home-generated inflation to the extent which we have had it in the past two years. Why is that? The main reason is that successive Chancellors of the Exchequer since 1951 and deliberate Government policy have created a situation in which wages had to be forced up at a rate faster than we desired or could afford as a nation, if we were to maintain their share of the national income.

That has been the hard fact of the past two years. We have got rather used to dividends increasing steadily at 20 per cent. a year—20 per cent. cumulative. If the rate of growth of the British economy were half the rate of growth of ordinary share dividends, we need not worry about Russian rivalry. There is nothing in the Budget to break the dilemma that if wages are to maintain their share of the national economy, in the economy as ordered by the Government, they have continually to be pushed up at this rapid—and I fully agree, damaging—rate.

We have had nothing worth while from the Chancellor of the Exchequer to deal with the two main problems of our economy, the problem of moving from a low to a high investment economy and that of breaking this home-generated inflationary spiral. I can only hope that the prospect for this country and the Government in the ensuing year will be better than the Chancellor's Budget entitles him to expect it to be.

9.50 p.m.

Mr. Alan McKibbin (Belfast, East)

I had hoped that the Budget would contain something which would help old-age pensioners and persons living on annuities and small fixed incomes. They will be hit by the increased cost of bread and in one of the few pleasures left to them—cigarettes and snuff. A great deal of snuff is used in Northern Ireland; I do not know whether that is so in England. Unfortunately, unlike hon. Members, these people cannot get a free pinch.

I am also very disappointed to find no mention in the Budget about war disablement pensions. The only hon. Member who mentioned this matter, so far as I know, was the hon. Member for Brierley Hill (Mr. Simmons).

Mr. Hayman

I also mentioned the subject.

Mr. McKibbin

The British Legion's claim is that the basic 100 per cent. rate of disablement pension should be 90s. a week, with comparable adjustments for those with lower medical assessments and for war widows. In February, 1955, the basic rate was raised to 67s. 6d., and for that we were grateful. But no one can say that the cost of living has gone down since then. One thing in particular which we must continue to impress upon the Government is that war pensioners deserve priority in relation to our national finances. As the two great wars recede further and further into the past there is a danger that war pensions will be submerged in the common pool of welfare benefits, without reference to war service.

Although the Budget makes no mention of the matter, I hope it is the intention of the Government to grant this overdue and modest increase, which does not require legislation but merely the signature on the Royal Warrant. It should be granted now, because every shilling and every moment is vital, especially to the veterans of the 1914–18 war, whose average age is 66 and who are dying off at the rate of 20,000 a year. There must be no delay in seeing that these men, who fought our wars for us, are not denied the little extra happiness which this small increase would bring. I understand that the total amount required would be less than ½ per cent. of the total Budget estimates for 1956–57.

Whereupon Motion made, and Question, That the Chairman do report Progress and ask leave to sit again—[Mr. Legh]—put and agreed to.

Committee report Progress; to sit again Tomorrow.