§ 3.40 p.m.
§ The Financial Secretary to the Treasury (Mr. Henry Brooke)
We have just reached half-time in our Budget Debate. My hon. Friends will, I am sure, have noticed that the first half of this four-day match has been conspicuous for a striking absence of valid criticism against my hon. Friend's Budget. There was a theme in the Budget speech, the theme of saving, a theme to which the country has been quick to respond. There has been no theme in the speeches from the Opposition benches—no, to be quite fair, there has been a kind of nostalgic harking back to the policy of bureaucratic restrictions and Exchequer subsidies which was tried in the later 1940s and which lamentably failed.
My hon. Friend the Economic Secretary may have something more to say on that subject next Monday. I will not attempt to follow right hon. and hon. Members opposite in their expeditions into esoteric depths of economic theory. I will leave my hon. Friend to pursue them on Monday and bring them to the light. He is uncommonly good at it, as I think is recognised on both sides of the Committee. He was described yesterday by the right hon. Gentleman the Member for Huyton (Mr. H. Wilson) as the "Rasputin of the Treasury". I felicitate the right hon. Gentleman on the timeliness of his researches into Russian 1184 history, but I think it is a comparison personally unkind to my hon. Friend. I must say I find him physically distinguishable from the ascetic and bearded Russian monk, though what I have always understood about Rasputin is that he was the sort of man who knew all the answers.
That last can hardly be said of the right hon. Gentleman the Member for Huyton. He even asked yesterday whether it was right to drive the local authorities out into the market, whether it is right to bring the nationalised industries into the Treasury, for their borrowing. The answer is, of course, as my right hon. Friend the President of the Board of Trade said yesterday, that the former can borrow on their own credit and the latter at the present time unfortunately cannot. The answer seems only too obvious. The Chancellor spoke of the mistake of looking up trains in last year's Bradshaw. Perhaps the right hon. Gentleman does not even quite understand the A.B.C.
As there is so thin and jejune a case against the Budget so far deployed, and as all the armoury of the Economic Secretary and my right hon. Friend the Chancellor of the Exchequer is still in reserve for the final day of the match, it seems to me that I can best try to serve the convenience of the Committee this afternoon by filling in some of the details of the Budget proposals. At least one of the announcements I have to make will, I know, be of interest not only to the Committee but to the whole country.
The Budget speech included a proposal to treat cider and perry of artificially high alcohol content as British wine for Excise purposes. That has given some unnecessary fright to a number of people who make or drink ordinary cider or perry. I assure them that I can relieve them of all anxiety. The Bill will be drafted so as to exclude from the tax field any cider and perry which is made by the ordinary processes of manufacture whatever its alcoholic strength. The whole purpose of this proposal is to prevent what is at present an unfair discrimination between certain artificially strong liquids and British wines which are subject to duty.
Sir Charles, I do not know whether you often indulge in a "Baby Cham"—[HON. MEMBERS: "Advertising."] I am not 1185 advertising something when I am taxing it, am I? This is a specimen of the perry of artificial strength which will be subjected to tax.
§ Mr. Harold Wilson (Huyton)
I rise on this matter only to ask your guidance, Sir Charles, not to criticise the right hon. Gentleman. We are all familiar with this bottle. It is advertised on I.T.A. quite regularly. But is it in order for the right hon. Gentleman to bring out the bottle and put it on the Dispatch Box; secondly, if he is going to advertise one of these mock champagnes, should he not advertise the lot?
§ Mr. Brooke
I will rapidly transfer it to my pocket, Sir Charles. I brought it not with any desire to infringe the rules of order but to convince the Committee that there are these articles which at present have an uncovenanted advantage; not only would it be commercially unfair, but, also, the revenue would suffer if we were to take no action to make sure that they are treated for duty purposes on the same basis as other British wines.
One item in the Budget speech which has aroused widespread interest is my right hon. Friend's declaration that he will invite the House to implement in part the recommendations of the second Millard Tucker Committee. There have been representations made to the Government, without distinction of party, from many authoritative quarters to the effect that the Millard Tucker Committee was entirely right in saying that the law was at present unfair in its treatment of policy premiums as between self-employed and employed persons.
It is true that my right hon. Friend is not going to invite the House to go to the full length of the Millard Tucker recommendations. He proposes to exclude from the benefit of tax relief any policy which would provide for a lump sum payment. He is fixing the limits rather lower than those recommended either by the Millard Tucker Committee or by the Royal Commission on the Taxation of Profits and Income. But because there has been, I fear, slight misapprehension of his intentions in this matter I would 1186 venture to repeat the main points which he made in his Budget speech.
The relief will be limited to premiums not exceeding £500, or 10 per cent. of earned income in any year. The relief will apply to professional men in practice, to individuals and partners in businesses which are not companies, to controlling directors of companies, and to employees who are not entitled to any benefit—and I stress the words "any benefit"—under schemes set up by their employers.
I have been asked whether it will extend to policies which, including pensions, also give life assurance cover. The answer is that tax relief will only apply to premiums paid in respect of pensions. Premiums paid in respect of the life assurance element in a policy will not qualify for the new tax relief, though they may or may not qualify for the existing tax relief in respect of life assurance.
I have been asked about the position of married women who seek to take out a policy of this kind. I assure the Committee that married women, or single women who marry, will be in exactly the same position as a man as to these rights, and that they also will be entitled to tax relief subject, of course, to the same limits. I must warn the Committee that there will be a good deal to discuss when we come to the Committee stage of the Bill about this part of my right hon. Friend's recommendations.
Having stressed the outline which my right hon. Friend gave in his Budget speech, and expressed willingness to answer any further questions or have them answered later in the debate, I would suggest to the Committee that the interests of all of us probably would be better served by postponing detailed discussion on the proposal until we all see the terms of the Finance Bill.
§ Mr. J. T. Price (Westhoughton)
Could the right hon. Gentleman clear up this point, so that we may have it on the record? Is it his intention to apply these regulations to privately administered funds where new types of entrants are admitted?
§ Mr. Brooke
I should much prefer to defer these details until the Finance Bill is published. I am particularly anxious not to say anything today which might be misleading. All those who are interested 1187 will see exactly where they are under the proposals when the Bill is published.
My right hon. Friend has broken with tradition in proposing to ask Parliament to enact that the first £15 of savings bank interest shall, in future, be free of Income Tax, but not of Surtax. Indeed, the income will be grossed up for Surtax purposes. I think that it will be agreed on both sides of the Committee that the purpose of the concession is to stimulate small savings and not to give some adventitious benefit to a richer man who, perhaps, put £600 in a savings bank. The limit on which benefit can be enjoyed is an investment of £600 at 2½ per cent. in the Post Office or one of the trustee savings banks. It is proposed that husband and wife can each have £15 interest from the savings bank and have the benefit of this relief.
§ Mr. Brooke
One of the results of Income Tax change is the effect on P.A.Y.E. and the immense amount of recoding that has to be done. Nobody need hasten to write to his tax inspector to ask to be recoded at once because of this change. It is true that relief to the taxpayer under the P.A.Y.E. system will normally be given by way of adjustment in the code number. As the Committee will appreciate, it will take some time to trace all the cases affected and to issue revised code numbers, but the work will be put in hand immediately and should be completed at latest by 6th July. Anyway, whatever the date of notification to the taxpayer, the benefit will be back-dated to the beginning of the Income Tax year. Therefore, there is no need whatever for a taxpayer to worry if there is any delay before he or she hears from the tax office about the recoding.
§ Mr. Douglas Houghton (Sowerby)
The right hon. Gentleman will realise that on this occasion, since this change and this change alone necessitates recoding, the employers will know what it is all about.
§ Mr. Brooke
I am not quite sure that I understand the significance of the hon. Member's remarks, but he is such an expert on the whole of the Income Tax system that I am sure that he is on to a 1188 good point although, on the spur of the moment, I have not fully appreciated it.
My right hon. Friend, in his Budget speech, dealt with a great number of matters. I have listened to the whole of the two days' debate since then and several questions of substantial importance have been raised. I cannot hope to deal with all of them without wearying the Committee, but there are certain matters which I would wish to take up.
In the last two days several hon. Members have pressed the Chancellor to make concessions on Entertainments Duty and have expressed regret that no proposal of that kind was included in his Budget speech. Some of the hon. Members who have spoken have sport at heart, others the living theatre and others the cinema. It has been my duty, in the past few weeks, to receive, on behalf of my right hon. Friend, representative deputations from those who are specially interested in each of these three main facets of the duty. I should like to thank those deputations for the conciseness and clarity with which they stated their cases. I can personally assure the Committee that as a result I am as fully informed as I can be on the cases made for concessions.
I reported to the Chancellor the representations and the arguments and indeed, apart from that, my right hon. Friend is obviously seized of them from the Questions put to him in the House and the letters sent to him. There has been this year a thorough-going review of the whole scope of Entertainments Duty. It has not been hastily or superficially done. My right hon. Friend called for an appraisal of the duty and its effects on each separate kind of sport, entertainment or performance.
This has been carried out in detail and we have studied it in detail but, after very careful consideration, my right hon. Friend came to the conclusion that the case for making any changes in the duty was not so strong that he ought to propose any change in his Budget this year, when a change of that sort would have been quite out of tone with the whole purpose and theme of this Budget. My right hon. Friend has to be stern this year. As a nation, we are not out of our difficulties and we have nothing to spare.
In saying that he cannot see his way to doing anything in that respect this 1189 year, my right hon. Friend is not saying that nothing will be done as long as he is Chancellor. However, he has asked me to put this to the Committee: that to come forward with proposals for making concessions in Entertainments Duty here and now would be strange indeed in a Budget the main purpose and object of which is to encourage people to save and not to spend.
§ Miss Margaret Herbison (Lanarkshire, North)
In that review, was the effect of the duty on Highland games, in Scotland, considered with the other sports?
§ Mr. Brooke
Yes, I can assure the hon. Lady of that. Last year I received a deputation on that very matter. I am well aware that the duty causes difficulty for the Highland games, and, also, that the amount of revenue raised from them is only about £10,000 a year.
I was about to say that one has to consider Entertainments Duty as a whole. For whilst I well know that each individual, such as the hon. Lady is specially interested in getting Entertainments Duty removed from the sport or entertainment which he or she knows about or particularly cares for, and may, therefore, argue that the Chancellor can afford to do it because, on the living theatre, he would be giving up only £2 million a year, and on any one sport—Association Football, Rugby League, boxing, or what you will—it would be less than that, we must all remember that if we start picking and choosing in tax matters we may do a great deal of injustice.
§ Mr. Brooke
What is really at stake here is not £1 million on this, or £500,000 on that, but something affecting the entire yield of the Entertainments Duty, which is just on £40 million, no small element in the Budget revenue.
§ Mr. Harold Davies (Leek)
I appeal to the right hon. Gentleman, who has so kindly given way, to realise that there is much more in the world than statistics. The living theatre has a greater appeal today than any other entertainment. It is traditionally British, something which we are likely to lose, and I hope that when the opportunity confronts us, hon. 1190 Members on both sides will fight for something to be done.
§ Mr. Brooke
I have a feeling that we shall be debating these matters further before the end of July. The intervention of the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) has proved my point.
I know well the strong feeling about the living theatre, but I must tell the hon. Member for Leek (Mr. Harold Davies) that each of the other deputations on behalf of sport and the cinema made the same representation to me as he has done, namely, that their case should take precedence over all others.
That is one of the problems in this matter, because my right hon. Friend wishes to do justice and it would be extremely hard to tackle one little bit of the Entertainments Duty, and make any adjustment there, without calling into question all the three facets; and all three facets together add up to the formidable sum of £40 million.
§ Mr. Douglas Jay (Battersea, North)
Will the right hon. Gentleman tell us how much of the £40 million comes from the living theatre and sport together?
§ Mr. Brooke
Certainly. I hope that I shall be able to prove that I have this information at my finger tips. The revenue from the living theatre is approximately £2 million, from sport approximately £3½ million, and the rest of the total sum, which is between £39 million and £40 million, comes from the cinema.
Next, I was proposing to say a word or two about the small increase which my right hon. Friend is proposing to make in the already high Tobacco Duty. As he explained in his Budget speech, my right hon. Friend felt it necessary to increase two taxes, one direct and one indirect, in order to offset the remissions that he would be making in other directions to stimulate savings. This is because he feels strongly, as a point of principle, that he should not allow the prospective surplus to be eroded, but, rather, should fortify it and end, when we have the Finance Act on the Statute Book, with a 1191 surplus larger rather than smaller than before.
My right hon. Friend therefore, proposes an increase in the Tobacco Duty which will, in a full year, bring in £28 million and which will amount to 2d. on twenty cigarettes. However, the form of the Motion, and of the Clause in the Finance Bill, for technical reasons looks rather more complicated than that.
Shall I put in arithmetical terms the option which my right hon. Friend is offering to everybody who smokes? If, Sir Charles, you smoke, you can steel yourself to having to pay 5s. 3d. for what has hitherto cost you 5s. or a guinea where you have previously spent £1. Alternatively, if you do not wish to allow your expenditure on tobacco to increase, you will have to harden your heart and smoke twenty-two cigarettes where, previously, you smoked twenty-three. That is the measure of the difference that the tax will make and the extent of the economy which will be necessary if people want to avoid contributing anything more to the Exchequer or paying any more out of their own pockets.
Outside the House of Commons, and may be inside the Committee, too, it has been recognised that among the most important and far reaching of the Budget proposals is the declaration of my right hon. Friend to cut £100 million of Government expenditure this year. [HON. MEMEBERS: "Where?"] This means, in effect, that the review of the Estimates, which normally takes place in the autumn with a view to pruning and paring them for the ensuing year, will, on this occasion, be brought forward in order to secure economies in the current year.
§ Mr. H. Wilson
Does the right hon. Gentleman seriously mean to tell the Committee that there was no pruning carried out last autumn?
§ Mr. Brooke
Yes, of course, there has been pruning and paring all the time.
As my right hon. Friend explained to the House in his speech in February, had there been no action of that kind, the Estimates presented to this House would have been considerably higher than they were. In fact, they represented a money increase of no more than 3 per cent. on the Estimates of a year before, whereas it is well known to the Committee that 1192 prices and wages have increased by considerably more than 3 per cent. in the twelve months. Therefore, there were substantial cuts in the Estimates as presented. But that does not satisfy my right hon. Friend, and I believe that he is in accord with the feeling in the country when he insists that we must be prepared to cut deeper. [HON. MEMBERS: "Where"?] Therefore, with the consent of his colleagues in the Government, my right hon. Friend has set himself to a thorough review of all the Estimates, both Civil and Defence, in order to secure by this measure economies operated not only in 1957–58 but in 1956–57.
§ Mr. Brooke
I think it will be within the memory of the Committee that that is precisely the opposite of what I have just said.
§ Mr. Brooke
The right hon. Gentleman has been a Financial Secretary to the Treasury and he understands better than most the annual timing of the Estimates review. He knows the work that is done in the Treasury every autumn to scrutinise the Departmental Estimates. The Estimates dealt with in the autumn are those for the ensuing financial year. Instead of waiting until the autumn, the Chancellor is organising an immediate review, not of the 1957–58 Estimates but of the 1956–57 Estimates, so that the economies which will be secured—I must warn the Committee that they will involve changes in policy—will be in the current year; that is, the year we are now in.
§ Mr. George Chetwynd (Stockton-on-Tees)
May we be told the policies that are to be changed? Surely the Chancellor must have given some indication of the changes in policy that he has in mind to secure the saving.
§ Mr. Brooke
My right hon. Friend will be making his announcements in due course, and he will choose his own time to inform the House, which he will do fully.
§ Mr. William Ross (Kilmarnock)
The right hon. Gentleman will appreciate that next week we shall be debating a group of Civil Estimates. Are we to understand that these Estimates will have no validity in that we shall be discussing something that may well be chopped and changed about? If so, that is putting the House in very considerable difficulty.
§ Mr. Brooke
The hon. Member is repeating a Question which was asked of, and answered by, my right hon. Friend the Lord Privy Seal only half an hour ago. The Motion before the House next week will be to move Mr. Speaker out of the Chair on the Civil Estimates, and that is a Motion which has no figures whatever attaching to it. I think I shall be straying beyond the bounds of this debate if I attempt to participate in next week's debates, also. Moreover, I have some more ground to cover. Perhaps the Committee will allow me to proceed.
I want to say a little more about an important matter touched on in the Budget speech. It is one with a considerable bearing on Government expenditure. It is the new Civil Service pay and conditions settlement which is now under negotiation. In the Budget speech my right hon. Friend indicated that this would, if it was agreed by the staff side, involve additional expenditure this year.
The Committee will remember that the Royal Commission on the Civil Service proposed comprehensive changes in pay, hours, leave and other conditions of service, some of them favourable to the staff and some of them unfavourable, but all of them designed with the one purpose of bringing Civil Service conditions closer to those prevailing in other occupations on the principle of fair comparison. The Government thought this principle right and were prepared to accept the Royal Commission's proposals. Negotiations, were, therefore, authorised with National Whitley Council. Those negotiations have gone far, and agreement has been reached, which I hope, may be ratified by the annual conferences of the staff associations.
1194 I will not go into detail, but there are two or three points which I should like to pick out for the Committee. First, the Royal Commission proposed reductions in Civil Service leave. These have been agreed with minor modifications, but existing staff will have certain reserved rights. Secondly, the Royal Commission proposed new minimum working hours. These will be longer in London than pre-war hours, and the same as pre-war hours elsewhere.
Thirdly, the Royal Commission proposed a rearrangement of attendances on the basis of a 5-day week or a 10½-day fortnight instead of the present 5½-day week. I want to emphasise something about this because there has been some misunderstanding. This is not a reduction of working hours. It is a rearrangement of working hours. Exactly the same number of hours will be worked in a five-day week as in a five-and-a-half-day week. Also, it is clearly laid down that this rearrangement is not to be carried out at the expense of the standard of service to the public. Lastly, the Royal Commission proposed increases in pay and the steepening of the differentiation between London and the Provinces.
All these different elements in the Royal Commission's proposals hang together, and, as they have been negotiated with the National Whitley Council, they will need to be accepted or rejected as a whole.
The Royal Commission related its proposals for revised pay to the standards of remuneration in other employments as they existed at 1st July last year. As the Committee knows, there have been increases in outside salaries and wages since 1st July last. Adjustments have been made to take account of that, and the Government have agreed that the new scales proposed by the Royal Commission should be increased on that account by about 5½ per cent. for the lower and middle grades. Let me emphasise that this merely keeps Civil Service pay in fair relationship with outside pay.
I am sure that that is the right course to follow. Those who jib at any increase in Civil Service pay might also be the first to jib if they found that they did not receive their pension book on time, or if there was no postman to deliver their letters. There is no reason why we should over-pay or under-pay the Civil 1195 Service, but we must pay civil servants fair market rates. I should like to add as a corollary that this proposed increase certainly could not be taken to justify any increase in pay in any other occupation which has already had an increase since 1st July last year.
The offer as a whole will be considered by the staff associations at their conferences. If it is ratified, it will come into effect from 1st July, but the new pay will operate from 1st April.
I think there has been some misunderstanding in certain newspapers about what is to be done about the higher grades. "Higher grades" is a technical term for everybody above the grade of principal. The higher grades will have the pay recommended by the Royal Commission.
There is one other point I should like to mention here, because it is so much linked with the whole matter of Government expenditure, and that is the size of the Civil Service, in which there is, rightly, great interest. Virtually the whole of the Civil Service is now working regular and continuous overtime and that, as the Committee will appreciate, makes neither for efficiency nor economy. The Royal Commission proposed that that should be abolished, and we are doing our best to secure that that should be done. But if the work is to be done in shorter hours without large increases in staff, there must be a great drive to improve efficiency. A greater effort to greater productivity will be called for from the whole Service, and I am grateful to the Staff Side leaders who have promised their full and zealous co-operation in securing that this occurs.
The country needs a first-rate Civil Service. We shall press on vigorously with our plans to reduce the size of the Civil Service wherever we find that people are being employed whose work is not really required; and we shall seek also to reduce the size of the Service and improve the methods of working. But I want to say, in all sincerity, to the Committee that it will be a bad day for the country if at any time the idea becomes current that we can get our Civil Service on the cheap. We have the right to expect the best of the Civil Service and we should give them fair market rates and conditions in return.
1196 In this connection, in a speech yesterday, my hon. Friend the Member for Basingstoke (Mr. Freeth) had something to say about the alleged over-staffing in the Estate Duty office of the Inland Revenue. His point was that although the number of estates dealt with by the office had gone down very substantially since 1939, the staff employed had increased in numbers and in grading. I would, with respect, point out to my hon. Friend that he omitted to take into account changes that have occurred in the difficulty of the work.
The bulk of the efforts of the Estate Duty office have at all times been concentrated on estates with a value of £5,000 and more. In 1938, the number of estates of this magnitude was 18,000. In the last year but one, 1954–55, it was just double that number. My hon. Friend should also understand that the steep, the very steep, increases in the rates of duty since the war have made settlements more contentious, and the volume of legislation affecting them has greatly increased. In fact, in total staff between 1939 and 1956 there has been no material change in numbers, and the relatively larger numbers in the higher grades in the office are simply a reflection of the increased complexity of the work.
I, for one, am always ready, as I think I have shown today, to investigate every charge of overstaffing in Government Departments and certainly in a department such as the Estate Duty office which is under the direct auspices of the Treasury. I never take it amiss when any hon. Member calls attention to these matters, but it would be a bad thing were it to get abroad that overstaffing occurs and could be proved and that no one did anything about it.
§ Mr. Arthur Moyle (Oldbury and Halesowen)
May I suggest to the Financial Secretary that that part of his speech dealing with the Civil Service be sent to the Conservative Party Central Office for distribution to every Conservative Parliamentary candidate, so that they may know the facts about the Civil Service?
§ Mr. Brooke
I am anxious not only that Conservative candidates but Labour and Liberal candidates, and all those 1197 who make public speeches and pronouncements, shall know the facts. I hope that the hon. Member will do me the credit of believing that I introduced this passage into my speech this afternoon because I was anxious for an opportunity to put all this into the right perspective. I am jealous for the reputation of the Civil Service, and, equally, no one is more anxious than I am to probe into any allegation of overstaffing in any connection.
§ Mr. Brooke
There has been overstaffing in the Civil Service and as a Government we have reduced the size of the Civil Service by over 50,000—
§ Mr. Brooke
—by about 7½ per cent. and we are pledged to reduce the size of the Civil Service by another 10,000 or 15,000 or more, if we can. But we are going to do this by a zealous search after economy, and I am certainly not going to be a party to the abuse of the Civil Service or back-biting against those who cannot answer for themselves.
I think that the Committee would wish me to say a word about another Royal Commission, the Royal Commission on Taxation of Profits and Income. The Commission made a great many recommendations, some, but not all, of which have been and are being implemented. I should like the Committee to realise that if my right hon. Friend has as yet said nothing about some recommendation or other in the Commission's Report, that does not mean that he has reached a final conclusion upon it. There is a great deal of work arising out of that Report, a great deal of Parliamentary work if all the recommendations are to be implemented.
My right hon. Friend has given immense thought to the whole of the Commission's Reports. For instance, a passage which needs special attention is the proposals of the Commission for 1198 overseas trade corporations. If there is nothing proposed and nothing has so far been said about that in this Budget, that does not mean to say that the Commission's proposals have been rejected or accepted, but simply that further study and work is required upon them. In due course, my right hon. Friend will be announcing his decisions on all these matters.
The right hon. Member for Huyton (Mr. H. Wilson), and the hon. Member for Stechford (Mr. Roy Jenkins), in his powerful closing speech yesterday from the Dispatch Box—and we were all very glad to see the hon. Member speaking from the Front Bench—made considerable play with the subject of tax avoidance. The hon. Member for Stechford produced a number of Surtax figures. He may wish further examination made of those when we come to the Committee discussions on the Finance Bill, but I should like to make this comment on them here and now. In some 16 years we have had extremely high rates both of Estate Duty and Surtax and this has had the effect of taking large amounts away from the estates of those who die. We have prevented the accumulation of large new fortunes out of savings on current incomes. Perhaps hon. Members, and those who have heard or read the speech of the hon. Gentleman, will study his words in the light of the facts which I have mentioned.
The hon. Gentleman referred also to the different tests for allowable expenses under Schedule D and Schedule E. That, again, is a matter which it will be desirable to debate further when we come to the Committee stage of the Finance Bill. I do not think it would be beyond the ingenuity of hon. Members opposite to find means to debate it. As to the insinuations and allegations about particular methods of tax avoidance, the Committee will recollect that in the autumn Budget we stopped one hole, that of dividend stripping, and my right hon. Friend has foreshadowed two further measures of this kind in his Budget, one dealing with "Heelex" and one arising from the recent decision of another place in what is known, perhaps rather appropriately, as the "Universal Grinding Wheel" case.
The Inland Revenue is constantly on the watch for new avoidance devices, and 1199 I should like to tell the right hon. Gentleman the Member for Huyton, who flourished in the Committee a leaflet about methods of tax avoidance and offered to send it to my right hon. Friend, that there was no need for him to do so because a copy of that leaflet, which is now in my hands, had been in the possession of the Inland Revenue for a considerable time.
§ Mr. H. Wilson
I am delighted to hear it. May I say that almost every newspaper in London has been asking me to give the address of this firm, and that I thought that in the interests of the revenue and the national interest I would be right to refuse to do so, in order not to widen the range of its facilities? But if the right hon. Gentleman has had this alarming document before him all this time, why has not the Chancellor done something about it?
§ Mr. Brooke
This document is, of course, an advertisement, and I would have thought that the right hon. Gentleman would have been experienced enough by now not to take all advertisements at their face value. It is an intriguing and exciting document. I have no intention of disclosing to the Committee all the methods which are used by the Inland Revenue to check and secure the punishment of those who try to pay less tax than they should.
I am well aware of the distinction between tax avoidance and tax evasion, mentioned the other day, but sometimes the dividing line between them is somewhat thin. I would say to those who are attracted—and who would not be—by the suggestions that they can eliminate death duties in perpetuity and limit and possibly eliminate their liability to Surtax and do a number of other most seductive things, that that line is such a thin one that they had better be on guard least they put themselves right outside the Surtax class, and find themselves for a number of years as guests of Her Majesty, wearing the kind of clothing which the right hon. Gentleman and I, in the jargon of last autumn's Budget, would have described as being "below the D line."
The Profits Tax will no doubt be further debated when we reach the Committee stage of the Finance Bill, but this is particularly relevant to what I have just said about the Royal Commission's 1200 recommendation, because I must emphasise that my right hon. Friend's proposals on the Profits Tax regarding distributed and undistributed profits are not to be taken as any indication that he has rejected as a long-term objective the recommendation of the Royal Commission that there should be a somewhat different type of direct taxation of company profits at a single undifferentiated rate. He has not reached a final conclusion on this. He has decided that in the special circumstances of this year it would be wise to include an addition of 2½ per cent. on distributive profits, bringing in about £20 million, and ½ per cent. on undistributive profits bringing in £10 million.
Finally, although I do not think that anyone in our debates has as yet mentioned it, there is a matter on which I know that literally millions of people are anxious to know the Chancellor's intention. Frequent Questions have been asked about it from both sides of the House, since the Royal Commission produced its final Report. I am referring, of course, to the valuation of property for Schedule A purposes. The recommendation of the Royal Commission was that the annual value of property for Schedule A should normally be fixed either by the rent paid or by the rating valuation, whichever was the higher. This would mean that Schedule A assessments on owner-occupied houses and other property would follow their rating values.
My right hon. Friend the Chancellor of the Exchequer has examined this important question very carefully indeed. It became clear to him that if, in his Budget statement, he included the acceptance of the Royal Commission's recommendation, it would produce one major fiscal anomaly. For one thing, a new valuation for rating purposes has been completed in England and Wales and one is in progress in Northern Ireland, but it will be some years yet, we all understand, before, in Scotland, the proposed new valuation there is done. But Income Tax law has to apply to the whole of the United Kingdom, so we should find ourselves in the position of charging taxes on valuations which, in fact, had been arrived at on a different basis in the different countries. Whether the English came off worse than the Scots, or the Scots came off worse than 1201 the English, there would be trouble either way.
Secondly, the Royal Commission's recommendation assumes that rating valuations do exist. But, of course, there are no rating valuations for agricultural land in England and Wales because that has been exempt from rates for the last 27 years, and the Inland Revenue has certainly no surplus staff available who could quickly carry out and complete a special valuation of agricultural land for Schedule A purposes on the lines recommended by the Royal Commission.
My right hon. Friend saw clearly that if there was a Schedule A revaluation now it could not apply to property in Scotland or to farm land in England and Wales. That is not a matter of law or politics; it is a physical impossibility. The new valuations just would not exist in those cases and could not be improvised. Therefore, any Schedule A revaluation at the present time would be incomplete and the resulting anomalies would be unfair and justifiably contentious.
§ Mr. J. A. Sparks (Acton)
I can understand the physical difficulty of carrying out this vast piece of work. At the same time, we know, when the right hon. Gentleman says that anomalies would be created, as between different land owners, that anomalies are now created between owners of property who have been reassessed and the people who are getting off scot-free because of the physical difficulties.
§ Mr. Brooke
I do not think that anyone has got off scot-free. Perhaps I may be allowed to finish this passage of my speech.
I was saying that I could make no commitments for the long-term future. I know that the Committee is restive when the Financial Secretary says that he cannot anticipate his right hon. Friend's Budget, but I think it is reasonable for me to say, two days after one Budget, that I cannot anticipate the next, or the next but one, or the next after that. What my right hon. Friend might decide to include in his next Budget I cannot forecast now, but I have his authority to state definitely that for the time being owner-occupied property will remain for Schedule A purposes at their present 1202 value—unless they undergo substantial alteration which means that the annual value has to be recalculated.
I now come to the point raised by the hon. Member for Acton (Mr. Sparks). The announcement which I am about to make shows up the special problem of what is to happen to new properties. Up to now, new owner-occupied properties have normally been assessed for Schedule A in accordance with, to use our jargon, the tone of the list—the general level of assessment of owner-occupied properties of a similar character in the neighbourhood. In practice, the rating values appearing in the old valuation list have commonly been used for this purpose, because a precisely similar policy was followed for the rates.
If we continued that practice now that the rating revaluation has come into force in England and Wales, it would be unfair to owner-occupiers of new houses and other properties, because they would be assessed under Schedule A at a higher level than similar properties which had Schedule A assessment put on them before 1st April, 1956. My right hon. Friend intends to avoid this unfairness and he authorises me to tell the Committee that he has asked the Inland Revenue to assess these new properties at the same level as hitherto adopted in the area for assessment of other owner-occupied properties of the same character. This will, of course, be subject to the concurrence of the General Commissioners of Income Tax for the Division concerned. A property which undergoes substantial alterations ranks under Schedule A as new property, and will be treated in the same way.
The Committee will appreciate that no similar problem normally arises in the case of rented property. In that case, the full rent is taxed in one way or another, either under Schedule A, or, if the rent is more than Schedule A, assessment by means of an excess rent assessment. For rented property, therefore, the level of the Schedule A assessment is not generally of the same importance as it is for owner-occupied property. However, there are the exceptional cases where the rent paid is less than the full annual value, and, there, the Schedule A assessment does matter; and it is only fair in those cases that the Schedule A assessment is fixed in accord with the tone of the list.
1203 I apologise for taking up the time of the Committee for so long, but it is, as it were, a break in the contentious argument on the Finance Bill when it falls to the Financial Secretary to fill in the details and to seek to answer specific questions about matters which, clearly, cannot be filled in with full colour in the Budget statement itself. I feel the less guilty on this occasion, because up to the present our Budget debates have not generated a great deal of heat. I trust that the two days of debate that follow will be ample time for hon. Members on both sides of the Committee to develop their views, contentious or otherwise.
In closing, I should like to say that I was greatly encouraged by one sentence in the speech of the right hon. Member for Huyton yesterday. He said, speaking for his party, I think:We are as keen as anyone to see the wage-price spiral stopped, so that wages can rise with productivity."—[OFFICIAL REPORT, 18th April, 1956; Vol. 551, c. 1027.]That means that although we may have our differences about methods, we have the same common understanding about the end to be pursued. I hope that I shall not be trespassing on dangerous ground, if I suggest that in the public interest it is important to ascertain how much we may have in common and not solely to stress the differences between us.
We are all in a boat together, Government and Opposition, employers and trade unions. Any one of those parties can by its own actions upset the boat, and yet all four have a common interest in playing their parts to see that the boat does ride the waves and reaches, at the end, the happy haven that finishes a great voyage.
§ Miss Herbison
The Financial Secretary has given us some arithmetical calculations about the effects of the increase in Tobacco Duty. Since many more people are interested in the affects of the abolition of the bread subsidy, has he any calculations to show the Committee how much more a family will have to pay for bread every week, or how much less bread it will have to eat, if it cannot afford to pay the increase? If those calculations have been made—and they are far more important than those for cigarettes—can he give them to the Committee?
§ Mr. Brooke
I was under the impression that all these matters had been debated in connection with the removal of half of the bread subsidy. The figures which were given on that occasion are approximately correct in respect of the forthcoming removal of the other half.
§ 4.45 p.m.
§ Mr. Gordon Walker (Smethwick)
The right hon. Gentleman did not attempt to make a very exhilarating defence of his right hon. Friend's Budget. Indeed, he adopted a novel policy in Budget debates, of not trespassing on dangerous ground. He will perhaps be the only person taking part in the debate who does not trespass on dangerous ground. He used an extraordinarily flimsy argument about the absence of any valid attack on the Budget to justify his refusal to defend it. If we are to believe him when he says that, we must believe that he was asleep, because there was not only a very powerful attack by my right hon. Friend the Member for Huyton (Mr. H. Wilson) and by other hon. Friends of mine, but a number of attacks from his hon. Friends, including a slashing attack by his hon. Friend the Member for Tynemouth (Dame Irene Ward). After all that, to say that no attacks which need answering have been made is very extraordinary.
§ Mr. Gordon Walker
At any rate, the right hon. Gentleman very quickly sought relief from these powerful and valid attacks by resorting to cider and perry—incidentally transgressing the rules of order, and in a number of minor and detailed points, many of them of considerable importance and interest, but points which will be debated in Committee on the Finance Bill.
The right hon. Gentleman seemed to get into extreme confusion—at any rate, he got me into extreme confusion—about the question of the Estimates and whether they are to have any validity, or whether we shall be debating fanciful Estimates. He gave us no valid argument on that. When he talked about an increase of pay for civil servants—and I agree and support all he said about the Civil Service—did he mean that the cost of these increases is to appear in these fanciful Estimates, or will it come in later 1205 Estimates, in which case the cut would presumably be greater than the £100 million to which the Chancellor referred, because there will have to be a cut of £100 million as well as the cutting out of the increased cost of these services? Otherwise, the £100 million does not mean anything and could be wiped out by Supplementary Estimates.
I can understand the right hon. Gentleman not wanting to defend the Budget, or the economic policy upon which it rests. The longer we think about the Budget, more than ever do we come to the conclusion that the Chancellor very sadly failed to measure up to the occasion. The nation awaited a Budget of authority and leadership and instead it has had a flash Budget. The effect, if not the intention of the Budget, has been to divert the attention of the public from the great issues which are facing the country. I do not say that that was the right hon. Gentleman's intention, but it has certainly been the affect of what he did. The nation expected a lead and what it got was a speech full of sound and literary quotations signifying very little.
The main theme of the speech was misplaced. It should have been on raising investment and raising exports. Savings should have been an integral part of that policy and not taken in isolation. Of course, this is only one third of a Budget, although the speech was long enough for two. [An HON. MEMBER: "It was shorter than the Opposition's."] Our speeches have been packed with meaning and, on the whole, this afternoon has been taken up so far by the other side of the Committee.
The first part of the Budget was, of course, on 17th February, when the right hon. Gentleman cut investment and put up the cost of bread and milk by £28 million. Then came the contribution to the Budget of the Postmaster-General, who raised postal charges by £15 million, and then the proposals which we are now debating. If we are to judge the economic effect of the whole of the Government's policy since the right hon. Gentleman has been in office and its impact on the standard of living, we have to take all those things together.
The real significance of this Budget is that, despite some rather uncomradely attempts by the right hon. Gentleman to 1206 dissociate himself from his predecessor—upon which my hon. Friend the Member for Stechford (Mr. Roy Jenkins) commented—the basic economic policy is absolutely unaltered. Like his predecessor, the Chancellor has swallowed whole the mystique and mumbo-jumbo of the banks and the City that we must use a monetary policy and nothing else. One of the great defects of relying solely upon the use of the Bank Rate is that, in modern conditions in Britain, it has to go very much higher than used to be the case before the war if it is to achieve results, owing to the mass of Treasury Bills, and for other reasons.
In a recent article, Lloyds Bank Review, went so far as to suggest that it might be necessary to raise the rate to double figures in order to achieve the sort of effect which a 5 per cent. or 6 per cent. Bank Rate was intended to achieve in pre-war conditions. Even the advocates of the use of monetary policy and the Bank Rate alone admit that it has many disadvantages and defects—and the greater the Bank Rate the graver the defects.
A very high Bank Rate involves the maximum payment to overseas holders of sterling. Since taking office the Government have increased this charge upon the country by about £150 million a year, which, as a result of the Bank Rate policy, is paid to overseas holders of sterling. This is a new factor that has come into existence since the war. Before the war it had the opposite result, but now if we raise the Bank Rate it immediately puts a strain upon our balance of payments, which means that we have to rely upon attracting hot money. That is the only way in which the balance of payments position can be improved by raising the Bank Rate. As far as one can make out from the figures, some of the recent improvement in our reserves is due to the attraction of hot money. This is a very undependable asset for the reserves upon which the whole sterling area depends, because it can flit as easily as it came.
A very high Bank Rate also puts the maximum burden upon local authorities, and this is a direct cut in social services—housing, schools and other forms of local authority capital investment. Now there is worse to come, because this uncovenanted £100 million economy hangs like the Sword of 1207 Damocles over all the social services. Nobody knows where it will fall; all we know is that it will fall upon some services, and no doubt very heavily.
The worst effect of all of relying upon a high Bank Rate as the main weapon of control is that it depresses the whole economy indiscriminately. There was one very significant sentence in the Chancellor's Budget speech. He said:We cannot afford to run our economy flat out …"—[OFFICIAL REPORT, 17th April, 1956 Vol. 551, c. 855.]That means that a high Bank Rate will work only if we get the whole economy into low gear. It means that we solve our problems—if "solve" is the right word—by producing less than we otherwise could.
Not only has the right hon. Gentleman taken over the whole of this policy of relying solely upon monetary control, but he has added to it, as his first personal act as Chancellor, a further specific cut in investment. He has withdrawn the investment allowances; he has tightened up the working of the Capital Issues Committee, and he has made direct cuts in the nationalised industries and local authorities. Could anything be more foolhardy than to cut down capital investment when we are already falling behind our competitors—particularly Germany, Russia and the United States? As Lord Chandos said the other day, this is a policy of saving ourselves by eating the seed corn. It is a most shortsighted policy to cut capital investment upon which our future prosperity depends.
One of the most engaging characteristics of the Chancellor is that he blandly assumes that everyone but himself is to blame. The workers, the consumers, the investors and even the Lord Privy Seal are to blame, although the people who have increased investment were only responding to the stimulus and invitation of the Government. He seems to be blissfully unconscious of the fact that this is an unnecessary, self-engendered crisis, for which the Government must bear a considerable responsibility.
The E.C.E. Survey and our own Economic Survey make it clear that the United Kingdom stands practically alone in the world in being in a state of economic crisis. The rest of the world is 1208 prosperous. Only in this country, under this Government, has there been this tremendous rise in prices. One of the few international tables where the United Kingdom stands right at the head is the table of the cost of living. We stand at the head of the thirteen main nations. Between 1951 and 1955 prices in Western Germany rose by 3 per cent.; in the United States by 4.1 per cent. and then, after all the other countries, the United Kingdom is at the top with a 23.6 per cent. rise. That is quite unique and outstanding, and the Government must bear a considerable degree of responsibility for it. There is no other explanation for its happening.
Indeed, faced by these figures, the Chancellor has a choice of only two arguments. He must either say that he has really, honestly been trying to keep down prices—in which case he confesses, on behalf of himself and his Government, a unique and calamitous failure as a result of which we stand alone in the world—or that he has been deliberately pushing up prices on the principle of "Boyle's Law," which is that we fight the cost of living by putting up prices. That is what has happened.
Not only are rising prices hitting the least well-off most—the people with small fixed incomes and especially the old-age pensioners—but this Government have so managed things that they have increased working-class prices faster than the general average of prices. Their worst effects fall upon the workers and the poorest people. The all-item index in the cost-of-living index went up by 6 per cent. in 1955 while food prices, which particularly affect workers and old-age pensioners, rose by 8 per cent. Now the Chancellor has deliberately carried still further his policy of discriminating against the working class. He has put an extra charge of £23½ million upon bread. This is an extremely regressive and unfair tax. It is a tax not merely upon all bread; the subsidy is upon the National loaf, which is eaten mainly by the poorer people, especially by old-age pensioners.
I doubt whether the Chancellor has ever seen the National loaf in his house. This cut in subsidy will have no effect at all upon him. I have not seen the National loaf in my house. Very few hon. Members here have had it in their houses.
§ The Chancellor of the Exchequer (Mr. Harold Macmillan)
§ Mr. Gordon Walker
It is certainly quite true that the National loaf is eaten mainly by the poorer people, because it is cheaper. Therefore, this burden will fall mainly upon them. There is no doubt about these figures. We had the matter out when we were debating the original Order cutting bread subsidies.
§ Mr. Gordon Walker
Very few of the Chancellor's hon. Friends have had this bread in their houses.
The same criticism applies to his very mean treatment of old-age pensioners in connection with the increase of £28 million in Tobacco Duty. It seems as if the Chancellor has a special "down" upon old-age pensioners. This is also an excellent example of "Boyle's Law." We are apparently fighting the cost of living by putting up the cost of bread and smoking.
The cost-of-living index has just gone up by one point. I hope that the Chancellor or another Minister will tell us what effect the increase in the cost of bread by £23½ million and tobacco by £28½ million will have upon the cost of living. While the heaviest burden has been falling on those least able to bear it, the whole bias of the Government has been to favour the rich. They have had a very simple formula. When it has been a matter of inflation they have said, "We must cure that by damping down on demand in general, calling upon everybody." When it is a question of incentive, they have said, "We must make concessions to the rich." The right hon. Gentleman permitted himself this remark in the Budget speech:On the home front 1955 was a year of great prosperity for the mass of ordinary men and women in this country."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 853.]The next day he was contradicted by the President of the Board of Trade, who said:… the middle classes, which has not shared in this increased prosperity."—[OFFICIAL REPORT. 18th April, 1956: Vol. 551, c. 1040.]That was a very considerable subtraction from what the Chancellor said. It is a 1210 pity the Chancellor was not here to hear the very powerful speech by his hon. Friend the Member for Tynemouth—I hope he has read it—about middle-class small pensioners, and also the very powerful description of the plight of old-age pensioners given by my hon. Friend the Member for Ince (Mr. T. Brown).
Even the President of the Board of Trade will agree that 1955 was a better year for rich people than for anyone else in the country. This has been the deliberate aim and policy of the Government over the last 12 months. Only 12 months ago the Election Budget was introduced. It gave £100 million to Income Tax and Surtax payers—I see the Chancellor of the Exchequer is just leaving the Front Bench. I am sorry that he cannot bear criticism of his policy. It meant, of course, that people with the biggest incomes had the biggest advantages. In October, it was all put back on consumer taxes, which meant that the poorest people paid most.
Then came the Bank Rate policy, which had the direct effect of maldistributing the national income. It raised the interest paid by the Exchequer on Treasury bills; the recipients of these extra payments are in the main the same class as Income Tax and Surtax payers. We do not find many other people holding Government debt. Next year the interest above and below the line on Government debt—I think I have worked this out right from the figures—will be £100 million more per annum than it was last year. This is a direct, regressive redistribution of the national income.
In some ways the worst parts of this policy is the encouragement of what can perhaps be called "fiscal inflation," by which I mean inflationary tendencies actually built into the tax system. Of course, they benefit primarily the rich. It was amazing that the Chancellor did not do anything at all about this fiscal inflation in his Budget. He even missed the obvious chance to do something in regard to implementation of some of the Millard Tucker proposals. I agree in the main with the right hon. Gentleman that we must await the Finance Bill to study this matter in detail, although, broadly speaking, we are in favour of the proposals as remedying an injustice.
1211 The Chancellor did not do anything, although it would have been relevant and appropriate in this connection, to impose a check on one of the main abuses, in what is called the "top hat schemes", referred to in the Millard Tucker Report. These abuses are tax-free lump sum payments to beneficiaries under pension schemes. The Millard Tucker Committee said it had come across cases of lump-sum tax-free payments up to £40,000 and they recommended that they should be limited to £10,000. The Royal Commission on the Taxation of Profits and Income recommended that they should be limited to £2,000.
I hope that the Chancellor will take the opportunity to remedy this omission when we come to the Finance Bill, especially as he is preventing people under his own proposals from getting benefit in the form of a lump-sum tax-free payment. If the people to whom the Chancellor is doing justice are to be denied in this way, then other people who can get as much as £40,000 in lump sum payments tax free ought to have that privilege restricted.
Another source of inflation is deduction from Income Tax for such things as advertisements and entertainments. When people are encouraged to spend money which they would not otherwise spend, that is directly inflationary; they are encouraged by a State subsidy to spend. I believe that about £250 million a year is spent on advertising in this country and half of it is paid for by the State. Indeed, half the cost of that advertisement which my right hon. Friend the Member for Huyton read out yesterday on how to get out of Surtax, including the cost of printing it and sending it round, is paid for by the State as a deduction from Income Tax. It would be a real anti-inflation policy to stop this subsidy to advertisements except those for overseas. If advertising is as powerful a medium as we are told, it does not need a subsidy. Businessmen would use it to the economically right amount if there were no subsidy from the State.
The worst of all these things is the stubborn refusal of the Government to block up injurious leaks in the tax system. The Financial Secretary gave a very weak reply on this when he produced figures and talked about "insinuations" and "allegations"; but this is now becoming quite brazen and shameless, as my right 1212 hon. Friend the Member for Huyton said. If the Treasury had really got this information in its possession and had it for a long time, it is extraordinary that nothing at all has been done about it in the Budget and that there was not even a reference to it in the Budget speech.
I would draw the attention of the Chancellor—or I would do so if he were here—to another glaring way in which people now, apparently quite openly, get out of paying their death duties. There is an article in the Accountant which publicly, and without concealment, on 18th February this year, in an open and rather self-righteous way, was telling people how to evade death duties. It starts off by explaining how the life tenant of a trust buys out the reversionary interest, which it says is a "simple and elementary transaction." It goes on:The saving which can be effected in the higher rates of Estate Duty by this scheme is nothing short of fantastic. … It is no obstacle that the life tenant has insufficient resources to pay the reversioner out of his own money. … He can borrow from his bank.On a trust fund of £100,000, it says thatthe profit to the family as a whole may be £35,000, saved to the family purely at the expense of the Revenue.The word "saved" in this context is what the Chancellor would call "a term of art." I hope that whilst he is encouraging saving in his own way he will do something to discourage this sort of saving purely at the expense of the Revenue.
The truth is that where big incomes are concerned the tax system is beginning to be like a sieve; it leaves more behind than it takes up. This spread of cynicism and hypocrisy is very dangerous. It is spreading through parts of our community where open tax dodging is done, written about, talked about, and known about, except by the Financial Secretary.
§ Mr. H. Brooke
That is a very important subject, and I do not take any objection to its being aired by the right hon. Gentleman. I think I have given evidence today that the Inland Revenue studies not only everything that appears in print but a great deal which comes to its notice and which is not circulated in print. It quickly draws the attention of Ministers to any loophole which is allowing any substantial amount of tax to slip through. Indeed, two changes in the law are going to be proposed in the Finance Bill this year. The right 1213 hon. Gentleman is quite right to draw attention to the possibilities of evasion where he thinks they should be stopped, but he will be doing a bad service to the country if he gives an impression, because it would be a wrong impression, to taxpayers at large that great numbers of people can easily avoid paying their fair shares of taxation.
§ Mr. Gordon Walker
I really must say that I deplore the complacent tone of the right hon. Gentleman. I quite agree that no doubt the Treasury, which is a very efficient Department, draws attention to all these things. The question is whether anything is done about them. People will not form firms to help persons get out of their tax responsibilities unless they make enough money to keep themselves in being. The people who get out of paying the taxes save enough to pay these companies who specialise in this work and boast about it.
I hope the emphasis we have put upon these things, and the proof that we are bringing that there is a widespread belief among certain people that it is possible to get out of paying their taxes in this way, will jerk the Government into doing something about it. I agree that there are some anti-avoidance measures in the Finance Bill, but they are of minor importance compared with the very big leaks. Whether or not we talk about this matter in the House, these things are becoming known, bringing an ugly note into our society and undermining the spirit of good-will and common purpose that we must have in our working class and middle class if we are to overcome our difficulties. These are the people who not only have to pay their own taxes but also have to pay the taxes avoided by other people, because the revenue has still to be raised.
All these things are having a direct inflationary effect. Even if we leave aside tax avoidance, capital gains and such things, the inflation of the incomes of the rich has a much bigger inflationary effect on the economy than is often pretended by hon. Gentlemen opposite. The Economic Survey says, in page 36:The difference between the increase of domestic expenditure and the increase of domestic product amounted to about £100 million at 1954 factor cost, and it contributed to a significant worsening in the balance of payments on current account.1214 Therefore, it emerges from the Economic Survey that the £100 million increase in domestic expenditure contributed gravely to the inflation. However, the £100 million increase in domestic expenditure is equal to the £100 million given away in the April Budget. It is equal to the £100 million increase in dividends in 1955. It is also equal to the £100 million increased interest to be paid by the Treasury next year because of the raised Bank Rate. Really, the £100 million, which is very significant according to the Economic Survey, is more than covered by the inflation of the incomes of the rich in the last 12 months.
A change in the policy of discriminating in favour of the rich would contribute, on the evidence of the Economic Survey, to the holding of prices. Without a sense of fairness in the community, the Chancellor will not succeed with his savings policy. Nor will he succeed by overplaying his hand. His savings proposals in the main are good, taken in isolation. As my right hon. Friend said, we support them and will do our best to encourage savings, but we are doubtful whether they will have the efficacy which the Chancellor claims for them. The results will be nothing like as big as he makes out. In essence, it is a mere adjustment of interest rates on savings of one sort or another to the very high interest rates prevailing as a result of the Government's policy. To some extent, there will only be a shift around of savings from one form to another. Indeed, the Chancellor, in his remarks in the House and in his B.B.C. talk, practically invited people to take money out of the Post Office Savings Bank and put it into the State lottery.
The Premium Bonds stand apart from all the rest. I must say that I do not think the Chancellor's case for them is improved by his disingenuous, almost dishonest, way of saying that it is not a lottery because one cannot lose. People are putting their interest at risk and can lose it. The Manchester Guardian has estimated that the odds will be 1 million to one against winning a £1,000 prize in any quartely draw for each £ put in. In fact, it is a 2d. raffle. Each £1 deposited will entitle the holder, in effect, to a 2d. entry in each of the quarterly draws.
There was a certain poetic justice that last night when the Chancellor was appearing on B.B.C. television he was 1215 competing with a programme on I.T.V. called "Double your money." Now that the Chancellor is setting out to encourage gambling, he cannot complain if he lost a great deal of his audience to a rival gambling programme. The advertisement for the rival programme is really a good comment upon the Chancellor's Budget and his appearance on B.B.C. television. It starts off:Once again Hughie Green has fun asking the questions and handing out the money.That was what the Chancellor was trying to do on the other programme.One wrong answer and the competitor, who can pick his own subject from a list of over 40 different alternatives, loses all his winnings. But the biggest prize of all lies at the end of the Treasure Trail—1,000.Not "the Treasury Trail." That is the sort of thing that the Chancellor had to compete with last night, and it is the sort of thing that the State will have to compete with from now on.
The question of Premium Bonds is not a purely economic issue. Moral issues are involved. One does not have to be against gambling or to be sanctimonious about it to doubt whether the State, when there is a great need to bring stark issues before the people, should organise and advertise the winning of rewards by sheer luck and without effort. It offends very many people. I urge the Chancellor to consider the advice which he has been given to take this proposal out of the Finance Bill and to put it in the Measure dealing with betting, where it belongs, and also to think seriously before putting the Whips on to force it through the House.
There has been one extraordinary omission from the Government's case so far. There have been three major speeches, and yet no mention has been made of the sterling area or the Commonwealth. There is really no wonder about this, because the Government's policies are having very disturbing effects which should make Conservative hon. Members who take seriously what they say about the Commonwealth feel rather ashamed.
Again, it is a question of the mystique of the bank and all the rest of it because the Government have been pushed into liberalisation and a dash towards convertibility in order to restore the commodity markets. The Government's 1216 efforts to restore the commmodity markets have brought very great profits to certain people in the City, but it is doubtful whether the nation has gained very much. It is difficult to make out exactly what the gain in foreign exchange is. The best experts say it cannot be more than £10 to £15 million a year, a very small amount in terms of national gain as against the private profit of certain individuals.
It does, of course, involve a tremendous cost to the Commonwealth. For the sake of restoring the commodity market, the Government have torn up all but one of the long-term agreements with the Commonwealth. In consequence of that, we are now buying less and less from the sterling area. Between 1953 and 1955 the United Kingdom imports from the Commonwealth went down by 3. per cent., and the United Kingdom imports from dollar areas went up by 2.7 per cent., which is the very opposite to the long-term objective than any sensible Government would pursue, for it makes us more than ever dependent on the variations in the economy of the United States.
The higher Bank Rate policy has had a devastating effect. It is drying up United Kingdom investment in the Commonwealth. The Economic Survey states that in 1954 the net sterling area investment by the United Kingdom was £223 million, which was nothing like enough and that in 1955 the net investment was down to £4 million. Thus, it has practically dried up. This is, as the Financial Times made clear, directly due to the Bank Rate.
In consequence of that, other Commonwealth countries are beginning to go elsewhere for their capital. Mr. Nethersole, the Finance Minister of Jamaica, has actually decided to go to the United States instead of coming to London to raise a loan. Jamaica is the first Colony that has ever done it, and it is under a Tory Government and because of the Bank Rate. Sir Roy Welensky, Finance Minister of the Rhodesian Federation, is talking in the same terms, while Mr. McEwen, Commerce Minister of Australia, is coming here full of complaints asking for comparable preferences to be given; but this Government will only be able to say, "We have no means of giving you comparable preferences. 1217 The commodity markets must come before the Commonwealth."
The Government will not be able to complain if Australia carries out its revision of preferences which is now being demanded in a large part of the Australian Press. It would be the consequence of the Government's policy who are themselves behaving in total disregard of the longer term interests of the Commonwealth. How grave this all is was shown by a very frank comment in a leading article in the Financial Times of 3rd April:The position of sterling at the end of 1955 would have been much worse if the rest of the sterling area had not been induced to cut down drastically its demands for British capital. But it is worth noting that the sterling area is unlikely to survive in the long run on the basis of the 1955 remedy"—and "the 1955 remedy" means this Government's policy.
I do not think that Britain can get through its problems and great difficulties unless the Government create the right psychological atmosphere. We must really have a purposive economy. There must be some idea in people's minds of what is needed. The Government have some responsibility. In a great modern community like this, they cannot contract out of their responsibility for deciding what shall be done and what shall not be done. It is madness to import dollar steel to make motor cars for sale on the home market when, as my hon. Friend the Member for Keighley (Mr. Hobson) said yesterday, shipyards are calling out for steel. It is very doubtful whether Britain in its present state can afford to be the world's best market for French champagne. We cannot go on in this way.
If the Government are to create the right psychology, there must be evident progress towards social equality. The President of the Board of Trade said yesterday that we must look to the middle classes for the main contribution to economic development. Certainly, that is true—they must play their part, as everyone must do; but it is the workers and the trade unions who are the key to the economy today. Upon them depends primarily our productivity and, of course, the adjustment of wage demands to the increase of productivity.
We have been very lucky in this country since the war—and the Government have 1218 been very lucky—that our trade unions have had such a wonderful sense of responsibility. Trade union conferences recently have shown that the leaders and the unions are fully aware of their responsibilities in the economy, but the Government's policy makes it extremely difficult, if not impossible, for them to carry out the kind of policy they want to pursue.
If we have a free-for-all economy in which everyone is urged to make the most he can out of it, why should only the workers be under restraint? The Government has steadily and unfairly favoured the rich all the time. We must get a sense of purpose in the economy and a real advance towards social equality. I have no doubt that Britain then will get through and go ahead, but I have equally no doubt that it cannot be done by this Government and this Chancellor.
§ 5.24 p.m.
§ Mr. Geoffrey Rippon (Norwich, South)
I shall not attempt to follow the right hon. Member for Smethwick (Mr. Gordon Walker) into all the detailed points he raised, although there are one or two of them upon which I should like to comment as I develop my own argument. The Committee must, I think, particularly welcome the Budget for the imaginative measures it contains to stimulate private savings and to safeguard our present prosperity and state of full employment. It has, as its background, the aim of achieving a proper balance between production and home consumption and so securing a more favourable balance of payments based upon the foundation of strong reserves.
The general economic background to the Budget has been developed by my right hon. Friends the Chancellor of the Exchequer and by the President of the Board of Trade on Tuesday and yesterday in the light of the various White Papers. If I were to make a lengthy comment upon them I should be rightly accused of being repetitive. What we want to understand in discussing the Budget is that what we are doing is taking place in a situation in which one of our main difficulties is that we have moved too fast towards the aim of doubling our standard of living in twenty-five years. So far from resiling from that target, the position at the moment is that we are likely to reach it in a shorter rather than a longer time.
1219 What is important about the tenor of the Chancellor's speech is that he has made it perfectly clear that we do not at present face anything in the nature of a general economic crisis. Fundamentally, it is not even a balance of payments problem. The real need is simply and solely to build up our reserves to a level at which we can ride through temporary and normal fluctuations in the terms of trade.
The gravest danger in many ways that we face at the present time is a tendency to create an atmosphere of crisis and so undermine confidence at home and abroad that we succeed eventually in talking ourselves into real trouble. There were times during his speech when the right hon. Member for Huyton (Mr. H. Wilson) came very close to doing just that.
In that connection, and having made some tentative observations on statistics on Second Reading of the supplementary Finance Bill last October, regarding the historic and confusing nature of the welter of statistics with which we are at present inundated, I was delighted with the Chancellor's comments on this subject. The right hon. Member for Smethwick talked about the mystique which has developed around banking and monetary policy, but a great many statisticians attach an almost mystical value to the statistics they produce. The reason for this, I suppose, is that nobody could work with statistics the whole time unless he really believed that they had some mystical value.
All the time we see economists interpreting and misinterpreting statistics, and, above all, doing it in a vacuum. They play a kind of intellectual chess, juggling, arguing and disagreeing about them. They assume that there is no direction coming from any other source. I hope we never again find ourselves in the position in which we were before the war, when this country enjoyed a position of tremendous potential wealth but the economists said that we were on the point of bankruptcy and for years we worked and toiled to make the facts fit the theory, with disastrous results.
I very much hope that when my right hon. Friend the Chancellor of the Exchequer comes to determine the form and kind of the statistical information upon which almost inevitably our financial dis- 1220 cussions in the House of Commons turn, we will be able to do three things. The first of these is to discourage the drawing of hasty conclusions from the monthly or even quarterly trade figures, which, as my right hon. Friend the President of the Board of Trade said yesterday, and as we all know, are subject to so many distorting factors one way or another.
Secondly, I hope that we will be able to bring into focus the importance of the invisible exports. My right hon. Friend the Chancellor of the Exchequer rightly said in his statement that the balance of visible trade is the factor of immediate concern, but it is damaging to confidence, which is one of the most vital things we must maintain, at home and abroad, to over-publicise the figures which tend to imply exaggerated deficits.
Above all, I hope that the new statistical information will put the emphasis upon an analysis of trends of trade. It is important that when we look at these figures and see the high rate of imports, we should be able to determine how far that high rate is due to bulging order books and how far, on the other band, the rate of exports is due to a less satisfactory state of affairs a few years earlier.
It may well be that we should be more seriously alarmed when the position is completely reversed. Certainly, I think that this country should be seriously alarmed if ever we reach the state of affairs when our exports in any particular period were well above our imports, because that might imply that the trade of the country was running down. Some mention has been made in this debate of the improvement in the figures for the first three months of this year. Much as we all welcome it, we do want statistical information to show how far that improvement, for example, is due to higher export prices. The pressure of wages and other costs has the immediate effect of pushing up our export prices, and the immediate effect of that is to improve the terms of trade. For a period at any rate, the more favourable would appear to be the balance of payments, but that, of course, would be a disastrous state of affairs to continue for any length of time.
I raise these points only in order to show that I believe that the way in which some statistics are presented and the way in which they are interpreted, tends to 1221 over-simplify the nature of the problem with which we are faced. That is why I say that, fundamentally, this is not a balance of payments problem at all, because if we only had a sufficiently high level of reserves, we would be able to make, in an ordinary free market, the necessary adjustments over a period in the general balance of payments.
In so far as there is an immediate need to restrict home consumption because too high a percentage of our imports is being diverted to meet home demands instead of being re-exported, I welcome the way in which the Chancellor has pinned his faith to a policy of promoting and encouraging private savings. Quite apart from our differing views on the Premium Bonds, I think we all welcome the way in which ordinary small savings are being encouraged.
I welcome, as hon. Members on both sides of the Committee have welcomed, the decision to implement the recommendations of the Millard Tucker Report and so remove some of the obstacles which undoubtedly at present stand in the way of self-employed persons providing for their old age and retirement. I think that decision is right. The details can, as my right hon. Friend the Financial Secretary said, be discussed during the Committee stage; but I would underline the importance of the point which I think was made by my hon. Friend the Member for Langstone (Mr. Stevens) yesterday that some provision ought to be made for a part of the annuity to be commuted to a lump sum, as is the case with other pensions. I also welcome the encouragement which is now to be given to people wanting to own their own houses by means of the reduction in the rate of Stamp Duty, but, as has been said in this debate already, one must regard that as only a first step, though an important and useful one, in that direction.
I do not think it is necessary or desirable that I should make any comments upon the additional taxation that has been imposed. As very many hon. Members have pointed out, that is not a matter of very great significance in relation to the general economic state of the country, with which we are concerned today. These taxes are not of very great significance against a total national income of over £16,500 million. What I should like to 1222 comment upon are some of the very important questions of long-term Budgetary and financial policy with which my right hon. Friend the Chancellor dealt in his speech on Tuesday.
First of all, I am glad to see that he has repudiated as a general theory the view that we should deal with the balance of payments and restraint of consumption by enforced national savings brought about by a large Budget surplus. I accept that that is justified on a short-term basis for this year, and it may even have to continue until such time as we can judge the success of the new savings drive, and until we have raised our reserves to a safe and satisfactory level; but I am sure that it is wrong to regard any departure from the traditional view that the Government should raise only sufficient revenue to cover the year's estimated expenditure as anything but a temporary expedient.
I should now like to say something about matters raised by the right hon. Gentleman the Member for Smethwick on the subject of the efficacy of the monetary weapon, and particularly the Bank Rate, in modern times. It is a subject which my right hon. Friend the Chancellor showed he had well in mind from several of the observations which he made in the course of his speech. As he said, the real trouble is that it is difficult to suggest a satisfactory alternative, and certainly I believe that the Bank Rate is less blunt a weapon than the physical controls and restrictions on which hon. and right hon. Gentlemen opposite have for so long pinned their faith. I thought it rather significant that neither the Leader of the Opposition nor his right hon. Friend the Member for Huyton (Mr. H. Wilson) placed anything like the same amount of emphasis on that aspect of Socialist policy as has been done in the past, although, as the right hon. Member for Smethwick said, some hon. Members opposite, including the hon. Member for Keighley (Mr. Hobson), have dwelt upon it.
I reject entirely the solution of physical controls. At the same time, I think we must regard a high Bank Rate as a temporary expedient. It is at best a palliative, and I believe a dangerous one at that. Certainly, it is true to say, as the right hon. Member for Smethwick said, that it is a less potent weapon than it was once upon a time, as is brought out 1223 in the April issue of the Lloyds Bank Review and by other commentators; and I think there are two obvious reasons.
First of all, the local authorities and nationalised industries, which have been absorbing over 50 per cent. of our total annual investment, are largely indifferent to high interest rates. They grumble about them, but unless some further restraint is put upon them they have shown that they are prepared to borrow anyway. Secondly, high rates of taxation have cushioned the impact of higher interest rates upon private borrowers. It may well be, as the right hon. Member for Smethwick said, that the only way in which the Bank Rate could be operated as it operated in the past would be by having an even higher rate of interest than we have at present.
It is a matter for satisfaction that private investment, which rose by 18 per cent. last year, is going to rise by 18 per cent., or something very near it, in the coming year. So it would be wrong to give the impression that the Government credit squeeze is operating dangerously to reduce investment in this country, because the level of investment rose considerably in the private sector, and as I understand it, will rise again this year, which is a satisfactory state of affairs.
I think we want to get a greater emphasis in times like these on the importance of scarce money rather than dear money, which was a point made very forcefully by my hon. Friend the Member for Basingstoke (Mr. Freeth) yesterday. I hope, and I thought I saw some hint of it in the speech of the Chancellor, that it may be possible to go quite a long way towards controlling credit without increasing interest rates or maintaining them for any length of time at the level where they are today.
As far as the expenditure of local authorities is concerned, it soon became clear that the effect of forcing local authorities into the open market, even at a time of high interest rates, was not going to curb demand. That has been done, in fact, much more effectively, first of all, by a request to them to limit their capital expenditure to the 1954–55 level, and then by the virtual embargo for a period of six months on loan sanctions for all but essential capital expenditure. I am quite sure that that has been very 1224 effective, and that it is a very necessary, wise and sound policy. I am not suggesting that as a matter of long-term policy it is not very much better that a local authority should, in normal times, be able to finance the capital expenditure which it believes to be necessary in the open market, according to its own standing and credit in that market. In present circumstances, however, direct control is proving effective.
We know now that the capital expenditure of the nationalised industries is to be financed out of below-the-line payments. I believe that policy to be right on three grounds. First, it is undoubtedly true that considerable uneasiness has been felt because of the Treasury's growing volume of contingent liabilities. It would appear that in this respect Government policy is in keeping with the advice which the Comptroller and Auditor General gave to the Select Committee on Nationalised Industries, when he said that there should be some more efficient system of safeguarding Parliament against the danger of having the Treasury call upon the Consolidated Fund to implement its guarantees.
Apart from that I think it right because, as my right hon. Friend pointed out in his speech, unlike the local authorities the nationalised industries have in the open market no credit or standing upon which they can rely. It is a desirable policy at the present time also, because it brings the capital expenditure of the nationalised industries more directly under the control of the Government. I hope that this may one day be regarded as the first step in bringing the nationalised industries into public ownership and control.
Here again is a large section of the investment of the country the control of which is not dependent upon high interest rates. It is obviously important, as the right hon. Gentleman the Member for Smethwick said—what, I am sure, no member of the Government has ever denied—that private investment should be high, although on a short-term view it must clearly not exceed the amount of money and savings available to finance it. Therefore, it is obvious that credit restriction and the control of new issues must be continued for a period, but it can be argued with considerable force that there is no point in driving industry 1225 to pay high charges for credit which it must and will have in a time of expanding trade and general prosperity.
We must all of us be concerned with some of the observations on this subject which the right hon. Gentleman the Member for Smethwick has made and which, I think, were not wholly out of harmony with the observations of the Chancellor of the Exchequer. In the Seventh Annual Report of the O.E.E.C. it is significantly said that too much of the total impact of the measures taken so far have fallen upon investment rather than upon consumption. It goes on to say that any further action should be directed towards restricting the growth of consumption rather than investment. That, I presume, is productive as distinct from public capital investment.
There is a further serious consideration to which not only the right hon. Gentleman the Member for Smethwick and the right hon. Gentleman the Member for Huyton drew attention but to which—and this is what I regard as significant—the Chancellor of the Exchequer himself drew attention, and that is the cost of servicing the National Debt, and, in particular, the payments which have to be made to foreign owners of sterling. I think that that certainly lends itself to the argument that the efficacy of the Bank Rate to restrict credit must be reexamined. We must, as, I believe, was implicit in my right hon. Friend's speech, envisage a situation in which monetary policy will have to operate mainly through controlling the liquidity ratio and short term borrowing.
I turn to the control of Government expenditure. We have heard that, in addition to reviewing defence expenditure, the Government envisage a saving of not less than £100 million on the Civil Estimates. Connected with that is a reduction of between 10,000 and 15,000 in the number of civil servants. I associate myself entirely, as, I am sure, everyone on this side of the Committee does, with what the Financial Secretary had to say about the high standards maintained by the British Civil Service. The Civil Service is an institution of which we can all be very proud, and I am sure we all agree with what my right hon. Friend had to say about paying a proper market rate to hard-working public servants; but that does not alter 1226 the fact that we have to consider whether the total numbers employed are so employed as to give the most efficient and effective work. The situation is that 8½ per cent. of our total working population is employed in the Civil Service, while the local authorities and the police take a further 6½ per cent.
We should not allow ourselves to be misled by the argument of the right hon. Gentleman the Member for Huyton and the right hon. Gentleman the Member for Smethwick who suggested—I could not quite follow their argument—that there is something unconstitutional in the way in which this is being done. I should have thought that any organisation, any business organisation or any local or other public authority, would have regarded subjecting itself to continuous scrutiny as a proper means of improving its efficiency by economy. I welcome that announcement by the Chancellor of the Exchequer as a continuation of the Government's policy ever since 1951 of subjecting the whole of the Government's activities to a continuous, day to day review.
If we add to the proposals of the Chancellor of the Exchequer the important reduction by 3 per cent. of the Government's share of the national product between 1951 and 1955 announced by the Lord Privy Seal last October, and the reduction by 50,000 in the number of civil servants which has already taken place, as the Financial Secretary pointed out, since 1951, and which has taken place without any suggestion that the efficiency of the Civil Service has been impaired, plus the fact, also pointed out by the Financial Secretary, that the Estimates already represent a saving in real terms—if we add all those things together we must be satisfied that the Government themselves are making a formidable contribution to the battle against inflation, by pruning their own demands.
It is a common error to suppose that any Government can by their own monetary and fiscal policies solve all our economic difficulties. The Chancellor of the Exchequer summed that up in a single sentence when he said:Monetary policy cannot 'go it alone'."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 856.]It must be reinforced not only by other and different Government Measures but 1227 above all, by public co-operation. I am sure that on the short term view the policies proposed in the Budget are sound and wise. On the long-term view the highest importance attaches to the initiative which the Prime Minister himself has taken from the outset in bringing into consultation the representatives of both sides of industry. I am sure that on both sides of the Committee we understand that Budgets alone cannot cure inflation or produce goods or sell them abroad. That requires a united national will.
§ 5.48 p.m.
§ Dr. J. Dickson Mabon (Greenock)
The hon. Member for Norwich, South (Mr. Rippon) has made one point at least which struck me with considerable force, for he said that we ought not to claim that there is any economic crisis or that we are having any difficulty with our balance of payments. I do not mind one or two hon. Members holding that opinion. I do not object to certain people in the country holding it if it comforts them at all. However, it is not at all wise that we should allow the idea to get abroad that all is well and that the country is reasonably well off.
There are two very important facts which have to be borne in mind. The first is that our resources are almost as low as they were at the end of the war, which must cause considerable concern to very many citizens. The second is that in the last year, which we are considering now, we lost well over £200 million in our balance of payments. Irrespective of party, those two simple facts are bound to cause a certain amount of concern.
I raise this matter at this juncture because we have tried very hard in the last few months to make people understand that we are not living in the midst of a vale of prosperity, but are facing a battle for the life of our country. To propagate the idea that all is well, or that it is a simple matter to get out of our difficulties, is, to my mind, quite unfair. It is almost treacherous to suggest that all is well. All is not well. The people must realise that our country must make a great effort to overcome its present difficulties.
It is wrong for hon. Members opposite to spread about the country the idea 1228 that things are all fine. I suggest to the hon. Member for Norwich, South that while he may well believe, in the context of his own economic prejudices and his own views, that all really is well and that in the long run all will be well, nevertheless he ought not to encourage people to believe that the balance of payments problem is quite simply and easily remedied and we have been doing remarkably well during the last year. I put it to him that that is the kind of thing which will make people slacken their efforts and will encourage industry to become more concerned about its own affairs rather than the nation's wellbeing.
The hon. Member did refer to what he called the constitutional arguments of my right hon. and hon. Friends. Surely we are certainly entitled to question this suggestion which the Chancellor has made about a £100 million reduction. I agree with him wholeheartedly when he says that we ought to have throughout the year, as in any business concern, a constant scrutiny of all Departmental expenditure to ensure that no waste at all creeps in. But that is not the point we are trying to make. The hon. Member must realise, unless he is much more prejudiced than I would suspect, that this £100 million will not be found in simple wastage.
If it were the fact that £100 million could be found in simple wastage, then surely we ought to have found it years ago. Such a state of affairs ought to have been exposed a long time ago by other processes of the legislative and administrative machine. We are surely not going suddenly to find £100 million being wasted by the State through not surveying its normal processes of administration and execution of policy.
It is fair to say that an element of this £100 million—we suggest, a large element—represents a deliberate cut in policy. That may or may not be good, but we in this House of Commons, this democratic Chamber, are entitled to ask these fair and pertinent questions of the Chancellor. Where will this money come from, what policies are to be changed, and may we comment on them?
I have heard it said by the President of the Board of Trade that we are going to look to the middle classes. I know 1229 that one or two hon. Members comfort themselves in the knowledge that this Budget has been a fair one to doctors and teachers; they feel that the professional classes are given an incentive and that the middle classes are really given a chance to play their full part in the recovery of our country.
Do hon. Members really believe that conscientious and public-spirited citizens like doctors and teachers are really more concerned about their own personal wellbeing than they are about the state of our schools and hospitals? Surely, a doctor is more concerned about the welfare of the medical services. Surely a teacher is more concerned about his schools. A conscientious doctor or teacher is concerned not to see how much he has managed to secure in superannuation concessions. He is concerned to find out what is going to happen in regard to this £100 million, and how it is going to affect hospital and school building and the National Health Service.
These matters are very relevant. I do not know whether they are valid arguments according to the view of hon. Members opposite. It appears that valid arguments are defined simply as those arguments which the Government can answer, and invalid arguments are those which the Government do not wish to answer. I used the word "pertinent" a short time ago. I think my comments may be termed pertinent—not impertinent, but pertinent to the subject under review.
It has been the custom always to speak not of the cutting of the building of houses and schools but the postponement of it. This is a neat device whereby the politician manages to avoid the troublesome reactions of the situation. I suggest that if we are going to economise in the country to the extent of this £100 million, it is going to mean a very thorough postponement of school building and other building which will be really unfair.
This is a form of control we have over schools and hospitals which we do not exercise over many other forms of building. Hon. Members opposite, for their own doctrinaire reasons—to which they are entitled—object to controls. They object to any control of buildings. They dislike the idea of reintroducing building licences. But I put it to them that this distaste for controls means that 1230 they are willing to allow a certain part of the economy to go free and uncontrolled while another part of the economy, the building of schools and hospitals, is subject to the most rigorous control and is attacked first when difficulties arise.
If, therefore, we are going to economise, it must not be at the expense of schools and hospitals. There may be other things which are highly desirable. Nevertheless, the fact remains that we shall find, on the one hand, the Government stepping in to postpone school and hospital building, while on the other hand, petrol stations and other luxury buildings are erected all over the country, unrestrained and without reference to Government policy, availability of building materials or shortage of labour. It is quite shameful that our priorities should be treated in this way. We do not even know at the present time whether there is to be any slowing down in the school and hospital building programme.
We on this side of the House are very concerned that there should be a discussion of the Guillebaud Report. From what we have gathered from various associations, from the British Medical Association, the Medical Practitioners Union, and various other agencies within the medical profession and its auxiliaries, we understand that there is constant concern that the present Health Service charges should first of all be reduced one by one and then finally eliminated altogether. The B.M.A. is on record as supporting the idea that we could withdraw the prescription charge. There are many doctors who are anxious to see this Report accepted by the Government completely. Indeed, we would go a little further than that; we are willing to see the withdrawal of all the charges.
The present Budget proposes nothing like that at all. It is suggested in the Press—though I do not suggest the Government are responsible for it—that they are considering introducing further new charges rather than remedying the present inequity. One of the newspapers of this country most loyal to the Conservative Party is the Glasgow Herald. Today, without any apologies or quotation marks, the Glasgow Herald heads one of its articles, "The Macmillan Axe". There was a time in political affairs during the last ten years, which is the only period in politics which 1231 concerned me personally, when anybody who wielded an axe of any kind was extremely unpopular. We were building up the Welfare State, and, no matter what the party opposite may have said at the time, the fact is that anybody who said an axe ought to be wielded was considered very much of a reactionary by his own group.
Here we have the amusing situation that on 19th April, 1956, in this Scottish newspaper, there is printed, without apologies, the heading, "The Macmillan Axe", and also a sub-heading "Social Services May Be Cut". This newspaper is widely read among the professional and middle classes. I put it to hon. Members that there is many a doctor and many a teacher, and many other citizens, who will be very concerned to find that of this £100 million so much is to be recovered by cutting the social services.
Of course, we may have the declaration that the saving is to be made on defence. Very good; I will welcome that. But I think we are entitled to ask the Chancellor whether or not this £100 million is to be found in any measure at all by reducing the social services.
The Financial Secretary earlier stated that the whole theme of the Budget was savings. I would like to quote the words of Lord Mackintosh, Chairman of the National Savings Committee, speaking on the actual element of the Budget which concerns savings. He said—and I quote from the Manchester Guardian of today's date—With the new Savings Certificate and Defence Bond, the Movement had the best tools for the job that it had ever had, apart from the novel Premium Bond.I have tried to be fair, but I could not quite analyse the sense of that sentence. Does the use of the second comma mean that he agrees that these are the best tools for the job, apart from the novel Premium Bond? Does he mean that the novel Premium Bond is not one of the best tools? I suspect that he does.
We have had in Scotland in the last day or two from one of our foremost churchmen, a former Moderator of the General Assembly of the Church of Scotland, Professor James Pitt-Watson, one of the best comments on Premium Bonds. He said that it was 1232regrettable that when people could not be induced to invest in the future of their country, they should be asked to have a flutter on it.I thought that that was a particularly good comment on the situation.
I agree with my hon. and right hon. Friends that, no matter how we argue, this is, nevertheless, a simple gamble. It may be innocuous, but it is fundamentally an exercise of the principle of gambling and should not be discussed at this stage in our proceedings. In fairness to the consciences of hon. Members, this proposal might be put into a Bill on gambling and betting and, as has been suggested from this side of the Committee, a free vote of the whole House of Commons allowed on it.
It was suggested in one newspaper today that we on this side of the Committee are asking for a free vote because our party respects the consciences of its members. There are hon. Members opposite who have consciences and I know one or two of them who are anxious that their consciences should not be prejudiced in this matter. I simply make the point that we should not consider on party lines a matter of this kind which can very much violate the conscience of an hon. Member.
The definition of gambling, with which the Chancellor of the Exchequer entertained us two days ago, certainly amuses me, but I cannot quite accept it. It seems to me, with respect, that the risk of loss of some money for the possible gain of more is a far better definition of gambling than the one which the right hon. Gentleman offered to us. I submit that however small the money loss and however large or small the gain, one is gambling, and for anybody to say otherwise is to ignore the argument or to pronounce humbug.
Hon. Members opposite cannot escape the charge which will be levelled by history that they have willingly tolerated the introduction of gambling with the blessing of the State into the fiscal system of this country. So far, I have heard few hon. Members opposite willing to denounce this proposal as gambling, naked and unashamed—certainly unashamed. The point that I would put to the Chancellor, since he appears to be unmoved by arguments about gambling, is that some moral damage must be caused by the introduction of these Premium Bonds. The damage may be 1233 slight in his estimation or in mine, but let us weigh that damage against the profits and economic probabilities of the lottery.
Let us consider the difficulties of running the lottery. There are two classes of people who will be attracted to it, or will at least think about it. There are those who gamble constantly—those who are anxious to get something really big for nothing. Is it thought that they will turn to Premium Bonds, with their very doubtful attractions in terms of gambling? I am talking in gambling parlance which, frankly, I do not understand, but does anyone think that these bonds will attract an avaricious gambler? It is argued that the odds are lower than the odds of the football pools, but the first attraction of football pools is that those who spend their money on them get the results weekly, and I am told that there can be nothing more awkward than having to wait a long time for the results of a gamble.
§ Mr. F. M. Bennett (Torquay)
One essential advantage to the investor in the Premium Bond is that he keeps his stake, whereas in the case of a football pool he loses it.
§ Dr. Mabon
Let us consider the matter in those terms. If a man puts 6d. on the football pools he can win £75,000, and that every week. In the case of the Premium Bond he spends 2¼d. or 2½d. every week, and every three months he stands to win £1,000. This is a bet, for he would be earning 9d. every year on every. £1 invested if he were receiving savings interest on his money. I shall be glad to hear the Chancellor expound this matter further. The country is waiting with interest to find out what exactly this Premium Bonds scheme means, but I suggest that the gambler in the country will not be attracted by it.
§ Mr. Coldrick (Bristol, North-East)
Is it not obvious that if a person puts £200 into Premium Bonds, and not into Post Office savings, he will be losing thereby 2½ per cent. on £200, which is equal to £5? Therefore, he will be virtually handing over £5 to the Chancellor to speculate with and consequently it is at least vicarious gambling if not gambling on his part? He is losing, in any case, £5.
§ Dr. Mabon
I thank my hon. Friend for that intervention.
1234 The other people whom it is claimed this scheme will attract are those who now put money in Savings certificates and Post Office banks. They are not particularly wicked people and they may be very willing, in the words of Professor Pitt-Watson, to have a flutter. They may be willing to take money out of one deposit and put it in Premium Bonds, but the net result to the country is precisely nothing, because they have their money already invested in small savings. I can see no kind of investor who is willing to come forward and put his money in Premium Bonds who presently does not save or who presently is not involved in other forms of gambling on such a scale that he would not be attracted by the scheme.
The cost of running the scheme will be enormous. No doubt it will please hon. Members opposite that we shall have to have many more officials. The scheme will have to be advertised very extensively in the Press whenever the prizes are drawn, because I cannot see, otherwise, how the Government can make clear who has won, say, in June, July and August.
§ Dr. Mabon
We may well find this dignified Chamber used for announcing winners. We should be descending to the level of a banana Republic if that were ever the case.
The virginity of the new cost-of-living index has already been tarnished and the index has risen by one point. The change in the bread subsidy will cause it to rise higher. The simple fact, which may delight the hon. Member for Norwich, South is that the cost of living is going up. Whatever remedies are posed or changes made, not only have we an adverse balance of payments and our gold and dollar reserves are going down but the cost of living is going up.
We are told that it is now a case of four men in a boat—the Government, the Opposition, the employer and the worker. In my younger days it used to be "Three men in a boat, not forgetting the dog". Today, the dog is the housewife, who has had a dog's life of it trying to make both ends meet. Wage demands are not launched at the trade union branch but 1235 in the kitchen, because there the housewife explains the simple economics of the home to her husband, tells him that the £ is not stretching as far as it did, and that he should ask for a rise. These are facts which are carefully avoided in this dignified debate.
§ Dr. Mabon
It may not suit the hon. Member, but he has to answer to his constituents. The cost of living is rising as substantially in Lanark as anywhere else, and the hon. Member's constituents will let him know about it when he holds a meeting there, which, I hope, will be soon. If the hon. Gentleman wants me to attend that public meeting, I shall be delighted to accept his invitation, for we can then have a discussion on the cost of living and find out what people think; but he might not like it.
It is clear to me that the essential thing which ought to have been done in the Budget, but has not been done, was to stabilise prices. The Government should have been willing to come forward with a pattern of means, clearly defined, to stabilise prices. I say that because it is not only necessary to do what is good for the country, but it has to be clearly shown that what is being done is good for the country.
Do hon. Members opposite think that all over the country housewives are saying what a delightful Budget this is, that it will at last steady the cost of living, that it will at last give wages their real value? I do not think so. Any attempt to claim that this Budget will stabilise the cost of living is untrue.
I noticed from the Press that yesterday, in Edinburgh, a junior Minister told the housewives who are members of the Unionist Association there how to reduce expenditure. Her remedy was simple. She suggested that the housewife should buy cheaper meat and should not buy potatoes at an outrageous price but, instead, eat rice and various root vegetables.
§ Dr. Mabon
The Joint Parliamentary-Secretary to the Ministry of Pensions and National Insurance, the hon. Member for Edgbaston (Miss Pitt). I apologise 1236 for not giving notice to the hon. Member that I would raise this matter, but I have not seen her during the last day or two. This comment squares well with the hon. Lady's comment last year that if old-age pensioners would stop drinking beer, and would gamble less, they would find themselves better off on their pensions. That attitude of mind shows that the hon. Lady is not in touch with the daily lives of people. Of course some old-age pensioners drink beer and gamble, but few of them will invest in Premium Bonds because they will have difficulty in finding £1.
The hon. Lady's remark showed a complete misunderstanding of the lives of the people, and I put it to the Government frankly that the fall in the value of the £ is bound to undermine any savings drive. It will hamstring any restraint on wage demands. The only way we can get over our difficulties is to stabilise the cost of living. That is a point which the Government have failed to face, and I submit that as long as they do not face it they have not the right to call on people to sacrifice even more for the welfare of the country.
§ 6.13 p.m.
§ Mr. Cyril Osborne (Louth)
I have never been so envious of not being a Scotsman as I am tonight. I have been eleven years in the House of Commons, and if I remain another thirty years I shall never achieve the fluency and self-confidence on which I congratulate the hon. Member for Greenock (Dr. Mabon).
I am glad to see the Chancellor in his place, because I want to put one or two points to my right hon. Friend and to the Committee on the Budget and on the economic situation. We all agree that the problem facing us is that we must export a great deal more. If we do not do that, we shall be faced with considerable, if not mass, unemployment and a lower standard of life. The stakes involved in this Budget are immense, and nobody on either side of the Committee will do other than hope that the Chancellor will succeed. We all hope that the steps which my right hon. Friend is to take will pull the country round. I ask hon. Members opposite to realise that if my right hon. Friend does not succeed, we shall be faced with another devaluation of the £. Remembering the tragedy resulting from the devaluation of 1949, I do not think 1237 there is any hon. Member here who would not pray that this should be avoided.
I am sure that we all wish my right hon. Friend well in what he is trying to do and hope that he succeeds, whether we agree with him politically or not. On the other hand, it should be said that hon. Gentlemen opposite have occasionally painted such a black picture as to suggest that this Tory Government have brought the country to the verge of ruin. Of course, that is nonsense. I shall quote here an extract from a speech made by Sir Oliver Franks. Hon. Gentlemen opposite will remember that it was in the time of their administration that he was appointed Ambassador to Washington. Sir Oliver is a fair minded, well-informed man, who is now the Chairman of Lloyds Bank. I commend to hon. Members opposite what he said in his annual speech:In many ways 1955 will go down on record as the best year in the history of this country. It was a year of peace. It was a year in which the general standard of living of the British people was higher than ever before. It was a year in which unemployment in Great Britain virtually disappeared. Peace, prosperity and full employment—these are things which matter profoundly to us all. The simple fact that in 1955 they were realised is evidence enough that for the majority of our countrymen 1955 must count as a very good year indeed.
§ Mr. Osborne
We should all be grateful for that straight statement from an independent man in whom, I should think, hon. Gentlemen opposite have confidence.
§ Mr. Osborne
I think the statement I have read destroys some of the less responsible things said by one or two hon. Gentlemen opposite.
As the Americans say, we never had it so good. The point however, is that we had it better than we had earned it. That is the problem. We lived beyond our means. We spent more, we ate more, we drank more. We spent more on tobacco, sport and amusements than we could afford. Therefore, the problem facing this country is the one in Charles Dickens' book, when Mr. Micawber said that if you have 20s. income and 20s. 6d. expenditure, you are in queer street. [An HON. MEMBER: "He did not say that."] 1238 The position today in this country is very much like that. We have been spending a fraction—only a fraction—more than our income, and either we must increase our income or cut our expenditure. I suggest that the better way out of the difficulty is to try to increase our income.
I turn now to the suggestions on savings made by the Chancellor—
§ Mr. Julian Snow (Lichfield and Tamworth)
Before the hon. Gentleman leaves that point, may I ask one question? The hon. Gentleman referred to the activities of the Chancellor in stimulating exports. So that we may be quite clear what he understands by the efforts of the Chancellor, will the hon. Gentleman explain what he means?
§ Mr. Osborne
I will come to that point if the hon. Gentleman will allow me to make my speech in my own way.
In the Budget speech there was a suggestion about increasing savings. On and off, since 1926, I have been trying to help the National Savings movement; I shall continue to do so as, I am sure, will all hon. Members on both sides of the Committee. However, when I heard my right hon. Friend announce his Premium Bonds scheme I was rather shocked, though not on religious grounds. It seemed to me to be rather cheap. It seemed a wee bit "off white" for this Mother of Parliaments. [HON. MEMBERS: "Oh!"] I must say what I feel. It seemed to me that this Mother of Parliaments had come down in the world when she had to depend for the stability of sterling upon a Premium Bonds scheme.
When hon. Members attend international conferences, we are all proud that we come from the Mother of Parliaments. We are proud that men and women who come from newer Parliaments in other parts of the world tend to look to us for guidance and stability. It seemed to me, therefore, that the suggestion was lowering the prestige of this House, which has been supported for over 250 years by the City of London as the great banking centre of the world. The very word "sterling" suggests stability, and it did not seem to me right that it should be bolstered in a manner that I have always thought of as being associated with France or Italy, whose currencies are a dreadful example to us.
1239 Furthermore, I want to quote to my right hon. Friend one of his Conservative predecessors, Sir Austen Chamberlain, who, in 1919, was faced with a similar problem. He was a good business man as well as a good Conservative. This is what he said:At a time when the one lesson you have to teach everybody is that there is no salvation except in work.—and I repeat; he said that there was no salvation except in work—you teach them to expect salvation by luck.It is not from the moral point of view but from Sir Austen Chamberlain's point of view that I was rather shocked and saddened when this scheme was announced.
On the other hand, I think both sides of the Committee must face this problem, which will face any Chancellor, no matter what his party. When I was a child we were taught that we had to put a little away for a rainy day. That was the basis of the savings idea which the children had at the beginning of the century. But in the modern State, under a welfare system, where we say that there will be no more rainy days, it will be very difficult to get people to save. That is one of the problems which faces us in these modern times, and it will not be easily overcome.
The Chancellor next suggested that he would seek and achieve an economy of £100 million. I like this a great deal more than his Premium Bond scheme. The right hon. Member for Huyton (Mr. H. Wilson) and other hon. Members opposite have talked about economies as if there was something wrong in searching for economies, as if they were anti-social and almost a sin.
It is a very good thing that in private and public life we should try to save money. Ever since the war respect for money has to a large extent disappeared, and the Chancellor will do the country a service if he can restore in the public mind a wholesome respect for money so that we return to the old Victorian concept, "Waste not, want not".
I hope my right hon. Friend will achieve this £100 million saving, and I believe he can achieve it without touching policy at all. In my view, there has been an atmosphere of extravagance, waste or carelessness throughout central and local 1240 government and even down to parish councils, and I think that a great deal can be saved on the administration of the Welfare State without touching its services at all. I think that he can achieve the economy by millions of small economies, not in one big item, and I wonder whether the Committee will allow me to give an example, from right under our noses, of the way in which I think money could be saved. If he has time, I should like the Chancellor to look into it.
Next to the Palace of Westminster are the Victoria Tower Gardens, and in those gardens there has stood since 1914 a statute of the Burghers of Calais. It is in the process of being moved and for days a large number of men have been moving it. I went yesterday afternoon in the sunshine to see what they were doing and why they were doing it, and the explanation given to me was that this statue, which has been there since 1914, was previously on a pedestal 15 feet high. A workman said, "People have to crane their necks to look at it".
It has been there since 1914, yet in this year of grace, when we are hard up, we are spending money to move it 70 yards so that people shall not have to crane their necks. I call that tomfoolery. These are the economies which I think could be made.
§ Mr. Osborne
Mony a mickle mak's a muckle.
They have left a gap at the point from which they have moved the statue, and they have transferred the statue of Mrs. Pankhurst, which was standing about 200 yards further along, to help to fill the gap they have created. If that is not a waste of public money which ought to be avoided, I should like to know what is.
§ Mr. Ede (South Shields)
Does not the hon. Member recollect that during the past eighteen months there have been continual Questions on both these matters from both sides in the House, in which the Government have been urged to carry out exactly what they have done? Why did he not protest before the money was spent?
§ Mr. Osborne
Even supposing that I agree that I did not protest eighteen months ago, surely I am right in protesting now.
§ Mr. Osborne
All I am suggesting is that this is an example of where economies could and should be effected, and I should like to ask my right hon. Friends who gave authority for this statue to be moved. If there are any more silly schemes like this—
§ Mr. Osborne
I am obliged. Even if he made that statement two years ago, all I am saying is that if there are any more cases like that I would stop them tonight. That is the way to save money. We cannot afford silly things like that. I say that if the Government go through the whole of our spending, national and local, of £6,000 million a year, I am certain that they can save £100 million a year if they try.
But I would not trust too much to Departments to do their own cutting, because I am certain that in each Department there is a tendency to build and to maintain an empire. I should like a Committee of the House, or a body like that, to have power to go into these things and see whether a great deal more cannot be done. We must restore in the country the attitude, "We just cannot afford it. It does not matter whether we want it; we cannot afford it and we will not spend the money." I am sure that the Chancellor can do a lot, and I hope he will save a lot more than £100 million in that way.
I begin to wonder whether we can maintain the Welfare State, which we have all helped to build and in which we all take a pride, on a five-day week. It is a question of whether we are willing to work to pay for it. I am beginning to wonder whether the time has not come when those industries not working Saturday mornings ought to return to Saturday morning production. People often complain about the mining industry, but it 1242 works more Saturday mornings than some other industries.
If industry would go back to the 5½-day week, I feel that half of our troubles would be over. Furthermore, we shall not sell more abroad unless we can lower our prices, improve the quality of our goods and increase our production. I want to give three examples to the House.
In answer to a Question today it was stated that 27,000 men in Birmingham and Coventry are on short-time work in the motor industry. The export figure for cars for January and February, 1955, was 60,645. For the first two months of this year the figure was 47,842, a reduction of 12,803. At the same time, there were tens of thousands of cars that we could not sell standing in warehouses and in open fields and airfields. It is not a question of driving them from the home market to the export market. They will not sell because they are not good enough and because the price is too high. The Germans are beating us on quality and price, and we have to get it into the minds of people on both sides of industry that the only way to get out of this trouble is to work more efficiently than in the past.
May I give two figures from the important industry with which I am associated? The fully fashioned nylon stocking industry used to export about 90 per cent. of its production. Today, it does not export 10 per cent. The figures for the first two months of each of the last three years is startling. In 1954, exports in the first two months amounted to £397,000. In the first two months of 1955, the figure was £232,000, and this year the figure is down to £111,000. We have men working three days a week and we cannot sell their products. Why is that? It is because the foreigner is producing a better and a cheaper article.
In the Daily Telegraph this morning there was an item which I wish to read to the Committee. It is entitled, "British Bids Fail". It states:The Radio Corporation of America and General Electric of America have submitted lower tenders than Marconi and Pye of Britain for a television transmitting system for Portugal. The bids and delivery times were:R.C.A. £398,060—five months; G.E.A. £433,030—one to four months; Marconi £478,865–12 to 19 months; Pye £556,508—nine to 18 months.1243 And we pride ourselves that in the electronics group we beat the world. We have not a hope, and it comes down to this: that we shall not export more until we get our prices down and our quality up.
§ Mr. Osborne
That has nothing to do with party politics. It has to do with both sides of industry. I agree with the hon. Member for Greenock that we do a great disservice to our country if we tell our people that things are all right and that there is nothing to worry about.
The fourth point I wish to put to my right hon. Friend touches him closely. Sir Alfred Roberts, the cotton trade union leader, said today that Lancashire's exports for 1955 are 83 million yards fewer than 1954, and 155 million yards fewer than 1953. Why is that? It is because our goods are too dear and not good enough. We have to tell our people that unless we can get our prices down and our quality up no party and no politics can save them from unemployment and a very hard time. Sir Alfred Roberts went on to say, of the spinning section of Lancashire's industry, that in the first 13 weeks of this year it had lost 24 million lb. as compared with the corresponding period of last year.
These are very serious matters. The tragedy of it all is that in every case it is not more than 5 per cent. or 7 per cent. that separates solvency from bankruptcy. If we could improve our position by 10 per cent. at the most, we should be in a wonderful situation. I say to hon. Members opposite that unless the industrial position is enormously improved the Welfare State is in danger. It cannot be maintained unless we have prosperity in industry.
My greatest regret about the Budget speech was that nothing is to be done for the middle-class worker. It is upon the skill and technical knowledge of the middle-class worker, and upon his organising ability, that we depend for the efficiency that we need in industry. If he does not give of his best, no matter how willing the workers may be, he will not produce to the maximum. In the Daily Telegraph this morning there was an article explaining to Marshal Bulganin and Mr. Khruschev something 1244 about our way of life, and I should like to read one quotation. The writer states:I should like to make sure that they appreciate a number of things about us of which even we ourselves are not always aware. First, there is the bloodless social revolution of the past 20 years: in Britain, we have sent the bourgeoisie not to Siberia but to the sink. The middle-class has given up, if not with enthusiasm at any rate by consent, much of the material advantage over the working-class which it gained during the last century.It is true that during the last twenty years the men who run industry, the professional and managerial types, have come down in the world enormously. As the writer of the article states, they and their wives have gone to the sink—[HON. MEMBERS: "What is wrong with that?"] Men of that type have exceptional ability which could be better employed than at the sink. The nation will lose if we drive the best brains we have to the sink.
§ Mr. Gordon Walker
Does not that mean that there will have to be a large class of domestic servants and those people will be withdrawn from industry?
§ Mr. Osborne
Not at all. I am saying that unless there is a reduction in direct taxation that will offset the cause of inflation and high taxation we shall not get from the middle-classes men of the administrative type upon whom the country depends. We shall not get from them the maximum that they can do and we cannot expect it.
§ Mr. Osborne
On 3rd May, 1955, I asked a Question of the Minister of Labour about electronic engineers in this country who were being offered salaries of between £3,500 and £4,500 a year by the Westinghouse Brake Company of America to do the work in America that they were doing here, as I said, for £1,400. I have had dozens of letters from these young scientists who said that they were drawing only £700 or £800 a year. These men are leaving the country in large numbers and we cannot afford to lose them.
It is upon the skill and ability of a relatively small number of men that our prosperity depends, and if we are to retain the services of these men we have to pay them. A man will work only if he is paid for it. I know there are exceptions 1245 but, generally, men work only if they are paid. I say that it is no use paying a man a high salary and then taking it away through taxes and inflation.
As the late Sir Austen Chamberlain said so long ago, it is only by work, by more work from us all, that we shall gain our salvation. I say to my right hon. Friend that if he wants more work he should stop putting extra taxes on those who work harder. I should like to see P.A.Y.E. on overtime abolished. We cannot expect men to work harder if they are more highly taxed as a result. I beg my right hon. Friend to see if not this year then next year, that some help is held out to these men, upon whom we depend for our economic and industrial salvation.
§ 6.40 p.m.
§ Mr. John McKay (Wallsend)
I want to make a few remarks about the concluding part of the Financial Secretary's speech. The right hon. Gentleman said he hoped that, in a short time, we should get into a position in which the workers and the employers would be satisfied that they were getting a reasonable return for the work they did and that, in future, wage increases would be based upon productivity. The question which arises in my mind is whether the workers are getting a fair crack of the whip in this matter of productivity.
I read a periodical a fortnight ago in which there were figures based on Answers given by Ministers to Questions in the House about wage increases and the cost of living. On these basic figures, supplied largely by the Government, it was pointed out that from 1948 productivity per head had gone up 23 per cent. from 100 to 123, and that wages had gone up from 100 to 162, while the cost of living had risen from 100 to 139.
This periodical pointed out that on these figures alone productivity had risen 23 per cent. but the actual real earnings of the men engaged in industry had risen by only 16½ per cent. The question, therefore, arises whether, in the future, the workers will get in real earnings what the productivity entitles them to. Of course, we cannot have industry in such a static position that merely because production is rising in any industry the workers must of necessity be entitled to higher wages.
1246 I take it for granted that when we talk about wages being related to productivity we are talking about real earnings which give extra purchasing power. I do not think that that is happening. I want to comment on a point which was emphasised in the speech of the President of the Board of Trade yesterday. He mentioned that salaries and wages had gone up by 40 per cent. I think that there is an immense amount of confusion about the rise of wages, and so forth.
We may have a factory which is employing 100 workers. Suppose the employer is paying £1,000 in wages per week. If he doubles the number of his workers, his wages are then £2,000 per week. There is no doubt that the collective wage of that factory is doubled, but the individual wage remains the same.
There is a tremendous amount of confusion when we come to national figures. The President of the Board of Trade took collective wages of £10,040 million and compared them with the cost of living in 1938. The real position is that these figures do not indicate at all what the individual man or woman is getting. All that it indicates is that the collective wages of the workers have, in 20 years, risen by 40 per cent. in real earnings. Collective wages are of no use to the ordinary man. We may use figures of that kind and pretend that the workers' wages are so and so, but such figures, to my mind, are of no use whatever. They may be of use in considering the whole question of the inflation, but that can arise from various circumstances even if the individual wage is much lower, when we have many more people working.
In 1938, we had about 17 million people working compared with about 23 million in 1955. That is very interesting, but there can be no true comparison. We get the collective wage of 17 million people compared with the collective wage of 23 million. That does not pacify the workers in industry. We can only pacify the workers when they feel that, apart from collective results, they are getting a fair crack of the whip individually.
Let us see what we get when we analyse the position. The number of male workers is double the number of female workers. If men's wages have risen 40 per cent. in real earnings let us see what the position is. According to Government figures, it was admitted that in 1938 1247 the wage rate generally was about 69s. A man earning 69s. a week, or £179.5 a year, in 1938 earned 222s. 11d. a week, or £579 a year, in 1955. In 1938, the workers paid no tax, and only £4 per year in National Insurance, and all workers in the same grade, whether married or single, took home the same wage.
In 1955, however, the married man with two children had £18 13s. deducted in respect of Income Tax and insurance contributions; the married man with one child had £36 10s. so deducted; the married man with no children, £60 2s., and the single man £93 10s. deducted from the 1955 wage of £579 a year. In 1938, all workers took home £175, but in 1955, whereas the married man with two children took home £560.9, the married man with one child took home £543.2, the married man with no children, £519.5. and the single man, £486.1. About half of taxed workmen are single men.
Let us consider the difference which has occurred between 1938 and 1955 in the position of wages in the national economy. To the ordinary worker, wages consist of the amount of money he takes into his home. There is now a distinctive feature about those wages which did not exist in 1938. In that year there was no taxation upon the worker; today there is varied taxation. In 1938, the single man, the married man with one, two or three children, and with no children, all took home the same amount. If we want to compare their wages now to what they were in 1938 it is no use using collective figures. We must consider the individual working in the factory. Unless we give those individuals satisfaction we shall get nowhere.
If we consider the taxation which various individuals are paying, we find that the wage rise is not 40 per cent. at all. For the married man with two children it is 26 per cent. rise net, for the married man with one child it is 22 per cent., and for the married man with no children it is 17 per cent. For the single man it is only 9 per cent. These percentages are in reference to the ordinary wage recognised in industry for overtime work. The 40 per cent. collective figure has no relation whatever to the position of individuals, when comparing the years 1938 and 1955.
1248 I wanted to mention that fact, because the President of the Board of Trade gave a wrong impression in this matter. The trade union leaders and the men in the factories know quite well that the figure of 40 per cent. bears no relation to reality. We are not talking of men working an ordinary standard week, but a 49 hour week, when the standard week is recognised as 44 hours. All those points, taken together, give a different picture of the position of wages in relation to the other financial aspects of industry, and the percentage increases to total profits.
Like everybody else, I have tried to judge the economic position as best I can. My way of doing it may be a silly one, but I believe that when we talk about inflation we have to consider who are the inflators—who are the people who have been getting the biggest returns from the national work of the country. I have taken various figures from the White Papers which have just been issued, and I want to relate my arguments to the last three years, because it is during that period that this crisis has developed. If any blame is to be attached to anybody, it must be shown in some way by figures. If the figures show that conditions of the majority of our people have improved very little as compared with the improvement in the conditions of the minority, the mass of the people can not be the cause of inflation.
I have drawn up a table in relation to the last three years, showing the percentage rise from one year to the next. I will deal, first, with gross trading profits. I may be criticised for taking them, but they give a general indication of the total amount of money which is going into the other sectors of industry than salaries and wages. If we find that that total figure rises during these three years far beyond the figures for other factors, it will indicate that it is in the field of trading profits that we must look for the cause of inflation.
Within the scope of trading profits comes the interest on the debenture shares, the preference shares and other shares. In 1953, gross trading profits increased by 6.4 per cent.; in 1954, by 12 per cent., and in 1955, by 10.6 per cent. I have worked out those percentages from the figures shown in Table 1 of the White Paper on National Income and Expenditure, 1950 to 1955.
1249 I now turn to salaries and wages for the same period. They rose by 5.7 per cent. in 1953; by 7.2 per cent. in 1954, and by 8.3 per cent. in 1955—so they have not risen as quickly or as far as profits. If we take Table 3 of the same White Paper we find that the figures in respect of dividends, interest and profits, tax free, are respectively 12 per cent., 23 per cent., and 10.6 per cent. There was a big rise in 1954. Then we come to a very interesting Table in the Economic Survey, 1956—Table 13. This Table has an item which reads:Income available for distribution or investment.That is what it says. There is no question or ambiguity about it. It represents the total surplus money left in industry, with which industry can do what it likes, after all taxes and other expenses have been paid. In 1953, that income rose by 22 per cent.; in 1954. by 29 per cent., and in 1955, by 10 per cent. Stocks, works in progress and fixed investments rose from £180 million to £445 million in 1954.
Considering all these factors, it will be seen that whatever has been the cause of inflation it has not been the rise in wages and salaries. If anything, it is the increase in dividends, which has been a very big one. That is the point that I am trying to emphasise in my remarks tonight. I want the Committee to consider the share which the total gross wages and total gross trading profits enjoy in the national income. The share of the national income that wages enjoyed in 1938 was 37.1 per cent.; in 1948, it remained practically the same at 40.1; in 1955, it is still practically the same at 40.2.
Let us take trading profits. The figures in the Government returns show that trading profits in 1938 were £764 million in relation to a domestic income of £4,903 million, 15.5 per cent. In 1948 profit was £2,018 million against £10,517 million, or 19 per cent. share of the national wealth. In 1955, trading profits were £3,274 million against £16,739 million, a share of the national income amounting to 19.5 per cent. I am not trying to instruct Members of the Committee, but my figures will get into HANSARD and then perhaps hon. Members will examine them and will be able to understand them. I do not expect hon. Members to follow all these points.
§ Mr. H. Brooke
I hope I may be allowed to put into HANSARD that the figures which the hon. Gentleman is quoting are all before deduction of tax. He may care to look at the figures on the next page of the White Paper, when he will see an interesting statement on the increased tax burdens on company profits.
§ Mr. McKay
Whatever effect they may have, the figures that I have given are practically the same as are mentioned in the leaflet, 16 per cent. and 19 per cent. I have worked them out on the actual figures of the leaflet. In 1955, the increased share of trading profits was 26 per cent. above 1938 while in wages there was only 8 per cent. increase. I am putting these figures from the point of view of the wage-earner. I have gone to some labour to get these figures out and I believe they are logically put together. They show that the workers' share of the national product has been almost stationary for 20 years.
How does that compare with the idea that wages should rise in accordance with productivity? I am taking the position of people working a standard week, although the mass of the workers do 49 hours a week, which is five hours extra every week. Nevertheless, their share of the national product remains the same. The rise in wages is 196 per cent. for the 49 hours of the standard week, but there is a weighting factor for insurance, Income Tax and such matters. In 1938, the workers had no Income Tax to pay and there was no difference in the amount that men took home compared with the average earned. I am also taking the results in relation to married people, single people and others.
Now I want to compare company profits and dividends combined. According to a statement in the Government returns, in 1938 dividends totalled £481 million and reserves £299 million, total £780 million. In 1955, dividends totalled £772 million and reserves £1,596 million, a rise of about 203 per cent. One matter amazes me when I look at the figures. The 1955 Blue Book on National Income and Expenditure states the returns on ordinary shares, and then it has an item relating to preference shares, separately.
This year's White Paper gave different figures, and a new situation arose. In- 1251 stead of separating the preference shares from the ordinary shares, as had been done in the past, it lumped them all together. Before 1949 these preference shares were separated from the others and varied from year to year, but from 1949 the preference shares have been practically standing still. They have varied from £102 million to £104 million throughout the six or seven years.
When we compare the profits made it makes a difference if we include a stationary figure among figures for other shares which relate to a fluctuating market in a time of inflation during which profits have been rising continuously year after year. Including a more or less standing figure for certain preference shares has this result: it makes it seem that the rise in the risk-bearing shares, which fluctuate according to the market conditions, has been smaller than is in fact the case.
Hon. Members will find that from 1938 to 1955, with preference shares included, there was a rise in dividends and returns of 203 per cent. The preference shares apparently have a standing return and seem to have reached their limit in the past six or seven years. If they are excluded from these figures, the return of dividends and reserves combined has risen by 243 per cent.
Let me give an analogy. A man may receive £10 a week wages. He may put £2 or £3 of that into the bank, as we want him to do. On the basis I have outlined, it could be claimed that instead of having £10 wages he has £7 wages. That would be a ridiculous comparison, yet when they are comparing industrial profits—the returns on ordinary risk shares—they take the total net profit, after tax has been paid, and divide it into two, as if only one part of the money was a profit.
When we are comparing wages and profits the general idea seems to be to make people believe that the increase in wages compares favourably with the increase in profits. If I make any mistakes in the Committee in the comparisons I draw they are small compared with those made by Sir John Braithwaite, who is a great financier on the Stock Exchange, so I hope I can be excused. He compared the wages of 22 million workers in the country with the return 1252 to about 1 million shareholders. When the 22 million workers are given an increase in wages the total is bound to be a much bigger figure than the increase on dividends to 1 million shareholders. The Press encourage Sir John to disseminate the idea throughout the country that the increase in wages compares favourably with the increased return of dividends, indicating that if anyone is doing well out of the economic conditions, then one set of people, the wage earners, are doing better than others.
§ Mr. H. Brooke
I am anxious to understand this theory. In the White Paper from which the hon. Member is quoting it states that the real value of wages and salaries has increased by 40 per cent. since 1938 while that of dividends has decreased by 30 per cent. Is he challenging that?
§ Mr. McKay
No, I am not challenging the result of the rise in dividends. I am challenging the comparison made with the wages earned by the workers. The number of workers has increased from 17 million to 23 million. If each had the same wages individually as he received in 1938, when there were 17 million employed compared with 23 million today, naturally there would be a great increase in the total wages Bill, even though each man was getting exactly the same. It is not a true comparison.
I am not disputing the percentage rise in dividends, comparing one period with another. I am trying to emphasise what everyone knows: that, in practice, dividends form only a part of the profit which has been made year by year. The true comparison between profits and wages is made by taking the total net profit made which means undistributed profits and dividends combined. When we do that we find that the increase in the net profit has been far more than the increase in wages. That is my main objective tonight. It may be difficult to follow, but it is a matter of great importance.
When a trade union deputation meets employers the arguments have to be based on facts; the deputation will not accept artificial figures. The trade union leaders will not accept artificial comparisons such as are made in these financial returns when dealing with profits. It is not practical. These returns do not compare profits with wages; they compare 1253 a part of profits with wages. It does not matter whether part of the profits is saved or not; it is still a profit.
I am, therefore, trying to indicate that profits in reality rose from a figure of 100 to a figure of 303, including the preference shares which are a standing return in a fluctuating market; and that the ordinary fluctuating profits rose by 243 per cent. from a figure of 100 to a figure of 343.
Let us consider the figure for wages, after deducting Income Tax and insurance contributions. The figures given are for profits free of tax, so let us compare wages free of tax to get a true comparison. Hon. Members often tell each other to compare like with like. That is what I am doing when I compare wages and profits free of tax. I am not including any irrelevant factors or excluding anything relevant.
When considering the standard wage instead of the overtime wage—that is, putting the 49 hours into a 44-hour standard week one finds from the index that total profits have risen from 100 to 343 per cent. while, since 1938, according to the London and Cambridge return, the cost of living has risen from 100 to 246 per cent. In comparison with the cost of living, profits, excluding preference shares, have risen 39 per cent. above the cost of living. When wages are converted to a standard rate the increase is only 8½ per cent. as against 39 per cent. after weighting the effect of different Income Tax payments and National Insurance.
It may be thought that this is just a lot of twaddle and that I do not know what I am talking about. This is a difficult subject and it is not easy always to relate figures in comparison, but when we have to do something abnormal to overcome a great economic crisis we must look at the whole picture, whatever the future may hold.
Who is it who controls prices? There is an inclination frequently to say that prices are the result of wage demands, but there are bound to be some years when wage demands are met and will affect profits in that year to such an extent that there will be a big difference in the returns.
§ Mr. R. Gresham Cooke (Twickenham)
Will there be an intervening year before the hon. Member concludes his speech?
§ Mr. McKay
Because he cannot say something sensible, the hon. Member makes the silly kind of intervention which often has no effect.
I was putting an important point, but some people do not like it. They abuse the wage-earner for causing all the trouble. Substantial wage increases in industry are bound to make a big difference in the profit returns, and one would expect them to reflect the wage increases by a lowering of profits. Instead, we find that the profit returns of industry go up year after year without interruption.
Industry makes more than sufficient profit. The real people to reduce prices are those controlling the factories and the machine of output. Those who direct and own industry have the first say as to whether prices should be raised or lowered.
While we appeal so much to wage earners to stabilise their demands, what matters more than anything else is for the Government to make clear to those who own industry that its profits have been so high for the last ten years that had they wished they could have reduced prices and so obviated the need for higher wages. Only those who control industry can give a lead by reducing prices.
Let us have a method whereby the Exchequer stimulates the move not to keep prices stable, but to bring them down. There are ways and means whereby they could be reduced from their present level. The problem could be tackled if the right spirit prevailed among the owners of industry and if the Government actively dealt with the problem.
The Exchequer could help by telling industry that if prices were brought down to such an extent that it suffered loss, the Government would meet it halfway. Even so, the return to industry would still be sufficient to satisfy any decent-minded business man.
When we talk of profits and we are reminded of the middle class and the great skill of technicians, we must not forget those who hold numbers of directorships. We see them in the House of Commons day after day. Some of these people may have six or seven directorships, but how did they get them, and what were the influences behind them? All these questions are very interesting in the circumstances in which we find ourselves today, and if we go further into 1255 the matter, we find that these people who have been enjoying good living conditions and a good income want to keep these conditions just the same. They do not want the workers to be creeping up nearer to them. Oh no; that will not do.
The great men of our nation, the financiers and directors, who are apparently so splendid but in reality so rotten, cannot work for the good of the nation without a £3,000 net income. No doubt they are men of moral fibre on the financial side, but to work for the well-being of the people with an income of less than £3,000 a year net just goes against the grain.
I do not want to comment on any of the other matters, because they are not easy to understand, but I do want to deal with the increased family allowances. The Chancellor is giving another 2s. for the third child. What percentage of the total number of children is likely to benefit from this concession? Only one-sixth of the children will get the 2s.—one-sixth of the whole of the children of the nation. Is it going to do any good? To a small section, the Chancellor will give another 2s. in cases where there are three, four or five children in a family, and that is all it amounts to.
I want to conclude—[HON. MEMBERS: "Hear hear."]—because I have finished my main theme. I can think of many things about the wages position which have not been popularised or indicated. It may seem a confused position to many people here. [Laughter.] Hon. Members may well laugh if they do not follow me, and I will excuse them. I can even excuse myself, because I could not follow one of the earlier speakers. I ask the Government to adopt a new point of view and a new outlook on the whole questions of wages and profits.
§ 7.34 p.m.
§ Brigadier Sir John Smyth (Norwood)
The hon. Member for Wallsend (Mr. McKay) will forgive me if I do not attempt to follow him in his arguments, even if it were possible for me to do so, because I want to talk about quite a different subject.
Since the Budget statement, one or two hon. Members have criticised my right hon. Friend the Chancellor for not including an increase in war pensions in 1256 his Budget, and yesterday the hon. Member for Brierley Hill (Mr. Simmons) made a particularly severe attack on the Chancellor for excluding any increase in war pensions and accused the Government of grave neglect of the war disabled. Anything which the hon. Member says about pensions we all listen to with respect. I gave him notice that I was going to speak on this subject, and I am grateful to him for having waited in order to hear what I have to say.
I admire the hon. Gentleman very much indeed for his unselffish work on behalf of the war disabled both in and out of office, but I consider that in his remarks yesterday he was most unfair, when we remember that two Conservative Governments in 1952 and 1955 have given the two largest increases in war pensions since war pensions began. And in view of the fact that the purchasing power of the present 100 per cent. disability pension, as was made clear in an Answer in the House the other day, is—or was last month—13s. 11d. above what it was in October, 1951, when the hon. Gentleman was Parliamentary Secretary to the Ministry of Pensions. Therefore, I feel that he ought not to be too critical of anyone else.
I have always given the fullest credit to the Labour Party for what it did for war pensions after the war, and particularly for the introduction of the welfare service, which is one of the biggest things done in the whole history of war pensions and indeed, for the special supplementary allowances; but it was not so good in what it did—or did not do—in regard to the basic pension. It gave one increase of 5s. in 1946, and no further rise in the basic pension, even though, as we all know, the cost of living rose very steeply in those years from 1946 to 1951.
I remember, as I am sure the hon. Member for Brierley Hill does, a debate in this House in February, 1951, on a Motion moved by my right hon. Friend the present Secretary of State for War, and seconded by the hon. and learned Member for Northampton (Mr. Paget), in which the whole House pressed the Government of the day for a substantial increase in the basic rate of pensions, in view of that very great increase in the cost of living since the last rise was given in 1946.
1257 In the Budget which followed, in 1951, the then Chancellor, the present Leader of the Opposition, said that the economic condition of the country did not permit him to give any rise at all in the basic rate, and in that Budget he gave only £600,000 to war pensions. When the Conservative Government took office, at the end of 1951, the economic condition of the country was even worse than it was at the time of the Budget, and yet we straight away brought in a really substantial increase in war pensions. In our first Budget in 1952, we increased the basic rate by 10s., and did other things which cost altogether £10 million a year. Only last year, we gave an even bigger increase in war pensions, totalling £15 million a year.
Therefore, I feel that if the hon. Member for Brierley Hill was going to criticise anyone about war pensions, he should have criticised the Chancellor of his own party in 1951, because he had not given any increase for five years, instead of my right hon. Friend when the present Government had given such a very big increase only last year.
I want to call the attention of the Committee to the priorities that we established in war pensions. They are just as important today as when we established them. We established as our first priority the badly disabled man unable to work. We know that the war pension is assessed on loss of amenities, comparing the disabled man with a fit man of the same age. It has nothing to do with wages or employment. Nevertheless, the state of employment, whether there is a high or a low level of employment, must be a big factor for any Government to take into account when considering the position of war pensioners, and that was stressed by the right hon. Gentleman the Member for Middlesbrough, East (Mr. Marquand) when he spoke on the subject on 29th July, 1948.
Employment amongst war pensioners has never been higher than it is at present or was during the past year. Employment is what every disabled man wants. He wants to get back into the life of the community and he wants to feel he is doing a proper job of work. Employment means more to him than anything else. Even amongst the paraplegics the rate of employment today is over 70 per cent.
§ Mr. Ellis Smith
The hon. and gallant Gentleman is putting a very reasonable case. I know he wants to be fair to my hon. Friend the Member for Brierley Hill (Mr. Simmons), so I would point out to him that they were the people of whom my hon. Friend was speaking last night. He mentioned one of their organisations, B.L.E.S.M.A. I can understand the hon. and gallant Gentleman's interpretation of what my hon. Friend said, but he should bear in mind that it was only a limited number of people to whom my hon. Friend drew attention.
§ Sir J. Smyth
I concede that, but the hon. Member started his remarks by saying:Once wars are over, those who fought them, unless they are field marshals or generals, are usually forgotten.A little later he said:I was very surprised that the Chancellor of the Exchequer had no word to say about the position of our disabled war pensioners."—[OFFICIAL REPORT, 18th April, 1956; Vol. 551, c. 1082.]I return to the order of priorities, which, I think, is very important. We found when we came to power in 1951 that a single badly disabled man who was unable to work got a minimum of 80s. a week, which we thought was too low. I was then, and had been before, very concerned about that. We immediately raised that amount to 90s., and we raised it last year to 112s. 6d. So we have given a minimum rise to that class of man, the badly disabled man unable to work, of 32s. 6d. a week. It is very important to note that. That was something apart from the basic rate.
Our second priority was that of the war widows over 40 or with children and the war widows unable to work. We gave a rise last year of 26s. a week to a war widow with two children. Our third priority was the basic rate, which we have raised by 22s. 6d. since 1952. That is incomparably the greatest rise in war pensions that there has ever been.
I said from that Box in answer to a Question a little while ago:I feel perfectly certain that the position of the war pensioner today is better than it has ever been."—[OFFICIAL. REPORT, 21st November, 1955; Vol. 546, c. 1044.]I would like to repeat that from the back benches, because I believe it to be true. 1259 I base my statement on the big improvements which have been effected, as I have mentioned, since 1952—the high rate of employment for war pensioners and the complete change in the war pensions code set up since the end of the last war; improvements started by the party opposite in the supplementary allowances, the welfare scheme and in the improvements in the social services generally, which have been carried on and consolidated by the present Government. I do not like being party political about war pensions, but when a speech such as that of the hon. Member for Brierley Hill is made, very critical of the Government, I feel it must be answered.
The war pensions scheme is very broadly based. It consists of the basic rate, the basic rate for widows, special allowances, priority of hospital treatment, the provision of artificial limbs and of appliances and of cars and bicycles, the welfare service, and our social security system. I do not think we often realise how much the social security system we have adopted in this country means to the war pensioners.
It is only when I have been abroad to examine other countries' pensions schemes, and when people of other countries come to me to discuss their pensions schemes, that I have realised how much our social security scheme means to our war pensioners, as well as to our other pensioners. For instance, the National Health Service makes an extraordinary difference to our war pensioners. It makes a great difference to their position compared with that of war pensioners in any other country where there is not a national health service. I have seen for myself what a difference it makes.
A war pensioner in this country is saved a great deal of worry when his wife or children are sick or have to have an operation. He is saved a great deal of worry which a war pensioner in many another country on the Continent has to suffer if his wife or children are sick. I have seen for myself the difference that is made by the existence of our National Health Service.
I would point out something else which is not realised by everybody. For ten years now the basic rate of the Industrial Injuries Scheme and that of the 1260 war pensions scheme have been linked together, and I do not believe it would be possible for any Government now to separate those two basic rates. I am sure that the right hon. Member for Middlesbrough, East and the right hon. Member for Southwark (Mr. Isaacs), who were Ministers of Pensions in the Labour Government, would entirely agree with me in that. Indeed, I have heard them state it themselves. So it is unreal to quote a figure for a rise in war pensions, as though that were the whole of the matter, because war pensions are linked with the industrial injuries pensions, and they must go together.
There are many allowances which are common to both schemes, of course—the special hardship allowance which we call the allowance for lowered standard of occupation in the war pensions scheme; the unemployability supplement; sickness benefit, unemployment benefit, old-age pensions, etc.
There is another thing which is not, I think, generally realised. Certainly, I have not heard it mentioned here. It is that, despite the fact that these two schemes are linked together, the war pensioner has certain definite advantages all the way through the scheme and in many different directions. For instance, the war widow had an advantage of 5s. over the industrial injury widow. We have seen that advantage retained, and in the last increases, we increased that advantage to 7s. 6d. The advantage in unemployability supplement of the war pensioner in 1952 was 2s. 6d.; we have increased it to 5s. We all agree on both sides of the Committee that the war pensioner deserves a certain priority; he is the man who, in time of war, goes overseas and gets wounded in the service of his country. I do not think it is always realised that there are those definite advantages to the war pensioner.
§ Mr. James Simmons (Brierley Hill)
Does the hon. and gallant Member also believe that the same priority should apply to the basic pension? He mentions the linking up of the war pension with the unemployment and disablement allowment allowance. We, in the ex-Service men's organisations, have always contested that and contended that the ex-Service man, by reason of his special sacrifice in volunteering for his country, has a right to something a little bit better.
§ Sir J. Smyth
The indisputable point, and the main point, is that in the two schemes for industrial injuries and the war disabled, the basis is and has been for ten years that in every way they are linked together.
The hon. Gentleman criticised my right hon. Friend in regard to the B.L.E.S.M.A. claim. That has often been discussed in this House and outside. I have the greatest admiration for B.L.E.S.M.A. as an organisation, and for the men who form part of it. It is a very efficient organisation; it has a good welfare service which it operates extremely well in the interests of its members. It has a very strong propaganda department. It is very strongly represented in this House. Moreover, the men of B.L.E.S.M.A. are all proper battle casualties, and, therefore, we all have a particular regard for them.
Nevertheless, it has been since the war quite impossible for any Minister, whether he was on that side of the House or this, to single out any separate class of war pensioner for some particular allowance. I do not see how a particular allowance can be given to the limbless while leaving out in the cold the chronic bronchitics, the paraplegics, the young men of the Second World War who have no old age to look forward to, people who have got half their insides out, and those for whom I feel the greatest sympathy, the complete nervous wrecks, men who have had their nerves completely shattered so that they cannot stay in any profitable job.
I feel that no Minister who has to be fair to all concerned can give a special allowance to one class and leave out all the others. As the hon. Gentleman knows, he wisely turned this subject over to a committee in 1947, and then to another committee in 1951. This last committee, the Rock Carling Committee, in its final conclusions on amputees and amputations said this—and I think it is important—that limb amputation and subsequent wearing of an artificial limb does not initiate or aggravate cardio-vascular disorders; and, secondly, that there is no material difference in the mortality rate between amputees and other war pensioners, and very little difference in both classes over the general population. Those conclusions gave great comfort to amputees all over the world.
§ Mr. Simmons
I am sorry to interrupt the hon. and gallant Gentleman, but he surely must know that fresh evidence has now been adduced. The President of the Royal College of Surgeons and other eminent medical men have said quite definitely that there is a special consideration due to men who have to wear artificial limbs, in contradiction of the findings of the Rock Carling Committee.
§ Sir J. Smyth
The hon. Gentleman himself set up this Committee in 1951, and the Committee sat for four years. It went into this matter very carefully. It saw every possible type of man. Members of the Committee examined every kind of statistical evidence, and they had clinical examination of 4,500 people. The investigation was most carefully and exhaustively conducted. When such a Committee comes to a conclusion with which the hon. Gentleman does not agree, I do not think it is right for him to say that he has all sorts of other subsequent opinion, in an effort to controvert it. If one sets up a committee of that standing, one must abide by what it says.
I feel that the hon. Gentleman has really not been quite fair to the House—perhaps unwittingly—on one or two occasions, in intimating that the rate of mortality of amputees is extraordinarily high. He rather hinted at it in his speech yesterday. And I remember that on 14th November last year I did note that the hon. Gentleman stated that a large number of these men, referring to amputees, are dying every year, and he said something must be done about it quickly or it will be too late. That kind of statement greatly lowers the morale of the families of amputees, as I know very well because I used to receive so many letters from them. They begin to feel that their man, who has lost a limb is going to "pop off" next week because there is something radically wrong with him. That, of course, is not so.
Lastly, I wish to bring to the notice of my right hon. Friend the Chancellor for his special consideration one most important matter which concerns the badly disabled, those to whom I think we all give the first priority. I am referring to invalid carriages. The supply of invalid carriages has been a bone of contention for many years, as the hon. Gentleman knows as well as I do. We have seen these tricycles, one might say, grow and 1263 have all manner of additions made on top of them until they have, in many cases, become very unwieldy and top-heavy. Many of them are very dangerous both to the driver and to the general public.
I am firmly convinced that the very last people who ought to be out alone or travel about the country by themselves are the disabled; the badly disabled, whether civilian or war disabled, ought to have company. In my own block of flats there is a young, badly disabled man living with his wife. He has one of those A.C. tricycles. He often goes to visit his relatives in North London. It is a most difficult matter to arrange; the wife puts him into the tricycle at this end and then she has to go off by bus and underground, trying to synchronise her journey with his, so that she is there at the far end to pull him out of the thing.
Many people have thought these tricycles unsatisfactory for a long time. I suggest to my right hon. Friend that as soon as they wear out they should be replaced by small two-seater three-wheeled cars. We see a lot of them on the roads today. I have had talks with the Invalid Tricycle Association about this. I have been to some of their rallies, and I have their ideas on the subject. It is a problem which ought to be very seriously examined.
Similar requests to the one I am now making have often been made before, but they have always been turned down on grounds of cost. I agree that so long as the Minister of Health has to pay Purchase Tax on a two-seater and not on a single seater, then, of course, the two-seater must always be more expensive. At current retail prices, before Purchase Tax, three-wheeler cars on the market today and available to the public, are a cheaper proposition than what the Government have to pay for one-seater tricycles, which in my opinion are out-of-date and quite unsatisfactory. Provided that the question of Purchase Tax can be overcome, I am quite certain that it would be quite reasonable and not any more expensive to introduce a good type of small three-wheeler car to carry two persons, which is just the thing the badly war-disabled want. I hope that my hon. Friend the Economic Secretary to the Treasury will convey that point to the Chancellor.
§ 8.0 p.m.
§ Mr. Julian Snow (Lichfield and Tamworth)
I am always interested in the speeches of the hon. and gallant Member for Norwood (Sir J. Smyth). If I may say so, the fairness with which he always puts his case is very commendable; but I should like to add one rider to his remarks about the invalid's two-seater car. I hope that he will not make too much of the point of distinguishing between the disabled ex-Service man—and in a very humble way I speak as an ex-Service man—and the injured industrial worker. I have in my constituency a young man who lost the use of both legs as a result of a mining accident within the first few weeks of his going into the pit.
§ Sir J. Smyth
I did not mean to give that impression. The single-seater tricycle service is common to all types—wardisabled, industrial injury, disabled and civilian disabled—and my scheme would be to give them all the three-wheeler type.
§ Mr. Snow
I am subject to correction, but I believe that there are certain disabled ex-Service men who have two-seater cars, whereas those are not available to disabled industrial workers. That is the point I was trying to make.
In connection with the care of disabled ex-Service men, I should like to make a case that there is need for urgent review of the forms of treatment of mental cases among ex-Service men. This may be a politically dangerous thing to say. I belong to an organisation which carries out research into new methods of rehabilitating men who are mentally sick. My opinion is that the Ministry of Pensions ought to give more urgent consideration to more up-to-date methods of bringing mentally disabled ex-Service men back to health. I believe that a quicker job can be done and that many men who for years have been subject to pensions would have recovered years ago if they had been subjected to more modern methods of rehabilitation in group form.
I am conscious that certain hon. Members have spoken for a disproportionately long time, and I do not propose to follow their example, but I should like to address the Committee on a subject which has been rather overlooked by the Government Front Bench. I refer to exports. I listened carefully to and have since read 1265 the Chancellor's speech, and I heard the President of the Board of Trade. I have listened today to a few speeches from the other side of the Committee, some of which bore on exports, but it seems to me that there is one common strain in all these speeches, whether Ministerial or back-bencher, in that while the speakers took great pains to analyse the situation there were very few ideas about what should be done.
§ Mr. Snow
I shall try to remedy that.
There are underlying misapprehensions in the steps taken by the Government in relation to exports. I believe that it is an entirely false argument that if we restrict home demand we automatically get an increase in exports. The President of the Board of Trade said yesterday that events had proved the efficiency of the measures taken by the Government. These measures can be assumed to have been the credit squeeze and the hire-purchase restrictions. I do not believe that as a result of these efforts we shall automatically get an increase in exports. The Government would be well advised not to take too optimistic a view about the results of the last few weeks
We really must consider the whole pattern of our exports and what the future is likely to be. I do not think that we should assume an indefinite overseas demand for manufactured goods, that is end-products. To an ever-increasing extent we must plan for the export of plant and raw material processing equipment. I do not think that the organisations which exist in this country of a financial nature really meet the present situation. I have the greatest admiration for the activities of the Colonial Development Corporation, and, similarly, I think that the Exports Credits Guarantee Department does a fine job, but these organisations, by their articles, are large and, in my view, are not applicable to the smaller exporter and smaller industrialist. The process of obtaining their assistance is slow and not flexible enough to put us into a competitive position.
I wonder whether we really match up to the facilities offered to exporters and shippers by other countries. If we are going to encourage the exporting of plant 1266 and the starting of industries in the Commonwealth and elsewhere, we must arrange financial terms for the smaller shippers, which are financial terms of a relatively long-term nature. For example, when we want to put a plant in West Africa we have to arrange financial terms which may cover a period of ten or more years. The small man will not get that kind of assistance from conventional merchant-banking or finance houses in the City. As I understand, ordinary finance houses or merchant-banking houses are not particularly interested in long-term loans. They want a quick turnover of their money. They are not interested in starting industries or erecting plant board.
It may be said that that is where existing organisations like C.D.C. come into effect. That is not true, because C.D.C. obviously applies only to the Commonwealth and there is, of course, a big and growing demand in other territories over which we have no sort of control. The Government should have another look at long-term financial provisions which would encourage the export of plant from this country.
I am very perturbed at the stonewalling which some of us have received from Board of Trade representatives in the House of Commons recently in connection with the export of goods to the so-called satellite countries. The Board of Trade itself recently published figures of exports from Western Germany, which—and this may be controversial—are very largely American-financed, compared with our exports to the satellite countries. We do not show up very well.
The President of the Board of Trade and the Minister of State, Board of Trade, will say that we abide strictly and fairly by the agreed embargo list. If we do, are we certain that Western Germany also does so? The percentage increase in the exports of that country to Czechoslovakia, Hungary, Roumania and Bulgaria are fantastic. I am quoting from memory when I say that in the case of Czechoslovakia the exports of Western Germany in 1955 went up by about 150 per cent. compared with 1954. We should look at this matter because unless and until we find new markets, we shall find ourselves in an ever-increasing difficulty in maintaining, let alone increasing, our export trade.
1267 As constitutional developments take place in the Commonwealth, and as risks persist in other countries outside the Commonwealth which are not a fair burden on the exporter from this country, so the Government ought to take the view that they should bear part of the credit risk. After all, private investors since the war have lost a lot of money in the Argentine, and that goes for other countries as well. Are these export risks a fair burden on the exporter? I suggest that the Government have a duty to provide a better credit insurance for the industrial exporter.
I want to comment now on the question of trade with China. I am sorry that people who talk about increasing trade with China tend to be criticised on the ground that they are encouraging a Communist State. Opinions may differ as to whether we should or should not trade with a Communist State, but the fact is that traditionally this country has a vast trade with China. I say candidly to the Committee that I believe that to a large extent the difficulties placed before would-be exporters to China are encouraged by a pressure lobby which has the ear of the Government and which represents the old China hand companies. This pressure lobby is undoubtedly trying to secure that the trade goes through the old channels and not through companies which have started up since the war.
I mentioned earlier the duty of the Government, as I see it, to re-examine the facilities for the smaller type of shipper, the would-be exporter of industrial plant. Although perhaps it is not an exact parallel, the Government might look again at Western Germany and at what she has been doing regarding the erection of plant abroad. I have specially in mind the case of the Krupp plant, in India. If we go to the City nowadays we are told, "Do not worry about Germany. She has not got the money to finance that kind of activity abroad. In the end she will have to come back to the City here." If that is so, how does it explain what Krupp's have been doing in India?
The same thing will apply in West Africa. Recently, I had the privilege of meeting a trade delegation led by two Ministers from one of the West African 1268 territories. I noticed with regret that they spent only a few nights in London and then one half of the party went to America and the other went to Japan. We must watch out because, unless we can match credit risk support and long-term financing with the activities of Germany, Japan and America, we shall lose this battle. It is not good enough to maintain our exports, we must increase them.
§ 8.12 p.m.
§ Mr. Nigel Fisher (Surbiton)
I know that the hon. Gentleman the Member for Lichfield and Tamworth (Mr. Snow) will excuse me for not following his most interesting argument on the export position, but I want to follow his excellent example of being brief.
Perhaps I should not say so, Sir Charles, but I think I shall have some sympathy from you in what I am about to say. Many of us have sat here for three days all through these debates, and I must make my humble protest. It is inconsiderate of our colleagues on the back benches to speak, as they have done again and again during these three days, for half an hour or more and even, this evening, up to 55 minutes. This is a small protest and quite out of order on this debate, but I have felt obliged to make it. I want to thank the hon. Member for Lichfield and Tamworth for not falling into that error and, of course, after what I have said, I propose not to do so myself.
I want to turn to the Budget itself, which we have not discussed for three hours. No one in the House of Commons, and few people outside it, I imagine, could have expected extensive tax remissions in this Budget. They could not really have thought that we were likely to get a prosperity Budget. Not that the nation is not prosperous, it is; not that the Chancellor had not a surplus, he had quite a good one; but because, in the context of the February measures, and also of the continued fight against inflation, it seemed obvious to most of us that the Budget had to be, if not positively deflationary, at any rate, anti-inflationary, in character.
Therefore, there was no real prospect of overall tax reductions, though there might be tax changes. At the same time, there was clearly no point in a large surplus withheld by the Government and 1269 subsequently spent by the Government. That would merely have meant that the individual was able to spend less and that the Government would spend more, and the result would still have been just as inflationary and rather more irritating to most people.
Quite rightly, therefore, in my view, the Budget surplus above the line is to be used towards balancing the deficit below the line. After all, that is anti-inflationary and, therefore, no one in this Committee should complain of it in the present context. Nor, I think, should anyone complain that the theme and purpose of this Budget is savings. Every single category of savings has been catered for. There is public saving by means of the Budget surplus, private saving by the new and varied incentives, and Government saving of £100 million, which has been the subject of discussion and about which I hope we shall get more detail in the debates on the Finance Bill.
Earlier this afternoon one hon. Gentleman opposite envisaged, I thought rather alarmingly, large cuts in the school and hospital building programmes. I have not heard anything in these debates to indicate that this is in the minds of the Treasury or of the Chancellor. However, I hope we shall hear more detail as to the type of saving that the Government envisage in this target of £100 million. The target itself is not inconsiderable, despite what some hon. Gentlemen have said. Indeed, I thought it was impressive. It is the equivalent of approximately 6d. or the Income Tax, which might have been the very unpleasant alternative, so I do not think we should cavil at it.
I realise that Premium Bonds are controversial. I know that immediately after the Budget my stepfather, who was for many years an hon. Member of this House, telephoned me and said that this innovation of Premium Bonds offended his Nonconformist conscience. That may be, but it appeals also to the inherent gambling instinct of the British people.
It is no use being morally indignant about that. The instinct exists. I feel that these bonds are designed to cater for a new type of potential saver, the man who would normally invest—if that is the right word—his money in the football pools. That kind of man would not normally save money, but is catered for 1270 by this new and imaginative savings scheme. I am sure that in his anti-inflationary and saving theme, my right hon. Friend has adopted the right theme and the right policy at the present time.
I thank my right hon. Friend very much for not forgetting the important contribution made by the building societies to savings and for the reduction in the Stamp Duty on house purchases; and also for what the Financial Secretary said this afternoon about Schedule A. It was good news that this is not to be increased in the forthcoming Finance Bill. I was rather afraid that we would have new legislation in the Finance Bill. The fact that nothing had been said about it in the Budget made me rather alarmed about the possible contents of the Finance Bill.
I am also grateful, as are most hon. Members, for the implementation of the Millard Tucker recommendations which I think we all consider well justified and the implementation of which was somewhat overdue. They will be a source of encouragement and much needed assistance to a large number of self-employed people.
Like my hon. Friend the Member for Tynemouth (Dame Irene Ward) yesterday, I have said all the nice things first, but, unlike her, I do not propose to make a vitriolic attack upon the Government on this occasion, because I think that this is a far better Budget than the autumn Budget, which I was not eager to support.
§ Mr. Fisher
We cannot go as far back as that. I was not satisfied with the autumn Budget at the time. This is a far more relevant and a far more realistic Budget, far less provocative and far less irritating; but I intend, nevertheless, to make one or two criticisms, which are criticisms of omission rather than of corn mission.
As I saw it before his Budget statement, the Chancellor had two tasks, which I acknowledge were to some extent mutually conflicting; perhaps that is why he decided to tackle only one of them. The first and most important task, which he tackled, was that of continuing the fight against inflation. I think he has done that. The second and secondary 1271 task, which I hoped he might attempt, was that of mitigating the consequences of inflation in the meantime to certain sections of the community whom I consider deserve it.
That second task he has neglected, or perhaps, as I hope, he has merely deferred it. I realise the difficulty—perhaps my hon. Friend the Member for Tynemouth did not realise it; she certainly gave no indication that she realised it—of making any tax concession at all in this Budget, for any concessions would perhaps have opened up the Whole field of competitive reductions of taxation, which would have been argued from both sides of the Committee again and again, with hon. Members putting forward the claims of various sections of the community.
This, after all, is not meant to be a Budget of reliefs or even of incentives; it is essentially a Budget of savings and of anti-inflation. Nevertheless, I was a little disappointed in one respect, in that the Chancellor has given incentives to everyone to save but not very much money to save with.
In the past, this Government have helped those who have been hit hardest of all by inflation. National Assistance scales have been raised; old-age pensions were increased last year; and retired public servants are to have pensions increases. Even hon. Members helped themselves a little while ago to a slight increase in the form of an expense allowance, and if rumours which I read in the popular Press are not altogether ill-founded, we may even be invited to help ourselves in that way again in the near future—but I hope not just yet.
§ Mr. Fisher
All these measures helped certain people, but I want to say a few words on behalf of a much larger category of people who have not had very much help up till now—and I refer to the middle classes as a whole, the people one might describe, not unfairly, as the "new poor."
My hon. Friend the Member for Louth (Mr. Osborne) was very good on this subject this afternoon, and we also 1272 had a very sympathetic intervention from the President of the Board of Trade on it yesterday, but I cannot help saying that fine words are very poor consolation for very high taxes. For seventeen years the middle classes have suffered a steady, remorseless decline in their real incomes. I think that that is generally accepted.
If inflation continues, the wage earners will certainly suffer, too, and very severely; they will suffer through unemployment. But I think it will be agreed in the Committee that they have not suffered yet, because, by and large, their wage increases have kept pace, and slightly more than kept pace, with increased prices. On the other hand, the middle classes have suffered and are still suffering. They have suffered patiently and doggedly for years the twin evils of high taxation and high prices. Now they have the credit squeeze as well which operates particularly harshly on this section of the community.
Their standard of living has steadily declined. They are being relentlessly squeezed, if not out of existence at any rate into a sense of grievance and frustration, which, I believe, could have serious social consequences for our country. They are mostly unorganised, and perhaps that has been their weakness. They are the professional people, the Service people, the self-employed people, the junior executives in big businesses, and the owners or senior staff in small businesses; they are the school teachers, the civil servants, the shopkeepers, the clerks and the typists—in fact, the black-coated workers throughout the country.
They are the sort of people, as I am sure my hon. Friend the Economic Secretary will agree, who used to save. They had the savings habit and their thrift was a source of strength to the whole economy. They cannot save today. They cannot make provision for the future as they used to do. They cannot even keep pace with the present. Some are still trying to give their children a good start it life and are making very real and serious sacrifices to educate their children at their own expense. In so doing they are saving public expenditure on education.
I wonder whether the Chancellor could not have recognised that and whether 1273 some educational allowance could not have been devised to help them. It would have been a source of encouragement and help to a deserving, and I believe hard-pressed, section of the community.
§ Mr. Fisher
The hon. Member says, "Rubbish". We have heard the point of view of other sections of the community this afternoon and I am trying to put the point of view of these people. I shall be much more irritating to the hon. Member now, because I intend to put the case of people earning £2,000 to £3,000 a year. Nobody in this Committee ever defends them because, presumably, they do not like to, or they do not dare to.
In point of fact, today these men are not rich men. I have read, and I have no reason to doubt it, that today an income of £2,000 a year is, after tax deduction, roughly equivalent to about £600 or £700 a year before the war; and that an income of £3,000 works out at something equivalent to £800 a year before the war. No one can say that a man was really a rich man before the war on a salary of that sort. Yet today these people pay Surtax as though they were rich men. Surtax starts at £2,000, just as it did a quarter of a century ago. In my view, the figure should be raised to at least £3,000. A concession of that sort would be a real incentive to saving for a group of heavily penalised taxpayers.
I submit that it is in the national interest to encourage these sort of people, because among them are the younger executives of industry and commerce, the men with new ideas and new techniques and new skills; the sort of people we must look to to keep our country in the van of industrial progress and knowledge in the future. I am sure that there is ample economic justification for giving some help to these people in order to mitigate the effects of inflation, and there is more than ample moral and social justification for doing so.
§ Mr. Fisher
I did not challenge the hon. Gentleman. He challenged me. But I do not see why people should not wish to try to do what they can to give their children a better start. I do not think it morally reprehensible to try to give one's children as good a start in life as possible.
I was saying that there was social and moral justification for helping these people. I believe that there are also political reasons for helping them which may appeal to hon. Members on both sides of the Committee. I think that these people are becoming "fed up," and I do not blame them. I must be perfectly honest and say, considering that, so far, we have done so little for them, I am always amazed that they loyally continue to vote Conservative. I am not in the least surprised that they do not vote Labour, because right hon. and hon. Gentlemen opposite have done even less for them than we have.
§ Mr. Jay
Does not the hon. Gentleman think that we on this side of the Committee have done rather more for those people by opposing the Teachers (Superannuation) Bill than hon. Members opposite have done by supporting it?
§ Mr. Fisher
I would never venture to answer the right hon. Member for Battersea, North (Mr. Jay) on any financial or economic problem. But when he drags in the Teachers (Superannuation) Bill, the object of which is to make an honest woman of the superannuation scheme, that is really not a financial matter at all. It is an issue purely on its own. Like the right hon. Gentleman, I hope that the teachers will have a good wage increase in the Burnham award when it comes to be considered in the autumn. The teachers' superannuation scheme is something quite outside the ordinary financial position of the teachers.
I wish to come back to the political aspect. I am concerned that if neither of the major political parties do anything to help the middle-classes fairly soon, they may do something really silly. They may even vote Liberal, not out of conviction, but simply out of frustration. They may do something even sillier, and form a British version of Poujadism, or something like that. It would not do 1275 them much good, but it would not do the country much good either. And just as I think that we have no moral right to disregard the middle-classes, I think we may also be unwise politically to disregard them.
I welcome the imaginative incentives to saving which have been announced by the Chancellor and the measures he has taken and is taking to defeat inflation. I shall support his Budget with a much better heart than I was able to support the autumn Budget. But in his next Budget I beg of him, if it is possible to give any relief at all, to bear in mind the plight of the middle-classes who are struggling to survive, and upon whose survival, I believe, the properity of this country largely depends.
§ 8.33 p.m.
§ Mr. Douglas Houghton (Sowerby)
Like the hon. Member for Surbiton (Mr. Fisher), I have listened to all the speeches in this debate and have been ready to follow most of the speeches made by hon. Members opposite, including the pessimism of the hon. Member for Louth (Mr. Osborne), a good deal of which, I may say, that I share. I believe that this country may have a desperate struggle in the future to maintain our standard of life for a growing population, and I consider it a great mistake to lull people into a false sense of economic security. That, indeed, is my complaint about the Budget.
I listened to the speech of the Chancellor of the Exchequer with grievous disappointment. I asked myself: is this the stirring message to the people of Britain? Is this the inspiration, the leadership, which the Conservative Party is giving to this country; or is this the limp and almost facetious sequel to the grave words uttered at different times recently by the Prime Minister and the Lord Privy Seal?
I went to the wireless to hear what the right hon. Gentleman would do in a quarter of an hour with his speech which, in this Committee, lasted nearly two hours. To condense one's speech into a quarter of an hour is an act of discipline. It enforces a degree of selection, which one does not indulge in otherwise, when the main point of a long speech has to be put over in that shorter time. What was the main theme in that quarter of an 1276 hour's broadcast? It was that this is a savings Budget. As my hon. Friend the Member for Loughborough (Mr. Cronin) said last night, saving is a desirable thing in itself. But, in launching a National Savings campaign, I think it is the duty of the Government to explain to the people what they are asked to save for and the conditions in which they are invited to hand over hard earned money to the Government.
There has been little said in the course of this debate about what people are to save for. If the Government had said, "These savings which you may otherwise spend on consumer goods, on things you would like to have in the home or to wear, will be converted into capital investment. With those we will equip our factories, modernise our mines and pour our treasure into the railways and lend money to the colonial peoples so that they may enjoy a tithe of the standard of life enjoyed by the people of this country." But none of that was said by the right hon. Gentleman. I have no expert financial knowledge myself, and all I have gleaned from the debate is that these savings are to obviate the issue of Treasury bills in order to finance the floating debt. I cannot see that that is a clarion call to the people of Britain for a new savings campaign.
§ The Economic Secretary to the Treasury (Sir Edward Boyle)
If the hon. Gentleman will look at the closing sentences of my right hon. Friend's Budget speech, he will find that the Chancellor linked savings with investment; but I am sure the hon. Gentleman will agree that it is not always the closing sentences of a Budget speech that are most clearly heard after the tax changes are announced.
§ Mr. Houghton
I fully accept that. The Chancellor, in his broadcast, asked the people to save for peace and prosperity, in terms which were so vague and conventional and, I may even add without offence, so pointless that I did not feel that he had put it over; and it certainly has not been put over in this Committee. I feel that has been sadly missing from the right hon. Gentleman's appeal to the country.
We were braced up for stronger measures than this. No one expected relief from taxes in this Budget—how could he? What we expected were measures to match the words of the Prime Minister 1277 and of the Government generally, and my complaint against this Government is that first they blow hot and then cold. First there is a crisis, then they do nothing to meet it, and then they do something like putting 2d. on twenty cigarettes and the Financial Secretary comes here to explain that that is only the difference between smoking twenty-three and twenty-four cigarettes a week.
When we are asking the country to make sacrifices, do not let us explain that away and say, "They do not amount to anything and will not hurt you. You do not really have to do anything." I was tempted to ask, when the Financial Secretary was speaking, if this tobacco tax meant that and that only, why in heaven's name put it on. What is it for? It is not to balance the Budget. The Chancellor has already budgeted for a substantial surplus. It is certainly to add to his surplus or maintain it at the sort of figure he thought he should have. People do not gladly pay additional taxes for surpluses. They pay them for purposes; in order that things can be done with their money. They are being asked to make a sacrifice, and they want to see a dynamic lead in Government financial and economic policy. They do not want merely a flabby and flippant introduction to a Budget which means little or nothing and vanishes to the back page the moment Grace Kelly got married and Messrs. B. and K. arrived.
In a week when the Chancellor had such competitors he should have attracted public notice with a stern call to duty. No Conservative Government can appeal to the country for service, but they can make a stern call to duty. They did not even do that. I am racing against time. We all promised to be brief—including my hon. Friend the Member for Wallsend (Mr. McKay)—and I must push on. I approve of that part of the Budget which relates to the Savings campaign. It is economically sound, although it has been badly explained to the people. I welcome the Chancellor's break with tradition in exempting the first £15 of interest in Post Office and trustee savings bank accounts. He has gone not only against tradition but against the Report of the Royal Commission on the Taxation of Profits and Income, and in the present situation I believe that he has done the right thing.
1278 I am by no means so happy about his proposal for Premium Bonds. Here again I share the opinion of the hon. Member for Louth. I do not want to moralise about this matter; that would be impudent. But it panders to one of the weaknesses in our society today; the desire for a lucky dip and for gains which are unrelated to effort or work. That is an undesirable tendency, and for that reason I am very sorry that the right hon. Gentleman introduced it. A taxi driver said to me, "I do not know what we are coming to. The Chancellor has turned bookie now." That is an exaggeration, but it is the kind of impression which this proposal has created. From an economic point of view he might just as well have recommended everybody to invest more and more frequently in the football pools. It would have made little or no difference.
I say no more about that subject at the moment. No doubt we shall have an opportunity of going back into it. I also regret that the Chancellor has trumpeted his intention of saving £100 million in Government expenditure. Economies should be made quietly and persistently, and not heralded in with a promise, in a round figure which may not materialise. This promise of a reduction of public expenditure—undefined and unspecified—obviously strikes a discouraging note in the hearts of old-age pensioners, war pensioners, and others who are still feeling the constant rise in the cost of living and who fear that the Government may not be able, because of this promise, to meet the increasing hardships which may befall them.
In addition, it creates an atmosphere of nervousness and apprehension among the vast number of people in public administration. Moreover, if we say that we are going round with the axe, a kind of resistance grows up—a desire to avert it and a temptation to camouflage oneself against it. Economy is something which one sets about without all this excitement and heralding of things to come. We shall have to watch that most carefully.
I make no point about the Government introducing one lot of Estimates and then trying to work to another lot, but say that the Government are either misleading the public in this matter or they are going about the right sort of job in the wrong way. None of us wants to see an 1279 inflated public service or Britain becoming more and more a nation of pen-pushers and book-keepers. We want more people in production. The administrative side and the executive side of our affairs should be kept to the minimum in order that the maximum manpower should be devoted to the productive effort. That is not to say that those in the back room are not making their contribution to production; not at all. We have to get the productive and the so-called non-productive workers into their proper proportion in the economy.
I appreciate greatly what the Financial Secretary said regarding the Government's adoption of the Report of the Royal Commission on the Civil Service. It fell to me to be Chairman of the Staff Side of the Civil Service National Whitley Council which carried out the negotiations in recent months. I congratulate the Chancellor of the Exchequer. I have criticised him; I will now congratulate him on the boldness and the courage with which the Government took the decision to adopt the Priestley Report and to negotiate it, through the machinery of the National Whitley Council and the staff associations concerned.
I believe that out of this will come a new deal for the public service. A new principle of fair comparison has been established by the Priestley Report and accepted by both sides of the National Whitley Council which will put the Civil Service on a fairer relationship to outside levels of pay and salaries than it has had hitherto. I am glad that it has been possible to complete this discussion by this time, in order that hon. Members might be acquainted with it at the time of the Budget statement and not afterwards, when it might have been very grievously misunderstood.
I know that hon. Members are waiting for me to sit down, and I shall not disappoint them. What worries me more than anything else about this Budget is that it does not get the Chancellor on any better terms with the trade union Movement. That is a grave matter. I see the inside of it as well as the outside. I see it here and I see it on the General Council of the Trades Union Congress. I see it in the discussions of the Economic Committee of the General Council with the Chancellor of the Exchequer, and I hope there will be more of them. An exchange 1280 of views between the Government and representatives of the trade union movement will be a good thing; it will enlighten both sides.
The Chancellor has been so foolish as to introduce into his Budget two irritants, the Tobacco Duty increase and the withdrawal of the remainder of the bread subsidy. He need not have done either, from the budgetary or the economic point of view. There is a great deal that is psychological in the reaction of the trade unions to Government action in the economic situation. I cannot stay longer to develop that point, but I regret that the Chancellor has once more seen fit to introduce into the Budget something which has made matters worse and which he need not have done from the budgetary or the economic point of view. Had he refrained from doing them he would be on far stronger ground in his discussions with the trade unions.
§ 8.48 p.m.
§ Mr. Patrick Maitland (Lanark)
I take up the point about the £100 million savings. Surely this much can be said: The Chancellor of the Exchequer, who has been authorised by the Prime Minister to pledge £100 million worth of savings, is now in a very strong position to extort it from his colleagues. If people are saying that this foreshadows critical changes in policy I would like to allude to a remark made a long time ago—at the beginning of the 55 minute peroration of the hon. Member for Wallsend (Mr. McKay) when he spoke about the take-home pay packet. He said that there was much in the take-home pay packet that the worker did not see. I say that the sooner the carry-home pay packet is understood to contain a lot of things that are not actually visible in the shape of subsidised schools, pensions and the rest, the sooner we shall have a realistic economy.
In the interests of brevity within the ten minutes that remain before nine o'clock I would allude to one point about the Premium Bonds. We have heard a great deal of humbug on this subject. We have had a degree of moralising, no doubt stimulated by divines and ecclesiastics. But it has not carried a great deal of conviction when hon. Members who, by the look of them—and I am one—like a flutter, get up and preach on the sub- 1281 ject. The fact is that for better or worse there is a considerable section of the population which not only looks for a flutter because life is so drab, but has been driven to "spivvery" by years of controls. It is that decline in the morality of the nation which one has to recover and restore; and suck the benefit into the stream of national advantage. There is a topicality about the Chancellor's project which is of unimpeachable Socialist orthodoxy. It has been run by the Soviet Government for about 25 years, and it seems that to announce it this week is the height of compliment to our guests.
The right hon. Member for Smethwick (Mr. Gordon Walker) made a remark near the end of his speech which I had hoped he would develop. He referred, in particular, to fears that Australia might, under the impact of trading patterns now developing in the Commonwealth, seek a revision of her preferences. At all events, I am comforted to know that the right hon. Gentleman is anxious about the preference system, because sometimes when I listen to arguments from the opposite side of the Committee I wonder whether on both sides we are not inclined to blame our opponents for problems which arise from a system of trading rather than from day to day political blunders.
I am referring to the system adopted in 1945 of non-discrimination in international trade. I wonder whether we are not approaching a time when we must look at that afresh. Whether that is the case or not, I would like to ask the Economic Secretary to pass on to my right hon. Friend the Chancellor this point, that in 1952 we had two conferences of Commonwealth Finance Ministers. In 1954, we had another. If one studies the pattern of the so-called "Common Approach" which emerged from them, or at all events which was attributed to them, we find that in some of the Dominions there was a certain similarity of economic policy to that initiated in this country, for better or worse.
So I hope that the Government will look at the possibility of inviting the Commonwealth Finance Ministers to meet to discuss a common approach to the whole problem of Commonwealth investment, of saving for investment, of the needs for investment, of the conditions that are required for sound and expanding 1282 investment, and of the incentives that are required. For unless investment develops in the Commonwealth in a wholly new volume, then the sterling area will face very difficult times.
A simple calculation derived from published totals of the Colombo Plan shows that the main countries seeking to develop their economies by extensive and co-ordinated investment under that plan, are together looking for about £3,000 million worth of external capital. So far, they have not raised more than about £500 million of it—by "raised" I mean actually received or obtained pledges of it—and of that £500 million, only a little more than half has so far been forthcoming from Commonwealth sources. Here is a fantastic deficiency, a deficiency that could wreck the Colombo Plan, and no doubt, in so doing, could have a serious effect on the Commonwealth as a whole. It is not only about the Colombo Plan areas that we need to be worried. There is the whole problem of African development and the future of those territories as the home of a peaceful plural society.
Looking at the Budget, one wonders exactly what is its philosophical background. It would be tedious at this time of night to repeat figures which have been given earlier in the debate, but we are faced with a grave decline in the Commonwealth share of United Kingdom exports, with a grave decline in the Commonwealth share of United Kingdom imports, with a significant decline of British exports to the United States, of the British share of world exports, and so I could continue. We see that in the expanding export trade there is a relative decline of British participation in trade even to the countries of the O.E.E.C. area and to the rest of the sterling area. Does all this argue the merits of a trading system that is based increasingly upon abandoning the principle of discrimination?
Before taking up his present office, my right hon. Friend the Chancellor of the Exchequer made one of the most remarkable speeches that the House of Commons has heard—while he was still Foreign Secretary. In the last Middle East debate, before Christmas, he alluded to the picture of an "expanding Commonwealth." I was heartened by noticing that in his Budget statement on Tuesday he seemed indirectly to allude to that again, in this regard.
1283 He stressed that our sterling area reserves are quite inadequate to the volume of trade which they finance and he stressed that it is vital for the sterling area system that it should establish closer ties with Europe.
I hope that the Government will at least pay attention to the very helpful ideas set out in two articles in the Manchester Guardian on 14th and 15th March by Professor Meade. They were articles canvassing the absolute necessity for this country to take an organic part in the financial and trading structure of Europe.
The Government must recognise, sooner or later, that the Strasbourg Plan is not dead and that there is some merit in seeking an adjustment of Article II of the General Agreement on Tariffs and Trade. Certainly, the Government are bound to recognise, sooner or later, that there is a kind of political and emotional yearning in Europe for an organic and functional association with the Commonwealth and sterling area.
The Berliner Handelsgesellschaft was so anxious about the sterling area that it recently urged the European Payments Union to put up a loan of £500 million to bolster our reserves. And it is a fact that while the sterling area reserves, at about 2,700 million dollars, finance nearly 25 per cent. of the world's trade, Germany's reserves, which are just as big, finance only 8 per cent. while the Belgian and Dutch reserves, only 1,100 or 1,200 million dollars each, finance only about 3 per cent. of the world's trade each.
Some possibility of the pooling of these reserves should be examined. It is implicit in Professor Meade's articles. They set forth a line of thinking which is wholly constructive. I plead with the Government not simply to concentrate on fiscal policy or the financial weapon, but to take another look at the structure of international trade with particular reference to retreat from the principle of nondiscrimination.
The Chancellor announced his slogan: "Save to be great". Let us make that slogan a Commonwealth wide theme embracing Western Europe, too. Let us study Europe's clamour to revive discrimination in the hope that we may save and trade together to be great, to be strong and, therefore, free.
§ 9.0 p.m.
§ Mr. Harold Davies (Leek)
I will try to keep my promise to speak for only about ten minutes in order to enable two or three of my colleagues and, perhaps, some hon. Gentlemen opposite to take part in the debate. I will, therefore, abandon some of the statistics I was going to use. In any case, statistics are dry things, which is exactly what is wrong with this Government at the present time.
This Government deal with pieces of paper—or somebody else does for them—and with a slide rule and maybe a few algebraic formulae and think they are dealing with human beings. At the present time, they are worshipping at the shrine of statistics, and very often they are all wrong, and one can easily prove it. The Budget estimates for the last seven or eight years have been hundreds of millions of pounds out, and when we are worshipping at the shrine of a surplus the important thing to know is what the surplus is to be used for.
Together with some of my colleagues I came here to hear what I might call an economic symphony to be played by a so-called dynamic Chancellor, but instead of an economic symphony we had a reedy mouth-organ solo ending in a squalid method of financing Britain's sterling. It is a tragic situation. With its great traditions, the party opposite has talked proudly of this nation, yet can come along at this juncture with a smile and think that these measures are going to help. In reality, they will not help at all.
What help will the Premium Bond give to the small exporter? My hon. Friend the Member for Lichfield and Tamworth (Mr. Snow) made an admirable speech about helping the small man. The party opposite, having talked for all these years about helping the small man, has now almost crushed the small man, and especially the small farmer in the mountains and the hills—the farmer who could produce at the present time probably another fifth of the food that we need. The party opposite has sacrificed British agriculture on the shrine of the City of London.
Now, I come to another point. In regard to quality of investment, we need to be very careful, because when this matter is in the hands of the Government, and we talk about investment in 1285 the nationalised industries, does that mean that they are going to question every step that may be taken? This can be a very vicious system, because by means of it we could bring about the socialisation of losses and the privatisation of profits. That is what has been happening in the aircraft industry, because the nation has financed research into the prototype planes, and then, after the country has financed it, the profits have gone to the firms concerned. This is the socialisation of losses and the privatisation of profits which is the sort of thing that is going on under this Government. It is State capitalism at its worst, and I wish I had time to develop this argument, but I must keep my promise.
On the subject of investment in the coal industry, I have never heard such utter rubbish as comparing an extractive industry like the coal industry with the motor car industry—comparing a coalmine with any polished, chromium-plated factory. We are taking from the earth of this little country 50 square miles of coal every year, irrespective of the depth of the seam and area; that is. 50 square miles of coal dug out of the earth by the sweat and muscles of our colliers. We cannot make a collier in five minutes, and I should like to tell hon. Members opposite that they would never get the production we need if they had a million colliers at the coalface, because there is no room for them in the old-fashioned pits.
§ Mr. Davies
I know I am right. It was an hon. Member opposite who talked such utter rubbish about the mining industry.
Are the Government to make cuts in this industry? The previous Chancellor of the Exchequer said we should double our standard of living by 1980. Power is required for that. Where do the Government intend to get increased power? Most of our power in this country is still derived from coal. We cannot increase oil consumption without increasing dollar and other foreign currency expenditure. We are spending £250 million a year now on that, and to double our standard of living by 1980 will 1286 require so much extra production, so much additional power, and, pro rata, so much additional oil consumption, over and above what we are consuming at the present moment, that we should have to spend £800 million a year on oil, especially if we relied upon it to a greater extent proportionately than we do now. These are the sort of problems the Government should be looking into instead of crystal gazing and organising lotteries and raffles. It makes one wonder. Why not have an astrologer at 10, Downing Street, instead of a Prime Minister?
There is a way to save, and we must do it. It is idiocy to think that we can any longer be a great, strong military Power, to think in terms of Waterloo in the age of the hydrogen bomb. We are spending £200 million on defence. We are spending rashly, like a man in reduced circumstances trying to live in an expensive mansion. We cannot afford it. Although we cannot afford it, we are inflating our defence expenditure. Has the astrologer at 10, Downing Street yet discovered whether the Germans are to pay that £75 million for troops in Germany? If they are not going to we shall have to have another Budget to find the money. It will mean at least another 2d. on cigarettes. Perhaps they will go up by 2s. We have heard nothing about these things. All we heard from the Chancellor yesterday was a wonderful exposition which lasted for two hours and ended in nothing.
I am not always in line with my party, but I think the nation must investigate the question of a wages policy. Have we now reached agreement in our society that we shall no longer have the terrible system of poverty which existed in the Victorian age? An hon. Gentleman opposite was prating about having longer hours of work. Does he want to pay more money for them?
§ Mr. Davies
I am sorry, but I cannot give way. The hon. Gentleman did not give way. He keeps asking questions, but does not give way.
Perhaps the time has come when the Labour movement as a whole may discuss scientifically the theory of a wages policy and what amount of the national income can be devoted to an increase in wages. It must be worked out with the trade unions. Perhaps the new thinking will lead in the next generation to something like a Socialist policy evolving in industry.
I said I should not be long, and so I must conclude, but there is one more observation I must make. I went out into the Lobby tonight to meet people from the cotton industry. What has the Budget done for Lancashire and the cotton industry? Ninety mills were closed last year, and about 30,000 workers are either on short time or out of work altogether.
§ Mr. Davies
Why? I will give one answer right away. Because of the folly of the boycott on East-West trade and of not allowing the Chinese market to be open to Japanese textiles. Japanese textiles are competing for all their worth against British goods in South-East Asia, in Latin America, and in Africa. The sooner the House of Commons denounces American policy or anybody else's, about not allowing trade with the 600 million people in China, the sooner it will help a little towards solving our problems.
§ 9.11 p.m.
§ Mr. T. L. Iremonger (Ilford, North)
This has been a remarkable debate, because there have occurred two things the like of which I have never known before in this House—a speech from the hon. Gentleman the Member for Wallsend Mr. McKay) of 55 minutes, and a speech by the hon. Member for Leek (Mr. Harold Davies) of ten. I do not know which is the more exceptional. I know which is the more acceptable. The hon. Gentleman the Member for Leek has put the Committee in his debt by being so very courteous and brief, and I will try to follow his excellent example.
I want to make some slight but, I hope, not unconstructive criticisms of the Budget. I will mention, first, the failure to extend the Tobacco Duty relief 1288 for old-age and retirement pensioners to the new imposition of 2d. on a packet of twenty cigarettes. I do ask the Chancellor to think again about this. He ought really to have another look at the whole system of Tobacco Duty relief and see whether he could not achieve a fairer distribution of the funds which are diverted from the Exchequer in this way by arranging some addition to the benefits for retirement and old-age pensioners generally.
The present Tobacco Duty relief is an invidious and questionable system. It is invidious because not all pensioners—not even all pensioners who smoke—benefit from it. I am sure the Chancellor must be aware by now that there is great resentment by smokers who are not eligible for this relief, and even greater resentment by non-smokers. The system of relief is questionable, because the habit of smoking, to put it at its lowest, is—if I may use the expression—inherently unbeneficial. It is in a totally different class from other services or foods which are subsidised, such as the supply of cod liver oil or orange juice for children. To subsidise the consumption of tobacco is economically and socially quite indefensible.
This relief ought to be abolished and the funds which provide it ought to be redistributed fairly to all old people. The relief is bad in principle and bad in practice, and in my view the Chancellor really should be able to find a better way of distributing these funds.
I want now to say a word or two to express my disappointment at the treatment the Chancellor has given to house owners. I welcome the concession to these people, whom he called his "old love", in reducing Stamp Duty on conveyances. I even welcomed the reference made by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), somewhat cynical though it may have been, when he referred to them as "these admirable people". But I feel that the Chancellor should have gone further. It would have been fully in keeping with his main theme of saving if he had allowed a tax concession in respect of mortgage interest payments and repayments for house purchase to owner-occupiers.
Such a concession would have been particularly fitting, because it is as a 1289 direct result of the Government's financial and monetary policy that these admirable people are at the moment suffering an increase in their interest rates. I hope the Chancellor will go a little further next time, and in the meantime bear this matter closely in mind.
Thirdly, in criticism of the Budget, I am frankly disappointed that the Chancellor did not see fit to give some remission of the duty on petrol. It has always seemed to me that this would be the least inflationary relief he could give. It would have had an immediate and direct effect on the cost of living, and I have never heard from the Treasury Box a satisfactory explanation of why this tax fails to come in for remission in Budget after Budget. I hope that, together with the other suggestions that I have made, this will be very high in the list of priorities.
Having made those points of criticism, I come to the main theme and purpose of the Budget. I give my wholehearted approval and support, for what they are worth, to the wise and imaginative proposals which my right hon. Friend has made. In adopting the instrument of saving, which is an act of faith, as opposed to the instrument of Purchase Tax, which is an act of certainty and rather an unpleasant one, we have seen a revolution in Treasury mentality from restriction to responsibility. That is surely very welcome. The object remains the same, which is to maintain the value of the £, to combat inflation by reducing consumption and the spending power in the pockets of the people. This time the method is more inspiring; it is to trust the people to do this without taking money out of their pockets. It will be more fruitful when the people respond, because the response will be in the form of saving which checks consumption without actually raising the cost of living.
Finally, it is an expression of faith in our people and, surely, the whole message of the Budget is that the people have their part to play, as the Chancellor said in his speech. In connection with this point, I come to what I think is the crux of the whole problem—the question of our national productivity, which is the principal way in which our people can play their part. Here a key factor is the relationship between the different interests in industry, in which again the key factor surely is the trade union move- 1290 ment. Although they would like to play their part, I think that here in a certain respect the people are not doing so. It is time that the Government encouraged them to do so.
I should like to explain to hon. Members opposite what I mean. They know, as well as I do, that time after time elections to key positions in our economy are decided by 10 per cent. of the people who are entitled to vote. The result is that Communist trade unionists are elected to positions of high responsibility in our industry and these people are in fact dedicated to the destruction of our way of life. It is a cruel irony that this is so, when it is the last thing desired by the 90 per cent. of those who are entitled to vote but who do not vote.
I say, and thousands of people are saying, that surely it is time the Government woke up to some sense of responsibility in this matter. What could be more simple and more innocuous and more democratic than to ensure that democracy is allowed to perform its healing function by making it compulsory for all trade unionists who are entitled to vote to exercise their vote?
§ Mr. Iremonger
I know that if one ever ventures to speak about the trade union movement, hon. Members opposite pop up like ping-pong balls in a bath, but I was confining my attention to the trade union movement which has a vital part to play. The Government can help these people to exercise their vote and thus play the part which they do not now play in industry.
The Government have promised to achieve a saving of £100 million. The right hon. Gentleman the Member for Leeds, South said that he was a little cynical about it. I would remind hon. Gentlemen opposite that they were a little cynical about the proposal of my right hon. Friend the Chancellor to build 300,000 houses a year.
I say frankly, however, that if the attitude this afternoon of my right hon. Friend the Financial Secretary to the criticisms made by my right hon. Friend the Member for Basingstoke (Mr. Freeth) about the Estate Duty office are any 1291 earnest of the spirit in which the Government are to tackle this question, the outlook is bleak. It was a convincing answer if one had not heard the argument, but, as I had heard it, I was exceedingly disappointed. I hope, therefore, that we shall find a more constructive and more positive approach to economies in Government expenditure.
At the same time, I tell the right hon. Gentleman the Leader of the Opposition, who I am sorry to say is not in his place, that although he may be a little cynical about the intention of the Government to save £100 million a year, the country will be more than a little cynical about him if his response to it is to come to this Government and ask for the salaries of hon. Members to be increased. It would be a pity if this House were to give leadership to the country, by saying, "Do as I say; don't do as I do!" I hope, therefore, that we shall not be embarrassed by that particular form of advocacy—
§ Mr. William Wells (Walsall, North)
Does not the hon. Gentleman realise that it is no part of the function of the Opposition to propose any increase in public expenditure?
§ Mr. Iremonger
The hon. Gentleman is being a little naïve.
I will conclude my remarks with a reference to what I think is the most important aspect of the inflationary situation in which we find ourselves, namely, the plight of the real victims of inflation.
We cannot impress upon the Chancellor too strongly the vital and desparate urgency of establishing a stable £ for those people who, failing a stable £, will go on suffering a slow death. I refer to the old and retired people, about whom much has been said, to the people living on fixed incomes, and also to those who are earning salaries and are now nearing the end of their working life. Many of the latter are in executive positions in trade and industry. Theoretically they can ask for higher wages, but they know perfectly well that if they go to their 1292 bosses and say that they cannot live on what they are getting, the answer is that they are free to go somewhere else. And, of course, at their age, with narrowly specialised experience, if they do that they will not be able to command even their existing salary.
The people I have mentioned are the principal sufferers from the inflation that is taking place, and which has been be-devilling our social and moral existence since 1939. They have no trade unions to fight for their interests; they have no way of ensuring that they do not suffer from the inflation. I commend to the Chancellor a little verse of which I have always been rather fond:The rain it raineth every dayOn the just and on the unjust fella',But it raineth harder on the just,Because the unjust has the just's umbrella.That summarises perfectly the situation in which so many of these people find themselves today. The Chancellor must recognise that he is their only hope. They can only look to the success of the economic policy of the Government in bringing to an end this apparently endless inflation.
§ Mr. Iremonger
These people have been suffering from inflation ever since 1939. At the time of the autumn Budget, which was itself an attempt to check inflation, we said to these people, "We know that this will cause a small rise in the cost of living. It may hurt a little, but it will be in your interest because it will cure inflation and then you will all be better off." That is all very well, but it is little comfort to say to the patient, "Never mind if the medicine kills you. If it had not killed you it will have done you good." That is not good enough, and I warn the Chancellor that these people are now very nearly at their last gasp. It is not enough for the Chancellor to continue to say:I tell you naught for your comfort,Yea, naught for your desire,Save that the sky grows darker yetAnd the sea rises higher.It has come to the time when they cannot endure much longer and I earnestly beseech the Chancellor to recognise that every penny he loses for them is lost to them forever. They have no redress. They rely entirely upon him and the success of his policy. Because I believe his 1293 Budget is rightly and imaginatively conceived as a further strengthening of the defence against inflation, I give my welcome and encouragement to my right hon. Friend in his imaginatively conceived proposals.
§ 9.26 p.m.
§ Mr. A. G. Bottomley (Rochester)
It was my pleasure to follow the hon. Member for Ilford, North (Mr. Iremonger) after his maiden speech and to congratulate him, but I am afraid that I cannot congratulate him tonight. As I develop my speech I will answer some of the points he made, but I want, first, to say that my right hon. Friends who have preceded me have torn this Budget to shreds. My right hon. Friends the Members for Leeds, South (Mr. Gaitskell) and for Huyton (Mr. H. Wilson) are known well beyond the shores of this country as two brilliant economists. Their judgments on the Budget will in time be shown to be fully supported by the facts as they unfold.
I speak as a trade unionist, and what knowledge I have in the field of economics is derived from my activity in that work. Last week I was present at a meeting when an hon. Member opposite, whom we all respect, said "In this case economics win over ethics, as they generally do." What he did not appreciate was that he was stating the fundamental difference between hon. Members on the two side's of the House. The Conservative Party are known as the Tories, because that was the name taken by outlaws and robbers of the past.
§ Mr. Iremonger
The right hon. Member really should brush up his history. He could find the factual explanation easily accessible in Macaulay. It was nothing to do with their being robbers; the allusion was to the Irish support of the Catholic succession in the days of James II.
§ Mr. Bottomley
If the hon. Member looks at the reference book from which I have quoted he will see them referred to as robbers and outlaws. It is an authoritative publication.
I regret to say that the Conservative Government have, with far too much success, created the impression in the public mind that the unethical party is the Labour Party. They certainly brought a slur upon the trade union movement and 1294 not only gave the impression that trade unions were unethical, but, for years, tried to stop their legitimate development.
The trade unions are very powerful and I think hon. Members on both sides will acknowledge that they are responsible. We want to be responsible, because this is our country and we have as great a pride in it as any other resident in the land. We have to be here. Workers cannot go to other parts of the world; we cannot evade our responsibilities. We are proud of our country and we face our responsibility for our economic problems and ethical problems too.
It is interesting to find today that the Conservative Party courts the trade unions. We even have Tory trade unionists. Within my experience the right hon. Member for Woodford (Sir W. Churchill), who is liberal-minded in these matters compared with some hon. Members opposite, referred to the T.U.C. General Council as "a little tin-pot gang of twopenny-halfpenny conspirators puffing each other up." Well, the Government, I regret to say, and certainly their supporters at the moment, are trying to create the impression in the public mind that responsibility for the present difficulties lie with the trade unions, because they press for wage increases. It is not because the trade unions have pressed for wage increases; it is necessary for them to do that in order that trade unionists may live. The present economic troubles arise solely from the policy of the Government.
Before the Lord Privy Seal, the first post-war Conservative Chancellor, introduced his first Budget, the Trades Union Congress sent a memorandum to the Chancellor of the Exchequer. It laid stress on the adverse effect on economic stability which would result if there was a cut in food subsidies. Of course, before the General Election pledges were given by very responsible leaders of the party opposite that they would do no such thing. But cuts were made in the food subsidies in spite of those Election pledges, and we have even further cuts proposed in this Budget. As was said by my hon. Friend the Member for Sowerby (Mr. Houghton) they are quite unnecessary. They will add to the cost of food, and result in the workers having to meet higher prices by making further claims upon the employers for wage 1295 increases. It is not their desire to do so, but they have no alternative.
Even after that first Budget the T.U.C. said that if the Government persisted in limiting their responsibility, trade unions would be compelled to place increasingly greater emphasis upon wage increases as a means of protecting the interests of their members. That was at a time when the Lord Privy Seal introduced his first Budget. The decision to communicate that intimation to the Chancellor was not lightly taken and at the T.U.C. Conference of 1952 this proposition was agreed:The General Council must emphasise that trade unions cannot contract out of the difficulties facing the community. These dangers threaten everyone. The trade union movement has a vital responsibility to ensure that by its own actions it does not worsen an already precarious position.The whole of the rank and file of the trade union movement assembled in conference accepted that very responsible decision. In other words, trade unionists wanted to exercise wage restraint, but they could not do it in the face of the facts that met them at the time.
I have taken the trouble to get some family budgets, the kind of thing which trade union leaders have to recognise, but I will not weary the Committee with them. But if I can give some figures to support the budgets presented to me by particular individuals, it will be seen that from 1954 to 1955 the cost of meat, bacon and fish went up by 10 per cent.; milk, cheese and eggs by 6 per cent., and fruit and vegetables by 15 per cent. If we take food generally from 1951 to 1956, the cost went up by 32 per cent. Travel costs, another important factor in the workers' budget, went up 14 per cent. and are going up still more. I was unable to obtain figures for rents, because they are still rising as a result of Government action. The £, which was worth 20s. in 1951, is worth 16s. 9d. today. No responsible trade union leader can ignore those facts. When trade union members present their case, the leader has no alternative but to meet the employers and ask for wage increases.
We would agree that the Daily Telegraph, a very responsible paper, is not "Left" in its views. It is certainly of the "Right". It gives support to the 1296 view that trade union leaders can have great responsibility. In a leader of 23rd August, 1955, after nearly five years of Conservative Government, it stated:Since the war, the Trades Union Congress has come to be recognised as an estate of the realm by the way it has co-operated with Governments of both parties.It also stated that… the concern of the trade unionists is the concern of the country.It is on that fact that I wish to develop the next part of my speech.
It is the concern of the trade unions, as it is the concern of every one of us in this country. We must endeavour to overcome our economic difficulties in the knowledge that if we fail, and go down, we all go down together. Why is it that we have our present economic difficulties and how is it that we have fallen from being a creditor nation of the world to a debtor? Why is that we who were once the richest country are now continually in financial difficulties?
We are substantially of the same stock which first harnessed our rich resources of coal and iron ore and manufactured goods which the whole world required. We sent these manufactured goods overseas and we got all the food and raw materials we wanted in return. We were not only able to get all the food and raw material we required; we were the shippers, bankers and insurers for the world, and we earned a great income as a result of that effort.
We invested overseas and got a large income for which we had little or no physical effort to make. Why is it that we have now gone down in the world and we have not the same standing as before? Even in the days when we were the richest country in the world, and the Conservative Party ruled supreme decade after decade, there were squalid surroundings, slums which we now have to replace, and out-of-date ill-equipped factories—the result of squandermania instead of investing in our future, which should have been done.
It is the same policy which the Conservative Party is following today—profits for the sake of profits themselves. They are not really concerned about the country's welfare, and so far as we on this side are concerned we have had no reason to think that the Conservative Party except in its approach to some general 1297 matters has changed. Fundamentally, its economic outlook remains very much the same.
§ Mr. A. C. M. Spearman (Scarborough and Whitby)
May I ask the right hon. Gentleman whether he remembers that the gross fixed investment last year was nearly £500 million more than in the last year of the Socialist Government?
§ Mr. Bottomley
I am not disputing that, and if we talk in terms of money we have to think in terms of volume, too. I am not disputing that there is that increase, but the important thing is to make sure that the investment goes into those industries which are of benefit to the country. That is not what happened in the past. We developed the kind of industry which did not actually show the maximum benefits.
§ Sir E. Boyle
Will the right hon. Gentleman give examples? Has he studied the Board of Trade Journal for 4th February, which gives the full figures for this year, because they do not bear out his point?
§ Mr. Bottomley
I will give one illustration which should be very familiar to the hon. Gentleman, because he sits for a Birmingham division. The Government encouraged the motor car industry to double its output in three years. It is not having to export motor cars now; cannot even sell motor cars on the home market. The whole of the industry has been over-capitalised. So I give to the hon. Gentleman one case in particular about which he ought to know more than I do.
I was going on to say that when we were a flourishing country we failed to re-equip and modernise our industry. We allowed other countries to do it—Germany, Japan and America—so no wonder it is difficult for us to compete with them today. It would be wrong if I did not say that two world wars contributed to our downfall, but we need not be disturbed about that. As a result of our sacrifices, we enabled a large part of the world to obtain its freedom and to enjoy liberty today.
As a result of selling our overseas investments, we lost £1,118 million. We had to pay back to our friends and allies £2,576 million in sterling balances— 1298 goods which we had to send overseas without getting goods in return. Our physical destruction on land was £1,500 million and shipping losses amounted to £700 million. In 1945, the right hon. Gentleman the Member for Woodford truly said that we were a bankrupt nation. Never in our history have we been in such a precarious economic position as we were in 1945, and that goes for today, too.
Thank heaven that we had a Labour Government which were able to tackle the problem in a way by which we were to bring about some hopes of success. That was not done without great effort. Today, sneers are made about planning, but it was planning which enabled us to overcome that great crisis. We not only had economic planning, we controlled investment. There was a proper distribution of raw materials, and a distribution of industry. This did not come about by leaving each Department to do the job on its own. There was a committee of all the Ministers concerned and they were told, "Never mind about your Department; you must look at the country as a whole." It was in that way that this economic planning policy was carried through to success.
§ Mr. Osborne
I know that the right hon. Gentleman will want to give a true picture. His Government also had the huge American Loan, and Marshall Aid.
§ Mr. Bottomley
I am going to deal with that. I am just making this claim for our policy.
By the end of 1950 the immediate task of post-war recovery was completed. I am going to start from the year 1947, because it would be wrong to take 1945, when it was inevitable that production and exports would go up. It is fair to say that the Socialist Government had from 1945 to 1947 to settle down. What happened after that? Did they keep up production and exports? The answer is "Yes." From 1947 to 1950, production increased by 30 per cent. and exports by 60 per cent.
To save wasting the time of the Committee, I will merely say that if anyone looks at the Press reports of 25th May, 1950, he will see that there were banner headlines in every newspaper referring to that fact that it was Britain's most booming period. There was full employment, 1299 high wages and savings. Everything appeared to be as good as it had ever been previously, even in our days of great glory and honour.
§ Mr. Bottomley
It would not be right if I did not acknowledge, as the hon. Member suggested, that we were able to do that because we received Marshall Aid—but, even then, Marshall Aid ended before the time limit that had been fixed.
I intervened in the debate yesterday because I thought that the hon. Member for Langstone (Mr. Stevens) was very fair-minded, and I put a question about our defence aid. He said, "Yes, it is 1 per cent." I did not think it worth developing the point then, if that was his sense of fairness, but Members of the Government jeered at the time and I thought that at least they ought to have a reply. I am giving them the reply tonight. I want to make it clear that this defence aid is not the only aid which the Government have received. As a result of the stationing of American and Canadian troops in this country, in 1955 we received £75 million worth of dollars. In addition, because it was surplus production in the United States, we were able to buy 19½ million dollars' worth of food for sterling. The help which the Conservative Government receive today is just as considerable, in present circumstances, as any aid received by the Labour Government.
I want to develop the trade aspect of this matter. It is unfortunate that not one trade Minister is now present. It is typical of the behaviour of this Government; they pay less attention to trade than to anything else, in spite of the fact that it is trade which will get us out of our difficulties. The President of the Board of Trade contrasted conditions in 1951 with those in 1955. In 1951—and I am sure that the hon. Member for Louth, who is very reasonable in these matters, would admit this—this country experienced the maximum ill-effects of the Korean War. We had to pay for war materials and food. I know, because I was then in the Government, and was dealing with these matters.
Food alone is £500 million cheaper today than it was in that year, and the 1300 vital steel and engineering industries had to be turned over from the export trade to serve our defence requirements. All those difficulties confronted us in 1951. Nobody would dispute that the Conservative Party benefited from the easing of those abnormal conditions.
The President of the Board of Trade made a contrast between 1951 and 1955; it would have been much more honest if he had made the contrast between 1945 and 1955. In that respect there is no doubt that the Labour Government did far better than the Conservative Government have been able to do.
I saw a Press report the other day of a statement made by the hon. Member for Aberdeenshire, East (Sir R. Boothby). He was reported to have said that a further bout of inflation was clearly imminent. He was also reported to have said:What did they do? They removed restriction on dollar imports, they lowered the Bank Rate to 3 per cent., they abolished building licences and restrictions on hire purchase … As a result, they gave the green light to inflation.My criticism is that the Government are employing the same measures as have failed in the past; cutting Government expenditure, increasing interest rates, trying to "look the dollar in the face." In introducing the Budget the Chancellor of the Exchequer referred to the fact that the right hon. Member for Woodford had also been Chancellor of the Exchequer. I suggest to the right hon. Gentleman that he ought to read "The Economic Consequences of Mr. Churchill".
Now that the President of the Board of Trade has come in, perhaps I can develop my argument about trade. I was holding a bit of it back in the hope that the right hon. Gentleman would come into the Chamber. One of our main difficulties today and the cause of the present crisis is that imports have exceeded exports, but the President of the Board of Trade yesterday tried, I thought, to give the impression that there was not much wrong. He therefore asked, "Why all this fuss? What are we troubling about?" I do not share his views.
Let us take the first nine months of 1955, when world trade had increased by £1,424 million and our share was only £110 million. There is something to be troubled about. The right hon. Gentleman said that we were not doing enough 1301 in the Western European markets. I agree; nor are we doing enough in the Eastern European markets either. I always suggested trade with the satellite countries, for political reasons as well as for trade reasons. We would encourage them to look to us if we traded with them, and we would not be pushing them into the Soviet economy.
Marshal Bulganin has said:The Soviet Union is ready considerably to extend Anglo-Soviet trade on the basis of equality and mutual benefit, both by means of goods normally exported at the present time and by means of new exports.There was a tame response from the Foreign Office and nothing at all from the Board of Trade. The President of the Board of Trade said that the Soviet economy was becoming self-sufficient. That is true, but are not all economies doing so? Is that not true of the United States? Is the President of the Board of Trade suggesting that we should stop the export drive to dollar markets?
The 1955 Economic Survey of Europe says:The trade of the Soviet Union and Eastern Europe with Western Europe continues to expand in 1955 at about the same rate as in the preceding year Nevertheless, the trade of Eastern Europe with overseas countries is still in its infancy, and judging by the current production plans and recent trade agreements, can he expected to develop considerably.That is an authoritative opinion.
I put it to the President of the Board of Trade that Stalinism is dead and that now incentives are now being given to encourage production in the Soviet Union. There was a statement that the farmers are to get consumer goods in the Soviet Union. The Soviet Union is far from being developed and there appears to be an opportunity of meeting their requirements in the field of capital goods which we could not have provided before because the pressure from the whole world was so great. Now we have facilities to meet their requirements in consumer goods too.
I suggest to the President of the Board of Trade that he should give attention to developing Eastern European trade. I wanted to say something about Chinese trade, but I do not think I need develop it at this stage. It was mentioned by one of my hon. Friends. Perhaps the President of the Board of Trade will do me the honour of reading the speech I delivered in the debate on employment. 1302 when I talked at greater length about the possibilities of trade with China. My own view is that if we are to have the maximum and the most successful form of trading with those countries it is to be done by State trading and not by private trading.
The Government give the impression that the men who do the buying for the nation are incompetent bureaucrats. That is not true and does less than justice to the public-spirited businessmen who helped the war-time and the Labour Governments to buy essential materials. Firms like Unilevers, Weddels, and J. Rank helped us to get feeding stuffs, oils and fats, sugar and bacon and eggs and other things vital to our people. They were joined by civil servants, and I was glad to hear the Financial Secretary today pay his worthy tribute to the great band of men and women who work unceasingly in the interests of the country.
Lord Chandos, whom we respect, on one occasion said about these civil servants and public-spirited businessmen who do the nation's work, "In many cases they are among the most skilled in the business." Businessmen come to me and complain that they get no lead from the Government. They say, "We do not know what they want us to do. They themselves do not know where they are going."
In the recent debate on employment I made some positive suggestions to the President of the Board of Trade on how I thought we could help industry. I did not have the courtesy of a reply. I am not complaining; Governments can ignore what the Opposition say, because some day they assume that the Opposition will be the Government and can put these things into operation themselves.
The hon. Member for Lanark (Mr. Patrick Maitland) raised the question of developing Commonwealth trade. We all strongly support that, and I am sorry that the President did not hear his comments. This is the best field of development. But what about the Government's own proposals in this respect? As a result of the Commonwealth Economic Conference of 1952, the country was told with great enthusiasm that there would be a company of financial, industrial and commercial concerns which would help to develop the Commonwealth. We have not heard a word about it since. The Committee and the country are entitled 1303 to know what the Government have done about it. Did they make a serious proposition or was it a lot of "hooey," as has appeared to be the case with many other things which the Government have said?
The President of the Board of Trade, who has a very heavy burden, is supported by two admirable assistants—the Minister of State and the Parliamentary Secretary. When the Minister of State was first appointed he was to be given a special duty; he was to conduct a drive among the small and medium-sized manufacturers to persuade them to undertake or increase exports. Aprat from a circular letter which was sent out, business men tell me they have heard no more about it, and certainly I have never heard either Minister at the Board of Trade comment from that Box on what success there has been in this matter or what further activity has been undertaken.
The Government refuse to consider the use of controls. We think that physical controls are the best way of tackling the problem, but I want to make a serious suggestion to the Chancellor. I suggest that the credit squeeze in which he places so much faith should be more selective. I think there should be a ban on credit for unwanted purposes. This would leave credit for those things which are badly needed. The Chancellor warned the bankers that the Treasury still had power of direction. He ought to specify in greater detail the credit policy which the banks should follow if they wish to avoid the use of compulsion. I make this suggestion to the Government because it is well worth following up.
The Chancellor of the Exchequer is the real villain of the piece. In introducing the Budget, he talked with pride of housing and the reduction of the Stamp Duty as though this would help the house owner. I remember that in 1953 he addressed the National Federation of Registered Housebuilders, to whom he said:The costs of houses must be brought down if we are to get house owning back on a wide basis, for we have to bring it within the means of the man who earns between £8 and £10 a week.To borrow £2,000 from a local authority nowadays is just about as much as that kind of person can afford. The rate of 1304 repayment of principal and interest, spread over 20 years, is about £166 a year. In other words, since 1951 interest charges have risen by £30. That does not make it easier for that type of person to buy a house. In addition, of course, there is the higher Bank Rate and hire-purchase costs, Purchase Tax on kitchen utensils, and other items of that nature. Any concern for the £8 to £10 class of wage earner can be ruled out by Government action.
This is the gem. On 21st January, 1953, in talking of bricks and cement to the London Master Builders' Association, the Chancellor of the Exchequer said:But I am asking you not to hoard but spend. I am asking you to use more of them to increase total productivity, not to sit upon them and gloat like misers over unused reserves, but to rejoice as patriots over ever-increasing productivity and expansion in a new and glorious era in our history.That was by the man who started inflation, at the same time as the former Chancellor was warned by responsible people.
Let me quote from the Economist, which, hon. Members will accept, is a responsible journal for quotations in these matters. This is what the Economist said after the Conservative Party Conference in 1950:On a cool calculation it is difficult to see how it is possible to build an extra 100,000 houses a year and still retain the rest of the investment programme without seriously adding fuel to the flames of inflation.That was the warning note. It is from the Chancellor's own policy as Minister of Housing and Local Government that inflation has developed as the years have passed, and that is one of the reasons why today we face further economic troubles.
§ Mr. Bottomley
Of course they should be built, and so should factories and other buildings, to get the production we need.
We were told before the Budget that the right hon. Gentleman was an "iron Chancellor". The nation was braced for a bold and tough Budget, but we did not get it. A colleague outside, to whom I was talking, said, "I see that the Press has called this the 'penny points' Budget, I shall keep to the penny points, 1305 because there is more chance of winning something there. I have told my boss that. It is the only way I can tell him where to go." In no way does the Budget measure up to what an "iron Chancellor" should do.
We cannot consider the Budget in isolation, but must examine the whole of Government policy. I do not say they want unemployment, but the policy they are following will lead to it. To ensure full employment, it is not sufficient to rely upon budgetary and financial measures. The Government must also maintain a framework of direct control and create conditions in which prices and costs can be expected to remain stable and industrial investment can expand. Over-riding objectives of Government policy must be to expand exports, increase production and investment, and stabilise costs and prices. In this the Government have failed miserably. I am reminded of Burke's dictum:A great Empire and little minds go ill together.
§ 9.59 p.m.
§ Mr. Ellis Smith (Stoke-on-Trent, South)
I have sat during most of this debate and have been very disappointed at the nature of the suggestions that have been made in the present serious situation. It seems that in the realms of political controversy we have again entered the sphere of denunciation as the basis of most of the speeches that are made. I hope on Monday, when I may have the opportunity of resuming my speech, to put forward constructive proposals of the type that should be made.
Some of us had to deal with certain political circles almost 30 years ago. Hon. Members to whom I have listened tonight have rightly stressed—
§ It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.
§ Committee report Progress; to sit again upon Monday next.