BUDGET PROPOSALS AND ECONOMIC SITUATION

HC Deb 11 April 1957 vol 568 cc1302-426

3.35 p.m.

The Financial Secretary to the Treasury (Mr. J. Enoch Powell)

Before I come to deal with my right hon Friend the Chancellor of the Exchequer's individual Budget proposals, and the comments which have been made upon them so far in the course of this debate, I would "Ace to say something about the Budget prospects for the financial year now begun, upon which those proposals were founded, and upon the nature of which the soundness, or otherwise, of those proposals must necessarily be judged.

The prospect which confronted my right hon. Friend before deciding upon his tax changes was that of a virtual overall balance. He could look forward to the entire Government expenditure on capital as well as on revenue account being met without any increase in indebtedness. I would remind the Committee that the capital account—the payments below the line—provides for a very high level of expenditure by way of investment in the nationalised industries; indeed, an even higher level than was achieved in the year just completed.

Nevertheless, in spite of that high level of investment expenditure, we could anticipate that the whole of the Government's commitments would be met with virtually no increase in Government indebtedness. This means that, as compared with the year just passed, the Government would now be making a greatly reduced call upon savings. During the last year,£331 million in all fell to be met by borrowing and out of savings. The comparable prospective figure for the coming year is less than one-third of that.£101 million. I would emphasise to the Committee that this magnitude takes full account of the bookkeeping transaction of the£37 million waived interest on the American and Canadian loans in accordance with my right hon. Friend's specific undertaking that he is taking no credit for that transaction in any way in his Budget.

So the prospect was that the Government's call in the coming year upon savings would be sharply reduced, by over one-third, and it is upon the basis of that general prospect—that virtual elimination of an overall deficit and the prospect of reduced call upon savings—that my right hon. Friend decided to make tax reliefs of a magnitude of approximately£100 million.

These will mean that new borrowing, new debt, of about£127 million will have to be incurred in the current year. In judging the soundness of a decision which has had that consequence, I would particularly draw the attention of the Committee to the successful year which the National Savings Movement had in 1956–57. For in that year was achieved a net increase in national savings alone of£116 million, almost equivalent, it will be noticed, to the whole sum by which the Government will require to increase indebtedness on the basis of my right hon. Friend's Budget proposals.

The achievement of the National Savings Movement is, in fact, rather better than even those figures suggest, because it is really the achievement of not a twelve-month period but an eight-month period, for it was only in August of last year that the new securities introduced by the present Prime Minister were marketed and it was only in November that the sales of Premium Savings Bonds began.

Perhaps I might here refer to the little joke which the right hon. Member for Huyton (Mr. H. Wilson) always likes to have about the Premium Bonds and the Surtax payer. If one looks at the maximum holding of Premium Bonds for any one person, which is£500, and the size of the purchases made of Premium Bonds —the total purchased in the first month alone was£50 million—it will be obvious that the Surtax payer can have had a very small hand in it indeed. In fact, the pattern of sales, the size of holdings of Premium Bonds purchased, differs in no material respect from the pattern of purchases of any other National Savings Movement securities. We are justified in taking full credit for this net increase in saving in the form of non-marketable securities in the last financial year.

Therefore, I would suggest that on the basis of a Budget prospect of sharply reduced need for Government borrowing, and on the basis of a good prospect of the entire need for borrowing being met by the amount of National Savings alone, my right hon. Friend was fully justified in the magnitude of the tax reliefs which he judged it right to give within the scope of his Budget.

I want now to examine in detail the individual measures which collectively make up the total of£98 million by way of relief, though, of course, for long-term purposes it would be more correct to take the figure of£88 million, thus excluding the virtually token figure of£10 million in respect of the premature removal of the hydro-carbon oils special duty.

To begin with the Entertainments Duty, there has so far in the course of this debate been very little criticism of my right hon. Friend's decisions in respect of reducing and reforming the duty. It has been said, it is true, that the benefit of the reductions in duty will not be passed on to the patron of the cinema, the theatre and the football ground. That remains to be seen. [Laughter.] It remains to be seen, when the duty has been removed, at what level admission prices will settle down over the long term. But in any case the argument that the benefit ought to be passed on in whole or part to the patron is not one which can be advanced by hon. Members opposite who have been calling for this change in the law on the ground that, with the duty as it was, cinemas, theatres and football clubs were closing down all over the country through lack of revenue.

The duty in respect of the cinema will be reduced by a total of£6½ million, though against that amount falls—not immediately in May when the new duty comes into force, but in October—to be offset the increase of£1¼ million in the levy which the exhibitors pay under the Cinematograph Films Bill, now awaiting the Royal Assent. Therefore, the net accrual of revenue to the exhibitors after October next will be at the rate of about£5¼ million in a full year.

My right hon. Friend has taken the opportunity afforded by the reduction in the Entertainments Duty upon the cinema, where alone it now remains, to rationalise and simplify the scales which, hitherto, have been fantastically irregular and complex. The result of the sub-stitution of a flat rate, so that the duty will be equal to half the difference between 11d. and the inclusive price of admission, will be that the greatest reductions will be felt in the most popular ranges. in respect of tickets between about ls. 6d. and 3s. Although there is a reduction over practically the whole range of ticket prices, it will be in the band in which most tickets are sold that the largest reductions will fall.

Mr. Marcus Lipton (Brixton)

In some categories there is an increase.

Mr. Powell

In the case of a very few tickets at very high prices, over about 10s. or 11s., there is a very slight increase.

The right hon. Member for Huyton welcomed the proposal as an adoption of the Opposition's proposal. It would have been much more correct if he had hailed this as an abolition of the Opposition's tax, for in his Budget of 1951 the right hon. Gentleman the present Leader of the Opposition increased the duty upon the cinemas to yield—by an amusing coincidence—exactly£6½ million. So my right hon. Friend is now relieving the cinemas of the additional duty which was placed upon them by the Labour Government.

It would have been wrong—I think that this has been recognised on both sides of the Committee—that Entertainments Duty should continue to be levied upon the cinema while no corresponding burden was placed upon the main form of entertainment which is in competition with the cinema—upon television. The right hon. Gentleman yesterday candidly accepted that point of view and accepted that it was a fair measure to impose a duty upon the television licence.

Mr. Harold Wilson (Huyton)

With qualifications.

Mr. Powell

Yes, with qualifications.

I now come to the Purchase Tax, another aspect of the reduction in indirect taxation. Pots and pans have been mentioned once or twice in our debates. I do not think hon. Members have fully realised that the reductions in Purchase Tax which my right hon. Friend proposes cover three times as much trade as is covered by the articles made subject to Purchase Tax in the autumn Budget of 1955. My right hon. Friend is relieving the purchasers of domestic articles and floor coverings of not only the extra Purchase Tax imposed upon the articles made subject to tax in 1955, but£9 million more. Therefore, we are giving back not only the amount of the additional impost of 1955, but half as much again.

I do not see the hon. Member for Govan (Mr. Rankin) in his place, but two days ago he asked me about steel furniture manufactured in his constituency and I am sure that he will be glad to learn that that is covered by this reduction and will, therefore, be placed in the fairer competitive position for which he asked.

I pass now from the reductions in indirect taxation to the reliefs which my right hon. Friend has given to sources of overseas earnings for this country. The doubling of the investment allowance for shipping, although it will cost nothing in the current financial year, will cost between£11 million and£12 million in a full financial year. Perhaps I may say a word about the relationship in this respect between the shipping and the shipbuilding industries. The investment allowance is applicable to the shipping industry and not to the shipbuilding industry, that is, to the capital of the shipping industry, which consists mainly of ships, and not to the capital of the shipbuilding industry, which consists mainly of slipways, and so forth.

Nevertheless, the doubling of the investment allowances to the shipping industry will, in time, not leave the shipbuilding industry unaffected; for it will help to sustain the demand from British customers for the output of the shipbuilding industry, and the shipbuilding industry should benefit from the improved financial position of its principal customers. Indeed, the only argument which I have heard in the course of the debate is not that these investment allowances should not have been increased as my right hon. Friend proposes, but that the increase should have applied to other industries as well.

More costly is the new taxation position which is to be accorded to United Kingdom companies trading entirely overseas, the overseas trading corporations. This will not only cost a considerable sum in revenue forgone this year and in a full year, but will, of course, in the short run tend to reduce the sums remitted to this country by those companies. Nevertheless, I am sure that the Committee will agree that in the long term this will be a good investment in remittances from overseas. It will be a good investment for overseas balance of payments purposes.

The right hon. Gentleman the Member for Huyton expressed the fear that this new taxation position of the overseas trading corporations would lend itself to manipulations and "fiddles" whereby companies which were not in any genuine sense wholly engaged in trading overseas would gain part of the benefit. I should, therefore, like to repeat the undertaking given in his Budget speech by my right hon. Friend the Chancellor of the Exchequer, who said that the legislation will make it clear that to qualify as overseas trading corporations concerns which deal in United Kingdom goods must buy those goods 'free on board' at the United Kingdom port at a price appropriate to a transaction between independent persons."—[OFFICIAL REPORT, 11th April, 1957; c. 1309; Vol. 568.] The necessary legislative provisions to give effect to this proposal will certainly be complex and my right hon. Friend will welcome the co-operation of the whole Committee, including right hon. and hon. Gentlemen opposite, in the attempt to make it as clear and as watertight as possible so that this concession falls only to the benefit of corporations trading entirely overseas to enable them to plough back from their earnings in the field overseas.

Mr. H. Wilson

As the hon. Member said, my concern is that false prices could be charged. I was well aware of the Chancellor's assurance on that point. Is the hon. Gentleman really sure that in the case of a British firm which has an overseas trading corporation to export its products, the Revenue will be able to check the accuracy and fairness, having regard to wide differentials and the rest of it, of the goods sold by a company with a subsidiary overseas procuring its raw materials, like the United Africa Company for Unilever; that the Revenue will, in every case, be able to check the exact price charged in each shipment and each consignment? If he is proposing that, we fear that it will be an intolerable task for the Inland Revenue.

Mr. Powell

Those are just some of the considerations which must be borne in mind in framing the necessary legislation, but I should like the right hon. Gentleman to see our shot at it and then we will see how watertight we can make this alteration in the tax law.

From that, I come to what accounts for practically half the total tax relief proposed by my right hon. Friend, the alterations in direct taxation. The increase in the child allowance has been warmly welcomed everywhere inside and outside the Committee. It is a commonsense recognition of the heavier burden imposed on a family by children at the age of 11-plus and, still more, at the age of 16-plus. It is fully in accord with the necessity of ensuring that an increasing proportion of children go on to higher education and to advanced training. It is only an extension of that principle to accept that the starting point for Surtax ought to be higher for a family man and a man with the responsibility of dependent children than for a bachelor. My right hon. Friend has accordingly proposed that all but the single personal allowance should be taken into account against Surtax.

This proposal, too, has received, at any rate, qualified approval from the Opposition and I believe that it hangs together with the general approach in this Budget of recognising and assisting with the burdens which are undertaken by a family with dependent children. Then there is the extension of the earned income relief above the income of£2,000. The extension is by way of earned income relief, not strictly for Surtax, but for Income Tax, for, of course, it is against Income Tax that the earned income relief is offset.

If it is right—this is a matter which could be debated at great length—that the taxation treatment of income which is held to be earned should be more favourable than the taxation treatment of income held to be unearned, then there can be no possible justification for ending that more favourable treatment when the taxpayer begins to earn more than£2,000. If it is virtuous to receive an earned income, if it is virtuous by one's efforts to increase that income from£1,000 to£1,500. from£1,500 to£1,950, why does it cease to be virtuous and become vicious when the total exceeds£2,000?

Mr. Douglas Houghton (Sowerby)

Why stop at£10,000?

Mr. Powell

I was just coming to that.

If there is justification for a preferential treatment of income which is earned as against income which is not earned, then that preferential treatment ought not sharply to be terminated at an income of£2,000. It is, however, the case that as the total income rises, and one gets into the higher and higher income bands, a higher proportion of more incomes comes to take on the nature of unearned rather than earned income. There comes to be an increasing element of return to investment of some kind or another. the higher the income which is in question.

That is the reason why my right hon. Friend reduced the level of the rate of earned income relief at£4,000 and terminated it at£10,000. Indeed, the general notion that there is a justification for a differentiation around£4,000 or£5,000 was accepted by the hon. Member for Stechford (Mr. Roy Jenkins) last night, when he gave qualified approval—I admit, under certain conditions, but, still, qualified approval—to earned income relief for income of—he raised his figure as he went on; he started at£3,000, went up to£4,000 and finished at about£5,000.

It is a misconception to suppose, as the hon. Member did, that the bulk of this relief will go to the higher incomes in the Surtax range between£2,000 and£10,000. In fact, if the entire relief were stopped at£4,000, the cost would still be 80 per cent. of the cost of my right hon. Friend's proposals. Approximately 80 per cent. of the persons now affected by the full proposals are in the£2,000–£4,000 income band. This relief will go, to an overwhelming extent, to those earning incomes between those two amounts. [Interruption.] I take£4,000 as a statistical figure to illustrate the extent to which incomes are crowded together at the lower end of the scale.

Mr. J. Grimond (Orkney and Shetland)

Why does the hon. Gentleman say that if a man is paid over£10,000 a year there is an unearned increment in that salary? Does he mean that there is an investment increment, or that the man is being overpaid?

Mr. Powell

It will by no means apply in every case, but I am saying that to an increasing extent in the higher income scales there is an element of return on investment—for example, from partnerships—and that in an increasing number of cases as one goes up the salary scale the income tends to be less of an earned income in the full sense.

Mr. Douglas Jay (Battersea, North)

if that is true, why is it a good argument for not extending the relief beyond£10,000 in the case of income which is wholly earned?

Mr. Powell

Because if one has to have a scale which applies to all earned incomes one must strike a balance somewhere. I should have thought that it was quite obvious that if there was this change in the character of incomes as one gradually moved up the scale, there was a clear case for tapering the earned income allowance.

An argument has been advanced throughout the debate that my right hon. Friend's claim that this relief upon earned income over£2,000 a year is an incentive is ill-founded. Yet it is impossible not to accept that what my right hon. Friend is doing here will have a substantial incentive effect. In every walk of life, in every profession and in every employment, from the Army right through to the teaching profession and the nationalised industries—wherever we look—we find that salary scales are designed to assign larger salaries as a reward, encouragement and recognition of greater responsibility, success and effort.

That is common ground among Members on both sides of the Committee. But if the graduated salary scale is an incentive to accept responsibility, to achieve success and to make a greater effort, surely to be able to receive more of a graduated salary scale must also be an incentive. If it is an incentive to receive a higher salary, it must be an incentive to receive a higher proportion of that salary.

The other main criticism made about my right hon. Friend's proposals upon direct taxation is that the band of incomes below£2,000 a year has been overlooked, and that apart from the relief given to the man with children aged over 11 the taxpayer with an income of less than£2,000 has been left out of account. This argument must be seen in the perspective of all the changes in taxation which have been made over the last five years, since the great taxing Budget upon which the right hon. Member the Leader of the Opposition went out of office in 1951.

I will take some typical cases in each income group, in respect of a married man with two children between the ages of 11 and 16—the same specimen as that which the hon. Member for Stechford selected last night. If his income was£600 a year in 1951, such a person was paying£36 in tax. He is now paying nothing. If he was earning£800 a year in 1951 he was then paying£91 in tax and is now paying£24—a reduction of£67: at a salary of f£1,250 he was paying£262 and is now paying£145—a reduction of£117; at a salary of£1,500 he was then paying£357 and is now paying£227—a reduction of£130; and at a salary of£2,000 he was then paying£547 and is now paying£393—a reduction of£154. So far from the taxpayer earning less than£2,000 a year having been overlooked, he has been dealt with first. It is the Surtax payer—the Income Tax payer with an income of more than£2,000 a year—who has been left till last.

Mr. H. Wilson

The hon. Gentleman has missed out one particular. He is comparing someone who was receiving£565 net in 1951—that is,£600 minus£35 in tax—with someone who receives£600 a year today, free of tax. Does he suggest that£600 a year today will buy what£565 would have bought in 1951?

Mr. Powell

I am looking at the question of taxation. We are all talking about the incidence of taxation upon incomes, and I have proved to the Committee that at every level below a salary of£2,000 a year substantial reductions, amounting in millions of cases to a complete relief from taxation, have taken place since 1951, and that now, last and not first, we have done something specially for the man earning over£2,000 a year. The Surtax payer has received no relief since 1920. It is, therefore, impossible to argue that we have taken him first. In fact, we have relieved every other class in the taxpaying community before dealing with those earning incomes of over£2,000.

Mr. Roy Jenkins (Birmingham, Stechford)

Surely the hon. Member does not suggest that those with incomes of over£2,000 a year have not also received substantial reliefs since 1951. For instance, would he care to tell the Committee, for the purpose of comparison with the figures that he has read out, how much less tax, before this Budget, somebody earning£5,000 a year was paying as compared with the 1951 position?

Mr. Powell

The hon. Member will realise that apart from the alterations in the standard rate of Income Tax all the improvements made in allowances and earned income relief have by-passed the recipient of over£2,000 a year. In the last five years the whole weight of taxation reduction has been concentrated upon those earning less than£2,000 a year, and the special position of and discrimination against the taxpayer earning more than that sum has not been altered at all until now.

The last but by no means least important form of relief in direct taxation has been the age relief and, in particular, the removal altogether from taxation of the single aged person receiving up to£250 a year and the married couple receiving up to£400. These maxima are the highest points to which this relief could be pushed without reaching the indefensible position in which more relief was given to an aged couple than to a couple with children. They have been pushed up to the limit at which there is still some differentiation between a couple with a dependent child and a couple without. Up to that limit my right hon. Friend has fully relieved of taxation these who are living upon small incomes in their old age.

This will be a benefit to the person living up a small pension, to the person living upon a small return from investments, and, what is more common than either case, the person living upon a very small pension, eked out by the return from his life's saving. As my hon. Friend the Member for Harrogate (Mr. Ramsden) said in the debate yesterday, and I know that this is within the experience of hon. Members on both sides of the Committee, some of the most heart-rending and tragic cases of hardship in old age occur precisely among these people, who are trying to get along upon the reduced yield of exiguous savings.

Naturally, the point has been made: what about the elderly who are already below the level of taxation? Of course, it is a facet of the old problem of how one relieves of taxation a person who is not paying it. Repeatedly, suggestions have been made from hon. Members opposite that the Budget should have been used as a vehicle for increasing retirement pensions. No doubt there will be many opportunities for debating the proper time for an increase in contributions and in retirement benefits under the National Insurance scheme. But I am surprised that hon. Members opposite should have felt justified in raising this criticism.

I need not deal at very great length with this point, because my hon. Friend the Member for Ormskirk (Mr. Glover) dealt with it effectively in his speech yesterday. He pointed out that today the purchasing power of the retirement pension under the National Insurance scheme is higher than in 1948 when the full scheme came into force; and higher than it was when the party opposite left office in October, 1951.

Year after year, Budget after Budget, from 1948 onwards, hon. Members opposite stood by, whoever was to be relieved of tax, and watched the value of the retirement pension falling sharply in 1948, 1949 and 1950. And then, in 1951, on the eve of the General Election, they relieved not pensioners generally, but only the pensioners who would be able to vote in October, by increasing their retirement pensions. Yet even the purchasing power which they gave to that psephologically selected fraction of the retirement pensioners was much lower than the present day value of the retirement pension which is in payment. That brings us on to the ambiguity of the position of hon. Members opposite in relation to this Budget.

Mr. H. Wilson

This has been an interesting speech to follow. Will the hon. Gentleman tell us a little more about the principle of psephological selection? Secondly, may I ask whether he is really trying to maintain, when the national income has increased by 30 per cent. since 1948, that there is to be no increase at all in the standard of life of the old people?

Mr. Powell

I have already pointed out to the right hon. Gentleman that there has been, and the purchasing power of the retirement pension is higher than at any time when hon. Members opposite were in office.

Mr. William Hamilton (Fife, West)

That is quite wrong.

Mr. Powell

It the right hon. Gentleman the Member for Huyton wishes to go into the sordid details of the deal done in 1951, it consisted in that the then Government increased the retirement pension only for those who had already retired before the October of 1951. Those who were to retire afterwards were to be on the old lower pension rate, but then, of course, they would not have votes at the General Election—

Mr. Gordon Walker (Smethwick)

Could not they vote?

Mr. Powell

—as old-age pensioners.

The Opposition have repeatedly said—and here is the ambiguity of the position of hon. Members opposite—that this is an inflationary Budget—

Mr. Wilson

The hon. Gentleman really cannot get away with this argument. Since he is suggesting that the old-age pension was raised in the 1951 Budget, he must now be suggesting that the Election was planned as early as April, 1951. Has it not been the whole suggestion of hon. Members opposite that we decided to have an Election only when the financial situation deteriorated in September?

Mr. Powell

Hon. Members opposite must have realised that they would have to get out pretty soon.

We have repeatedly heard the charge from hon. Members opposite that this is an inflationary Budget. The hon. Member for Stechford said yesterday that the Budget was … founded upon inflation."—[OFFICIAL REPORT, 10th April. 1957; Vol. 568, c. 1252.] In rather more lively language the right hon. Member for Huyton described it as …an assignment with inflation. The right hon. Gentleman accused my right hon. Friend of taking advantage of the effects of inflationary tax revenue to create the so-called surplus which makes possible his tax concessions. Does this mean—surely it must—that in the view of hon. Members opposite the Chancellor should have given less net relief in taxation, and, indeed, probably no net relief at all? If this be an inflationary Budget and the squandering of an inflationary surplus which does not exist in reality, then the view of the Opposition is that this year there should have been no tax relief at all, no net reduction in the tax burden.

Of course, hon. Members opposite can play about with a pushing in there and a pulling out here, but their view, on that basis, must be that this year there should have been no reduction in the burden of taxation—no net reduction. This is strengthened by another criticism that they have made. The right hon. Member for Huyton argued that what my right hon. Friend ought to be doing is to … hold back personal consumption…" —{OFFICIAL REPORT, 10th April, 1957; Vol. 568. c. 1136–1252.] I do not know how many hon. Members looked in at T.V. last night, but those who did would have seen the right hon. Member for Huyton dodging all round the ring pursued by the interlocutor who wanted to know what he meant by "holding back personal consumption" and how he was going to do it.

It is common ground that personal consumption was stationary in the year which has just concluded. Is it the view of the Opposition that more purchasing power should have been withdrawn from the public; that to hold back personal consumption more purchasing power should be held back from the public, presumably by higher still taxation? If so, I was really understating the case. It is not merely the view of hon. Members opposite that there should have been no relief of taxation, but there should have been an actual withdrawal of purchasing power by further taxation—[HON. MEMBERS: "No."] I am not surprised that hon. Members say, "No". because they have also said exactly the opposite. They have been asking for Purchase Tax to be removed from the articles on which it has been reduced by 15 per cent; another£24 million to be removed from Purchase Tax. Apparently, that is what is called "holding back personal consumption." They have been asking for large additional sums, for personal consumption, presumably, to be made available to the old-age pensioners.

But when the right hon. Gentleman is standing on this foot, when he is talking in this vein, it ceases to be an inflationary revenue. One or two paragraphs after his reference to an inflationary surplus, he proposed that pensioners should be regarded as a first charge on a buoyant revenue. At this stage, would the Opposition reduce taxation or increase it? What would be the steps they would use to hold back consumption? Last night, in his lame attempts to get away from his redoubtable adversary, the right hon. Member for Huyton burbled something about controls and, of course, controls would be the answer that would come up. That is the only answer which the party opposite has. It appeared in the speech of the right hon. Gentleman yesterday when he said that we should, restrain competing demands by anti-inflationary measures—yes, and by controls, too…. "—[OFFICIAL REPORT, 10th April, 1957; Vol. 568. c. 1136–44.] Well, we have had that. We had controls, operated by the party opposite. A whole armoury of controls—thank heaven more controls than exist today—were operated by the party opposite, and they were associated with reserves slumping, first, to a convertability crisis, then to a devaluation crisis and, finally, to a runaway-from-Government crisis. We had a balance of payments which fluctuated wildly year by year under that party of control and planning: and, to make it all the more palatable, we had a roaring inflation accompanied by a soaring cost of living. [Interruption.] And controls are supposed to be the cure for inflation. Yet now the same party blandly reappears with the same recipe.

This is not an inflationary Budget. It is a balanced and a prudent Budget which continues the work of the last five years in lightening the real burden of taxation upon this country. Every year, from 1951 onwards, from the great taxation year of 1951, the Government have taken a progressively smaller proportion of the national income by way of taxation. The proportion of the gross national product taken in taxation was 31.3 in 1951. By last year it had fallen to 26.5 per cent. This year it will fall to at least 25 per cent. and possibly lower still. That is a reduction of at least one-fifth, or of 20 per cent., in the real burden of taxation in this country over the last five years. That is the work which the Budget worthily carries on.

4.22 p.m.

Mr. Gordon Walker (Smethwick)

The Financial Secretary to the Treasury began his speech by repeating with some pride that the Chancellor of the Exchequer was not going to take any credit for the£37 million of waived interest. He spoke almost as if no benefit was coming from this waiver at all. This really is a case of taking the cash and letting the credit go.

I was intrigued by the rather extraordinary doctrine, as I understood it, of the Financial Secretary that virtue ends at£10,000 a year. That was in spite of his very heated defence of the interests of the downtrodden Surtax payer. This idea that the Surtax payer has not benefited at all from tax reductions cannot be sustained. Of course, the Surtax payer has benefited from the two reductions of 6d. in the standard rate of Income Tax. from the tax exemptions of Top Hat schemes and in all sorts of ways. This picture of the poor downtrodden Surtax payer to whom no benefits have come at all is entirely fanciful.

The Financial Secretary argued that we could not claim any credit as an Opposition for the abolition of the Entertainments Duty, because it was imposed by the Opposition. He cannot have it both ways; he cannot then claim any credit for the reduction of the pots-and-pans tax, which is merely reducing by half the taxation that was put on by his own Government. If he uses that argument, he must stick to it throughout.

We knew from the Budget speech that "Boyle's" law had now been repealed with the departure of the hon. Member for Handsworth (Sir E. Boyle) from the Treasury office; but we now have a new law, "Powell's" law, which is: the bigger the share of income kept by anyone the better for him. [Laughter.] Yes, "the better for him and the better for the country "—that was the point of the Financial Secretary's argument. That is really an argument in favour of regressive direct taxation.

We are very grateful to the Financial Secretary for the careful, thorough, if slightly arid, way in which he dealt with the detailed matters in the Finance Bill. These are, in their nature, matters that we cannot discuss until we have seen the Finance Bill. There will be many points which we shall have to take up then. We shall, of course, give very careful attention to them, and we shall naturally accept the right hon. Gentleman's offer to co-operate to try to improve and make watertight anything in the legislation about oversea trading corporations.

The main purpose of our debate is to consider the Budget as a whole against the background of the national economy. I would make two comments on the past year on matters which were rather glossed over by the Chancellor and were not mentioned at all by the Financial Secretary. The first is the very grave position of our gold and dollar reserves. As a result of one more year of Conservative Government the reserves are perilously low,£789 million. There is a new feature, that more than a quarter,£200 million, of these perilously low reserves are actually borrowed and are costing us interest. This fact about our economic situation is vastly more important than the plight of the Surtax payer.

There is a very interesting article on this matter in today's Daily Express, which the Chancellor may have noticed, by Mr. Frederick Ellis. He says: While the markets were making Budget-merry yesterday I sat sadly thinking of the financial facts of life. Sadly, because there is no cause for joy once you have penetrated the Surtax veneer of Mr. Thorneycroft's Budget. The£is still the barometer of Britain and the£stands or falls not on the odd£100 million Mr. Thorneycroft tosses our way but on the state of the gold and dollar reserves. That is an extremely frank, honest City view that must worry the Chancellor in his own inner heart.

The other feature of the past year is one about which the Chancellor showed himself to be extremely touchy, namely the fact—because it is a fact—that the economy was entirely stagnant in 1956. There is no doubt about the economic stagnation in this country. The facts in the Economic Survey are irrefutable on this point. For two years the level of United Kingdom output has been stationary. The figure for February, 1957, is the same as it was for March, 1955. The Government have indeed been vastly more successful in creating a plateau of production than a plateau of prices. Then there is the mournful, dismal sentence on page 15 of the Survey: Industrial production did not expand at all. That is a black epitaph on the outcome of the year for which the present Prime Minister was responsible as Chancellor. The result of his year of stewardship was total stagnation of industrial production.

This stagnation has not been an accident but the result of deliberate policy. It has been the way the Government chose to get out of the danger of a balance-of-payments crisis, an import crisis. In his Budget statement, the Chancellor had a very revealing passage on this matter. He said: In 1955, production was high and the rate of production was growing. But in the process we were bringing imports into the country faster than we could earn the money to pay for them. There was the beginning of a situation similar to that which got out of control in 1951. It was due to Korea, of course, but I will not pursue that point at the moment. The Chancellor went on to say— We had to apply a check."—[OFFICIAL REPORT, 9th Aprl, 1957; Vol. 568, c. 968.] The extraordinary admission in that passage means that directly production gets high we must, for that reason, and for that reason alone, apply a check. That is what the Chancellor said. He said that production was high and rising, and therefore a check had to be applied.

What hope is there of expansion if we cut back growth directly it shows itself? What chance is there of doubling the standard of living in twenty-five years? Indeed, this doctrinal view of the Chancellor, which he stated very clearly, as he will see if he will look back at what he said in his own Budget speech, is an inevitable consequence of the Conservative determination to leave the economy to the play of economic forces without any steering or control.

The Financial Secretary laughed a great deal at the idea that the economy should be somewhat steered or controlled, but look at what happens if we have no controls and no steering, at all. If we have a full employment economy which is left to a free-for-all, as production rises imports must of course be sucked in, and we must run towards a balance-of-payments crisis. The Government and the Chancellor have a doctrinal attachment to this laissez faire idea, and it leads the Government into an inextricable dilemma. They are always either curing a threatened balance-of-payments crisis by inducing stagnation, or curing stagnation by inducing a threatened balance-of-payments crisis. They have always to rotate, fluctuate and move about between those two positions. One thing which is quite clear from the Chancellor's Budget is that he cannot escape this dilemma; indeed, he has placidly and tamely accepted it.

Mr. Douglas Glover (Ormskirk)

Is the right hon. Gentleman talking about 1947 to 1951, or since then?

Mr. Gordon Walker

I am talking about the present time and the consequences of having no controls at all. Even if the hon. Gentleman can persuade himself that controls may lead to trouble, he cannot persuade himself that the absence of controls does not lead to trouble—he certainly cannot.

The great need of the country is, of course, to increase fixed investment; otherwise we shall continue to fall behind our main competitors, as my right hon. Friend the Member for Huyton (Mr. Wilson) showed we were in all important indices and still are. I think that the grimmest sentence in the Budget was …I foresee … probably a slight increase in fixed investment.…"—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 981] this coming year. It is to be only a "slight increase", and only "probably" at that, and he was completely complacent about it. The Chancellor does nothing whatever about this very slight increase which may only probably appear in the economy this year. The Financial Times has been clear and flat about this. It describes this as "a negative Budget for investment."

The refusal of the Chancellor to do anything about increasing investment, although he knows that it will increase only very slightly, is, of course, a deliberate and calculated decision, and the Chancellor made his reasons for this decision clear in his statement. He said, in effect, that he felt that the economy was somewhat re-inflating itself, left to itself. He said that the indices of mounting consumer expenditure were indications of this. He might also have cited the grounds on which he made his own Estimates, because he assumed in his Estimates an increasing yield from taxation before the Budget changes; that they were going to go up merely because of inflation in the economy. He calculated that the Income Tax yield would go up before any changes in the Budget by£116 million and, as my hon. Friend the Member for Stech-ford (Mr. Roy Jenkins) said last night, this is really the pure fruit of inflation in the economy.

In the light of the Chancellor's own analysis and his own estimates of revenue, the concessions to the Surtax payers are really quite wrong and quite illogical in the terms of his own economic argument. If the spare£100 million is due to inflation, he should not give it away in a manner likely to increase inflation. The Surtax concessions will exacerbate the economic problem as analysed by the Chancellor of the Exchequer himself, because, of course, the Surtax concessions are inflationary in two ways. They are directly inflationary because a large part of them will be spent. That was the real justification for the Chancellor making these concessions. He talked about rewards for the people at the top, but rewards must be rewards, and rewards must be increased expenditure.

Mr. Powell

Why?

Mr. Gordon Walker

What is a reward? The hon. Gentleman says that the purpose of a reward is to have more money, and the purpose of having more money is to spend the money.

Mr. Powell

Is not it a reward to have more money possibly to save for the future?

Mr. Gordon Walker

I do not think the hon. Gentleman meant that when he mentioned rewards. Like the late Lord Birkenhead who talked about "glittering rewards," he knows that you cannot take it with you and that the purpose of money is to spend it.

I formed the conclusion that the Chancellor was giving these concessions as an extra reward largely to be spent. In any case, a good deal of it will be spent —everyone knows that—but, apart from that, these concessions are indirectly inflationary, too, because they are calculated to set off another round of wage demands with the consequent danger, which is a real danger, of a wage-prices spiral. How can the Chancellor appeal to the trade unions for restraint to guard against inflation when he deliberately makes these inflationary concessions to the richest people in the country.

There was one passage in the Budget, the full callousness of which I only understood on re-reading the speech, because then I realised, as one did not when listening to it, that the Chancellor, when using these words, already knew in his mind that he had decided to make these concessions to the Surtax payers. He said: If we are to find a solution to this problem he was talking about inflation— we all have a part to play—and perhaps some sacrifice to make… He was calling on the workers to make a sacrifice on the assurance that everyone was going to share in this sacrifice, and I noticed that at that moment the faces of the back bench Members behind the Chancellor were pretty glum because they took him momentarily at his ward. He called for sacrifice by all, but what sacrifice is he calling on the Surtax payer to make? He is asking for sacrifices by all in order that the workers shall make the sacrifice. What does he mean by sacrifices for all? [HON. MEMBERS: "Answer."]

I will deal with the jokes which the Financial Secretary made about planning. It is very easy to put up Aunt Sallys and knock them down, but there is only one way of escaping from the dilemma which the Chancellor is in. That is by getting the surge forward in investment in production which we must have—without, in consequence of that surge forward, running into an import crisis. We can do that by a deliberate degree of steering and guidance of the economy. We have to do something to discourage the less essential things and to encourage the more essential, like steel, machine tools and other useful investments, if we are to be able to go forward without this sucking in of imports all over the place and the consequent balance-of-payments crisis.

The Financial Secretary sneered at anyone having any idea of attempting to guide the economy. He cannot really say that this is an impracticable, doctrinaire, Socialist idea, because the Chancellor himself went a tiny bit that way in his Budget, and in two directions. He has restored the power of the Capital Investment Committee to control all bank advances, which is a good thing, although it only restores the 1933 position, as he said. This is a slight degree of planning, though not anything like enough for guiding the economy. It is not enough because the great corporations can make their investments from undistributed profits and reserves. I think that the Chancellor's policy will somewhat hit the smaller concern. It is the smaller company that has not the reserves and cannot go easily on the market which has to rely to a great extent on bank advances. I am not sure that this step, which I generally welcome, may not have this effect, and I hope we shall look at it again from that point of view.

Furthermore, the Chancellor has increased the selective investment allowance in favour of shipping, which, of course, is a way of planning, a way of discriminating and selectively guiding the economy. The Chancellor having taken those little steps, the Financial Secretary cannot object in the way he did, because the Chancellor has done that a little himself, although he should have gone much further.

The Financial Secretary asked how we would spend the money. I would say that the concessions made to the richer Surtax payers should have gone in selective investment allowances. That is the real need of the economy. This has also been urged in quarters which even the Chancellor, even maybe the Financial Secretary himself, must respect. The Financal Times, for instance, in its comment on the Budget, picks out this very point for criticism. It says: Selective allowances of this kind.… which it wants— have had a valuable and stimulating influence both in Germany and in the United States, and either general or selective allowances would have helped to maintain the high level of investment in Britain in 1958 and 1959. That is not loose Socialist talk, that is a serious criticism from a quarter to which the Financial Secretary must pay some attention. It is saying that there should be a degree of guidance and a degree of planning in the economy. I say that the encouragement of investment, either by general investment allowances or, as I would prefer, by some selective allowances, would have been the proper, logical economic conclusion from the Chancellor's own economic analysis.

There was no economic logic which I could detect on the Chancellor's own premise in the concessions he decided to make to the larger Surtax payers. Of course, the Budget was not really framed in terms of economic logic but of party political logic. We all know the pressure there has been on the Chancellor from his own back benchers and the alarms of the Chief Whip—[An HON. MEMBER: "And Lord Woolton."]—maybe from Lord Woolton too—which have been brought to bear on the Chancellor.

I do not think it would be really unfair to call this a "Chief Whip's Budget." The purpose was to rally the back benchers and the hard core of the party. The purpose was not to catch votes, but to rally the hard core of the party. The News Chronicle, as I am sure hon. Members opposite will at once recognise, quite accurately described the hard core of the Conservative Party as consisting of business men and retired people paying Income Tax. Those are the two main classes which benefit from the concessions in the Budget. This, indeed, is an extraordinary example of psephological selection.

The more one looks at the Surtax concessions the less defensible they become, even in terms of the Chancellor's own defence of them. They do not really even remedy the main injustices which exist at this high level of income. As my right hon. Friend the Member for Huyton said yesterday, this concession does not help the young scientist, or the young technician, or frustrated people who are earning up to£2,000. Very few are earning more. I listened very carefully to the Financial Secretary this afternoon. He seemed to build up an unanswerable case for stopping the concession at£4,000. That would bring benefit to 80 per cent. of Surtax payers. The vast majority of scientists and professional people and so forth would come under that category. The Chancellor would then be able to save quite a bit of money.

This afternoon the Financial Secretary was very apt to argue all cases both ways, but I do not think he could now argue against stopping this concession at£4,000 instead of£10,000. If we are to deal with this sort of matter, the major inequity on high levels of income is the distinction between those who earn these large incomes and have to pay tax on them and those who have tax-free capital gains. There is a real source of inequity between people receiving nominally the same sort of spending money. One has to pay tax and the other does not pay because the latter gets the money in the form of tax-free capital gains. A capital gains tax would have been a reasonable conclusion after all we have heard about inequity and unfairness at this high level. That would have removed inequity and provided money which could legitimately have been used for making other adjustments, if necessary, at Surtax levels.

All this talk about injustice at the level of£4,000 to£10.000 a year pales into insignificance in comparison with the gross injustice which lies at the very heart of this Budget. All this talk about "room at the top" cannot conceal the very simple fact that£34 million is being given by the Chancellor to 335,000 people who are Surtax payers and not a penny to old-age pensioners and people on small fixed incomes—many of whom used to be among the supporters of the party opposite—who are below the Income Tax level. However much people may laugh at that or grumble when it is stated, the fact is that£34 million is going to 335,000 people.

Mr. Powell

Is not the right hon. Member ignoring the increase in the child allowance?

Mr. Gordon Walker

Do old-age pensioners and people on small fixed incomes who are not paying Income Tax gain from child allowance? I am talking about the£34 million which goes to Surtax payers as such—qua Surtax payers. There are two sets of concessions in the Budget to Surtax payers, and they add up to£34 million. I could have made the sum e yen bigger had I taken in other benefits. They get£34 million as Surtax payers, but nothing goes to the old-age pensioners and other people on small fixed incomes.

In a highly developed society like ours, there are certain prior social duties which we must fulfil on the grounds of conscience and on the grounds of humanity. Chief amongst those at the moment is giving a reasonable standard of living to old-age pensioners. That is one of the things we must do and must somehow or other find the money for even if it is difficult to find. This year there was money, but the Chancellor hardened his heart. I tell him that that is a thing for which we cannot forgive him.

This monstrous injustice becomes more monstrous still when we set it against the background of the whole range of changes which have been made in the burden of charges on the people in this financial year. The Financial Secretary explained about the surplus and why the Chancellor felt he could give something away. Of course, if it had not been for the effect of the changes on the burdens the people have to bear, there would not have been nearly so much surplus.

There have been great savings in the financial year we are now in due to charges and other changes in the social services. There have been great savings to the Revenue in this financial year. The cancellation of the bread subsidy, for instance, saves the Exchequer£45 million in this coming financial year. The cutting of the milk subsidy saves the Revenue this year£26 million, the prescription charges of Is. save the Revenue£5 million, the increase in health contributions saves the Revenue this financial year£40 million, and the increase in welfare foods payments save the Revenue£14 million. That all adds up to£130 million, which is just about equal to—in fact more than—the whole cost of all the concessions. Without those changes, for which, of course, the Government are responsible, there would not have been money to give away to the Surtax payer.

On the Financial Secretary's own defence of why the Chancellor felt it right to give away£100 million a year, it is shown that he could not have given it away if the surplus had been£130 million less and, but for these changes, it would have been£130 million less. That means that as a result of the whole of the financial operations of the Government this is a transfer from the poorest in the country to the richest in the country. The Chancellor who is responsible for that must stand condemned as the most brazen, the most hard-hearted, the most reactionary Chancellor in this generation.

4.50 p.m.

Mr. Douglas Marshall (Bodmin)

I think that both the right hon. Member for Smethwick (Mr. Gordon Walker) and myself had the honour of first coming into the House at the same time in 1945. At the beginning of his speech today he said that he would treat the Budget as a whole, but I am sure he will agree wholeheartedly with me when I say that the one thing which hon. Members do not want is that every back bencher who rises to speak should seek to deal with the Budget as a whole. As a great number of hon. Members wish to speak, I will confine myself to three particular subjects.

Before parting from the right hon. Gentleman's speech, however, I should like to make one or two comments on it. I agreed with him wholeheartedly when he said that although it may not be advisable at present, because of our overstretched economy, to enlarge the investment allowances, the ultimate future of this country must lie in the expansion of our industries.

On the other hand, when the right hon. Gentleman was criticising my right hon. Friend the Chancellor and my hon. Friend the Financial Secretary about the continuing inflation and recurring crises, I could not help but reflect that, again, we were both in the House at the same time when we heard such phrases as "round recovery corner," which meant flat out to the next crisis." We heard these such sayings from 1945 to 1950. The truth is that during the Budget debates—perhaps it is, unfortunately, the duty of Her Majesty's Opposition to make these points—this type of remark is generally made from the Opposition.

It will never be easy for us in our island home to maintain 50 million people in the standard of life which every hon. Member wants to see. Moreover, we must not only maintain it and sustain it, but must provide opportunities so that the standard of life does not remain static but grows. It would be utterly, impossible to achieve that objective if we did not have complete and absolute belief in our own ability in this country, in our own industrial capacity, and in the fact that we have a genius within our race of which we have every reason to be proud.

To release that part of our ability, it is also necessary to ensure that at every turn opportunity for expansion is offered within our country and that achievement will at all times receive a reward. The right hon. Member disclosed his innermost thoughts when he suggested that whenever a man receives a reward in monetary terms for an achievement his only ambition is that it should be spent. I must say that I am horrified that he should have made such a suggestion. This country has been built up through generations of men and women who have set aside small sums, which have grown larger, and have taken risks in development abroad and at home until such time that we can maintain a country of which the whole world has a right to be proud.

Mr. Gordon Walker

Would the hon. Member hazard a guess what proportion of the£38 million which is to go to Surtax payers will be saved by them?

Mr. Marshall

The right hon. Gentleman asks me to hazard a guess what proportion will be saved. He knows very well that a guess of that sort would be very difficult. If he asks me whether I shall be able to prove myself right by the end of the year through the fact that savings will have risen, I think I shall; I think that savings will rise, and I think that the Chancellor has introduced his Budget upon that assumption. The right hon. Member knows perfectly well that unless one has recourse to the Inland Revenue in respect of each case, the question he asks is unanswerable. He knew that when he asked it.

It is my belief that it is absolutely necessary to provide these opportunities, and I believe that the Chancellor has based his Budget upon that belief. Equally, I believe that if he had based it on a shrewd, prudent and very cautious assumption he might have been tempted to give back only£85 million, and I think that in going to£100 million he took a certain degree of risk. In that, I believe, he was right, because he believed that by giving the opportunities which he wants to give, at the same time recognising the ability of this country and recognising that savings have increased by£116 million over the previous year, he could provide the incentives which are necessary if we are to attract our best brains into industry and science and to give them the opportunity to expand the cake from which we all share. All hon. Members and right hon. Members will agree that the only way we can achieve any of our objectives is by expanding this cake.

I am delighted to see that my right hon. Friend has recognised the peculiar and special position of our shipping industry, and that this industry has been made a special case for investment allowances. This was necessary not only for the present, but to ensure that the percentage increase in the merchant fleets of the other maritime Powers did not continue to rise higher than the percentage increase in our own merchant marine. This concession will help the industry and, as the Financial Secretary said, it will also help our shipbuilding industry.

All the same, I think that the Financial Secretary will fully recognise that one point which must also flow from this is an expansion in the production of steel, for the shipbuilding industry cannot expand to the extent which all hon. Members want to see without an expansion in the production of steel. Apart from the steel needed for pipelines, the demands on steel at present are considerable. The whole world is in need of capital equipment.

We need tankers; and what is a tanker? It is nothing but a floating steel box, and it takes a lot of steel to build a tanker. It is, therefore, necessary to ensure that the production of steel is increased and that we are not always at the mercy of imported steel—steel which we have to import at a price higher than that at which our own people, through their efficiency, industry and drive, can produce steel in this country.

I must, however, confess that one point has surprised me. If, as I believe, the Chancellor has promoted a Budget with the principal reason not only of maintaining old wealth, but of creating new wealth, why did he not take one other step about which I have spoken in the House previously? I trust that I shall not weary hon. Members if I speak about it again. It would have cost the Chancellor nothing whatever, would have caused no risk of inflation and might, if I and others who think like me are right, ultimately give greater wealth to the country.

In this country we have metalliferous mines. Hidden in our hills lie metals of value. We are stopped from exploring and exploiting the possibility of their development by the present taxation system. South Africa, Australia, Canada and, recently, Eire have all passed legislation to deal with the point. I had hoped that the Chancellor would have looked at this and passed similar legislation, so that the producers who have the incentive and drive to try to find what lays hidden in the hills might know—as they would, indeed, take great risks—that for the first three years of production their rewards would be free of tax. After that, the full imposition of taxation would fall upon them. Such a form of legislation would have cost the Chancellor nothing.

There is one reason, it seems to me, that he might have withheld back this year. I hope that this may be the reason and that when my right hon. Friend speaks later he will refer to it. It is true that, in his judgment, it would be unwise at present to extend investment allowances to too many industries. The reason he has given, which is understandable and reasonable, is that because of the stretched-out economy it is no good, to put it in an easy phrase, building a whole lot of things when we cannot put the tops on them owing to shortages of the necessary materials. If that is so —and I believe it is—he might say that it would be unwise to promote a similar impact in a venture which I am willing to admit might or might not turn out to be good.

If that is the reason, and if, at a future date, when he feels that investment allowances can come back generally, he might again apply his mind to the point which I am making, then I shall be fully and completely satisfied. But if his answer to me were purely on the question that time after time Chancellors of the Exchequer, before they become Chancellor, have seen reason in the case but that on entry to the Treasury they hear the lovely words, "If you do it for this industry you must do it for another and, therefore, the thing cannot be done", then I must say that I do not share that view and I believe that it would be wrong to accept it in principle.

I believe that ultimately our health, wealth and the maintenance of our livelihood depends on the development of new wealth. Through the ages we have developed novel ideas, somehow just keeping in advance of the other fellow. By doing that, we have maintained our standard of life and gone forward to an even better one.

My concluding words are that there is a certain amount of risk in this Budget. I think that it is a right risk. The risk which my right hon. Friend has taken is one which I should expect him to take. It shows a belief in the people of Britain.

5.3 p.m.

Mr. Douglas Houghton (Sowerby)

I am sure that the whole Committee will agree with a great deal of what the hon. Member for Bodmin (Mr. D. Marshall) has said. There is no doubt that our whole future depends on being able to increase our national wealth in order to maintain, and, still more, to increase the standard of life which a growing and more enlightened population now demands.

Our claims upon resources are great. Our outlook upon the amenities of life is broadening. We want more and more out of life. To achieve that we need more and more resources and material things, though for myself, and I am sure for many hon. Members of the Committee, I would say that the expanse of life and its enjoyment cannot be judged wholly by material resources. However, the general proposition is undeniable. We must increase our national wealth and also ensure equitable distribution of that increased wealth if we are to have social contentment and industrial peace.

There are several conditions for increasing national wealth. Some of them are economic, some financial, some rest upon international confidence as a trading nation, and some rest upon industrial efficiency and the enthusiasm of the general mass of the population for the social and economic purposes they desire.

We should look at the Budget in that context. I wonder whether the Chancellor of the Exchequer would have introduced this Budget on Tuesday of this week had the strikes gone on. As Budget day approached I said to many people, "I think that the Chancellor must he going through a most anxious and uncertain time". Budget making was perhaps more difficult in the few weeks before Budget day this year than on many previous occasions. How would things turn out? Was the nation to become locked in serious industrial strife, or would some means be found of overcoming what appeared to be very serious difficulties, with exceedingly gloomy portents? The whole Committee will agree that the contents of Budgets must have regard to the social and industrial climate as well as to pure theory on fiscal justice or even to important but broader aspects of economic policy.

Speaking for myself, I feel that this Budget may give wage and salary earners below the Surtax level a feeling that the higher-ups have been given a tax-free pay increase by the Chancellor and that those below the Surtax limit must still fight for their slice of the cake. I do not object to the reliefs which the Chancellor has given, on their merits, looked at in isolation as studies in fiscal equity or in the suitable incidence of taxation; but where Budgets can go wrong is in not keeping the balance at the right time, or in mistaken priorities. I think that there is a danger in this Budget from that point of view.

The workers are restless. There is no doubt about that. It is not easy to diagnose the real cause of the trouble. We may ask ourselves, why do workers getting£10,£12,£15 or even£20 a week feel so strongly about being denied a pay increase? No longer is the industrial battle for the basic requirements of life. Industrial disputes are no longer fought for the difference between poverty and bare subsistence. Trade unions have won great battles for the workers, and enormous concessions have been made by capitalism and by Governments over the years which have given them a much more favourable place in the community than they ever had before.

Yet, as the workers see it, there is something wrong with our industrial relations and with the social purpose of the Government. The crucial problem is how the workers under our present mixed economy, and even with nationalised industries, are to get their share of a rising national income without bickering, without disputes and without strikes. Does anyone know how they are to do it? They do not, and no one has yet told me how it is to be done.

This is becoming of greater and more urgent importance because of recent events. If strikes or the threat of strikes yield concessions which are refused in negotiation or arbitration, then strikes there will continue to be. No employer is likely to be better off at the end of a strike than he was before it. He will be in no better position to pay higher wages after a long period of a stoppage than he was before. Yet if employers continue to be more convinced by strikes than by arguments, what hope is there for peaceful industrial relations?

On the trade union side, it is essential to realise that, with the intricate pattern of industrial activity in the modern State, few strikes can avoid hurting many workers who are not directly involved in the dispute and may have nothing visible to gain from its result. I think that workers must face the fact that, under present conditions, a stoppage will speedily develop stresses and strains within the trade union movement itself, may endanger traditional trade union loyalties and create confusion and bitterness within the ranks of the workers themselves. There have been some signs of that recently and, had the strike continued, there would have been more.

That is something that the trade unions have to consider when using the strike weapon under present conditions. And that is not to mention the damage which may be done to the national economy—that is, to the interests of the workers as a whole—by a stoppage which may inflict serious if not irreparable harm upon the country's ability to pay its way and continue its pre-eminent position amongst the trading countries of the world. So I say that something different and something better has to be found if the trade unions and employers are to come to terms when dealing with pay and conditions.

I know the traditional objection of trade unions to anything in the nature of a wages policy, but none can say that collective bargaining is tremendously successful at present. Far too much is having to be referred to arbitration, or to special courts of inquiry or other special machinery set up to settle disagreements, and far too little is being settled amicably through the traditional machinery of collective bargaining.

Another thing is this. Negotiations now cover millions of workers at a time, and what may be given to one large section of workers may spread to millions more, From the evidence given to the court of inquiry on the engineering dispute, we have seen that there are already a considerable number of unions, representing large bodies of workers, who are knocking at the door, ready to receive whatever may be given to the engineering industry itself. I think that this means that, in many cases, what are called wage negotiations are really economic debates and economic transactions on a vast scale which may, indeed, affect the whole economy of the nation.

I believe that it was suggested in one newspaper that if there was a prospect of an industrial dispute over wages which, when settled, would spread increases throughout industry, it might be far better and save a lot of trouble merely for Her Majesty's Government to declare a 5 per cent. inflation. That is what it almost comes to, or may come to in certain conditions. Yet, Sir Gordon, everybody is supposed to keep out of the ring while negotiations are going on and disputes are mounting.

Even though disaster threatens, nobody must say a word that will hinder or upset anybody involved in the disputes. My right hon. Friend the Member for Ebbw Vale (Mr. Bevan), when he was assigned the responsibility on the Opposition benches for looking after Ministry of Labour matters, said that it was the easiest job on the Front Bench; because when industrial trouble was brewing one had not to say anything in case one made it worse, when industrial trouble was upon us one had not to say anything in case one exacerbated the feelings of one side or the other, and when the industrial dispute was over there was nothing to be said anyway. That, it seems to me, is how we are all behaving—

Mr. Jack Jones (Rotherham)

Some.

Mr. Houghton

Most people. At least, if one does not behave that way one is condemned as irresponsible.

I want to know whether we are to continue this illusion that wages and conditions affecting millions of workers over a wide and diversified field of industry, with repercussions over fields still wider, are matters for settlement between the two sides of industry without assistance and intervention at any stage, even after it is too late.

Mr. Cyril Osborne (Louth)

In view of the hon. Gentleman's great experience of these matters, does he not think that part of the trouble is that the organisations on both sides of industry have got too big, and that in the smaller trades, such as the boot and shoe industry, where there has not been a strike for over fifty years, and the hosiery trade, where there has not been a strike for many years, the smaller units make for better personal relations on both sides and, therefore, prevent these disputes?

Mr. Houghton

With great respect, I do not think the hon. Member has put his finger on the point, because however we break up the wages' front or the employers' front it will come together again. It seems to me that we cannot make artificial segments of industries which are in such close association and which are guided by common policies or prices; and where the trade unions are guided by common policies on wages. I do not think that is the answer. We have to face the fact that these large accumulations of power on the side of both labour and of management are there, and we have to deal with them as they exist.

The boot and shoe industry is not of the same size as the engineering industry, but if we made as many boots and shoes as we make engineering products we should have an amalgamated union of boot and shoe operatives which would be as big as or bigger than the trade union dealing with engineering. We cannot solve the problem by breaking up alignments or the concentration of power. Power will not voluntarily be broken up, and if it is broken up by force it will find ways and means of re-establishing itself.

No, the whole problem has to be rationalised on lines different from that. I do say that we will have to learn our economics either the sensible way or the hard way. It will certainly be one or the other, and I think that the hard way is too heavy a price to pay for adult education on both sides of industry.

It is in this climate that the Budget is introduced. I agree that Budgets cannot solve all our economic. industrial or social problems, but they do create a climate. The Budget can influence the direction or course of affairs. There is considerable psychology involved. When one asks people what they think of the Budget, their reaction very frequently is based on enlightened self-interest—or just self-interest. Their reaction is not based on the niceties of fiscal or economic policy, still less on whether concessions to Surtax payers—as in this Budget—are counter-balanced by concessions to other taxpayers several years ago. On this important and grave issue, the Chancellor of the Exchequer offers little but well-chosen though pious words of advice to both sides of industry.

The really genuine tax reliefs in this Budget are those given in direct taxation. The Chancellor cannot really claim as a concession taking the 1s. tax off petrol when it was put on so recently. It is not even easy for the Government to claim that the Purchase Tax reductions are really genuine reductions in taxation, because they should never have been imposed in 1955. In my judgment, they were mistaken, if not foolish, in 1955, and the Government got a pretty quick answer to their mistake from the trade union movement. That only illustrates the importance of the point I have made about the reactions of large masses of industrial workers to the impact of the Budget on their minds and their sense of what is fair play.

If we disregard the taxes which have been removed but which should never have been put on in the first place, we come down to the main relief given to the Surtax payers. I am not going to join in the hue-and-cry after Surtax payers. I do not regard Surtax payers as a separate social class. Many of them are merely working men who manage to earn rather more than other working men, and I think it is a mistake to regard a particular category of taxpayers as in a class by themselves merely because they constitute a group upon which the fiscal burden rests more heavily than on others within a graduated scheme of direct taxation.

Of the 285,000 who are to benefit under the Surtax remissions, I think about 120,000 are in business or the professions, and 165,000 are mostly salaried people, such as directors, executives, town clerks, doctors on the salary basis, civil servants and the rest. They are to get tax relief on the average—and I know all the difficulties about averages—amounting to£85 a year. That group covers 285,000, but there are 8,700,000 other taxpayers with incomes between£500 and£2,000 a year who will get nothing at all unless they happen to have children over the age of 12.

I have listened very carefully this afternoon to the Financial Secretary to the Treasury, and what he says is true. The middle range of taxpayers benefited proportionately higher than the Surtax payers from the increase in earned income relief, from the changes in the differential rates of tax and from the increase in the personal allowance. That is true, but that does not destroy my main point that one has to consider whether it is expedient even to do justice at the wrong time, having regard to the state of unrest and confusion in the general body of workers today.

Just to put the position of Surtax payers straight, since I can probably do it with less prejudice than hon. Gentlemen opposite, I am going to say that over 80,000 of the 300,000 Surtax payers are getting less than£2,500 a year, and that over 130,000 are getting less than£3,000 a year. This is important. The earned income of over half of all the Surtax payers is 80 per cent. or more of their total income, and 40 per cent. of all the Surtax payers have nothing else, or practically nothing else, apart from their wages or salaries. It seems to me that that has to be said in fairness to the Surtax payers.

I do not agree, whatever anybody nay say, that all these men are parasites, or that they have no contribution to make to the wealth of the nation. They have, and there are some names that leap to mind of men who at the present time are rendering incalculable services to the country in the development of nuclear power for peaceful means, who are modest Surtax payers and who probably have nothing besides their earnings. Who is going to begrudge them some fiscal acknowledgment in addition to the other rewards for the services which they are giving to the nation?

We must, of course, admit too that to increase the salary of a married man without children by£500 from£2,000 to£2,500 is to give him a net increase in income of only£240. The higher we go up the scale the smaller the proportion of the financial reward accrues to the recipient, and there comes a stage at which it is practically impossible to continue to reward people by increases in salary, and that is why so many are encouraged to get their rewards by alternative means, producing the biggest accumulation of tax avoidance and tax evasion which this country has ever seen.

We have to acknowledge these things, and I say that, analysed on its merits and looked at in relation to the fiscal scheme as a whole, the Chancellor can make out a very good case for the relief he has given. Whether he should go as high as he has done is a matter of argument. It is chicken feed at that level, in any case. It must also be said, and this is something which must be reckoned in the balance-sheet, that these workers have one great boon in life—that they have the most interesting jobs, they get the greatest satisfactions as well as the biggest cares from responsibility and power. Many of them have amenities which can be provided by firms which want to keep them in their service and which are denied to those lower down, while those in business are more favourably placed from the tax point of view than those who pay under P.A.Y.E.

Yet, agreeable and welcome as This concession will be to those concerned, and I declare my personal interest in the matter, will they boost anything? Will any of us work harder, more zealously or more efficiently as a result of this concession than before? I doubt it. The Chancellor has said that it is not only an incentive to those who are already Surtax payers which he is providing, but that he is also wanting to give encouragement to those who hope to become Surtax payers. What we have to weigh in the scales here is whether that incentive which he is giving them on the one hand is worth the risk which he is taking on the other hand, and that, I think is really the major problem of this Budget. It is an important problem of judgment of what the corning year is likely to bring. At the moment, although the Canal is open, we are not using it. A few months ago, it was so vital a lifeline to this country that we were prepared to fight for it. Now we are not prepared to go through it. In fact, our ships are told that they must not go through. What effect will that have on freight charges? How uncertain is our shipping industry going to be for some time to come?

This cannot be described as an incentive Budget. Its incentives, if they are there—which I very much question—are lop-sided. That is my criticism of it. I know that some of my hon. and right hon. Friends have said that the Budget. including even the parts to which we do not object, would have been acceptable had it been accompanied by fresh measures against tax avoidance or a capital gains tax. I ought to give this warning to the Committee, that I do not believe there can be any real solution of the problem of tax avoidance unless the House of Commons is prepared to pass an omnibus prohibition against undesirable practices such as we previously had in the case of Excess Profits Levy, leaving a tribunal to decide whether a taxpayer is adopting legitimate or illegitimate means of avoiding tax.

There are some features of tax avoidance, if that be the name to give to this particular racket, which it is extremely difficult to eliminate, however efficient the administration. I refer in particular to the employment of wives. Nowadays, apparently, no man can do his job without employing his wife. Farmers do it; their wives collect the eggs and pluck the chickens. Journalists' wives work for their husbands. Solicitors' wives work for their husbands. Doctors' wives work for their husbands. I do not know how many Members of Parliament employ their wives as secretaries. How can the Inland Revenue tell all these honest taxpayers that they are liars? If evidence of what money has actually passed is asked for, how does the inspector of taxes know whether it was salary or just housekeeping money? It is really impossible to get to the bottom of that kind of thing. What is more, how much bureaucratic inquisition will the public stand? We saw only eighteen months ago how the Government responded to the criticisms made by the Institute of Directors when a closer inspection of expense allowance claims was to be introduced.

We must face quite frankly the very great difficulties in checking avoidance unless the House is prepared to adopt much more drastic measures than long and tortuous Clauses in Finance Bills which open up fresh loopholes almost before they are passed into law.

Although it is not a necessary part of a Budget statement to refer to social service payments, I believe that the whole country, not only the old-age pensioners themselves. was looking to the Chancellor to make some reference to their plight. Action can be taken at any time under a National Insurance Bill, and I know that the last two increases in the standard rate of benefit were not referred to in the Budget statement but were subsequently embodied in proposals under a National Insurance Bill. That gives me hope that later on this year the Government will come to the conclusion that something must be done—sooner rather than later, I hope. I am not in despair because the Chancellor has not referred to this matter in his Budget statement, although I wish he had done so.

Taking all in all, with every desire to be absolutely fair and objective in my analysis of it, I have concluded that this Budget is not the Budget for this hour in our affairs. That is my verdict upon it. Last year, the Government brought us to the brink of disaster. The world looked on amazed, incredulous and disapproving. I wonder how this Budget looks to the world outside. Does it look as if we are a country fighting back for our honour and economic strength? I doubt it. I should have liked to see this country and the House putting a braver face on the situation today. I am perfectly certain. if I may say so, with respect, to the Chancellor, that he has been influenced more by the falling fortunes of Her Majesty's Government than by the threatening dangers of industrial unrest and difficulty. If my assessment of that is correct, I regard it as a tragic reflection upon his courage.

5.35 p.m.

Mr. Geoffrey Stevens (Portsmouth, Langstone)

I am very happy to follow the hon. Member for Sowerby (Mr. Houghton). I did not disagree with a single sentence in the whole of his speech, with the exception of the last few sentences about the reasons which induced my right hon. Friend to introduce the Budget he did. Quite obviously, these are questions of timing, and in this respect I back my right hon. Friend's sense of timing against that of the hon. Member for Sowerby.

The most important part of the hon. Gentleman's speech was that which dealt with the psychological aspect of the matter, the reaction of workers in industry at the moment. He had some very important and rather disquieting things to say about that. I entirely agree that in this day and age it is disastrous to think that there is any question, as he said, of the workers fighting against poverty; and it is quite disastrous, in that case, that disputes should have to be settled by strike action which can but damage the workers more than any other section of the community. Quite clearly, there is an urgent need for us to do some fresh thinking on these matters.

I have in mind as a possible way out of these very grave difficulties, the method of arbitration. In Norway, I understand that there is compulsory arbitration, the awards being binding upon all parties to the disputes. We must consider things of that kind. My hon. Friend the Member for Louth (Mr. Osborne) wondered if one of the causes of difficulty was the vast size of the mammoth organisations dealing with these matters today for both employers and trade unions alike. That is not, in my view, a fundamental reason.

In the Netherlands, there is an organisation called the Foundation of Labour, upon which are represented the Government, employers and trade unions. The Foundation of Labour considers and decides upon all matters pertaining to hours and conditions of work, wages and matters of that kind. The strike record in Holland in recent years, since the formation of the Foundation of Labour, has been very good indeed. I wonder whether some such vast organisation, a vehicle for joint consultation at the highest level, might in due course offer a solution to our grave problem. If only we can solve it, then the prophecies of my right hon. Friend the Lord Privy Seal that we should double our standard of living in twenty-five years will be relatively easy of realisation.

The hon. Member for Sowerby spoke of disquiet amongst the workers. I doubt very much whether this Budget or the previous Conservative Budgets since October, 1951, are really a just cause for increasing doubt among the workers. It has already been said that this Budget is one of a series. It is part of a great Tory plan. That plan has been working not unsatisfactorily. It has four main objectives. The first is to restore some measure of sanity to our economy. There can be no real sanity in our economy so long as prices of essential commodities are artificially reduced by subsidies.

The second main objective is to stabilise the purchasing power of the£. It has not so far been wholly successful, but as my right hon. Friend the Chancellor said on Tuesday, if it is not exactly a plateau, none the less it is a very gentle slope, which is in contrast with what happened some years ago.

The plan is designed also to help industry, by which we live. When I say "we live ", we should not forget that the old-age pensioner, who now plays no part in industry and has retired from it, none the less lives by the fruits of industry and the labours of those still at work.

Mr. A. E. Hunter (Feltham)

Surely, the hon. Member would agree that the old-age pensioner has done his work in the past?

Mr. Stevens

I agree entirely, but, unfortunately, perishables do not keep very long and they have still to be produced by those who are currently in industry. Obviously, it is by the current fruits of industry that the old people still live. The final objective, of course, is to improve the living standards of the people as a whole.

In that connection, facts speak louder than words and figures speak even louder. Turning to the useful tables given in the Economic Survey—and this, I should have thought, was no cause for dissatisfaction by the workers—we find that between 1952 and 1956, during five years of wholly Conservative Government and Conservative Budgets, wages and salaries rose by 34 per cent., or by over one-third. It is quite true that part of that has been absorbed by inflation, by the increase in the cost of living, but my hon. Friend the Member for Louth, in his speech to the Committee yesterday, drew attention to another table, Table 6, on page 13 of the Economic Survey, which shows conclusively that the proof of the pudding is literally in the eating. It shows that the amount of food that we eat, in every possible respect, whether fats, sugar, tea or meat, has substantially increased during those same five years. There is no doubt whatever that under the Tories and under a planned series of Budgets, the standard of living has improved very considerably.

That applies to the great mass of the people, but what about the middle classes and particularly the self-employed? From Table 4 in the Economic Survey, we find that incomes from self-employment, so far from increasing by 34 per cent., have increased by only 12½ per cent. There is clearly something wrong there. Hon. Members opposite sometimes ask, "What about rent, dividends and interest? "These are included in the table, but they have gone up less than wages. They have risen by only 31 per cent. compared with 34 per cent. Quite obviously, in the last five or six years the middle classes have not had a fair crack of the whip.

Yesterday, the right hon. Member for Huyton (Mr. H. Wilson) and a number of his hon. Friends asked whether it is a new concept that the middle classes begin above the level of£2,000 a year and they asked why there was nothing in the Budget for those earning£2,000 a year or less. The answer is that those with£2,000 a year and less have in the last ten years—I include also the period of a Labour Chancellorship—had proportionately much more in the way of increased allowances than those with over£2,000 a year, both by way of increased personal allowances, earned income relief and the reduction of Is. in the standard rate of Income Tax.

In considering why the Budget gives such substantial reliefs to those with incomes above£2,000 a year, I wonder how many hon. Members opposite have read an article in the January issue of the Lloyds Bank Review by Professor F. W. Paish, a professor of economics at the London School of Economics and an economist of whose political affiliations I have no knowledge. The article is called, "The real incidence of personal taxation", and traces the effect of the progressive system of taxation which we have in this country, not merely in money incomes, which can be very misleading, but in real incomes—in other words, money incomes adjusted in accordance with the fall in the purchasing power of the£.

The article is fully documented with statistics and in it occurs one of the most remarkable statements—remarkable from a Conservative point of view—I have ever seen. It states: It is also noticeable that today, after five years of Conservative Governments, the proportions paid of real incomes equivalent to£2,000 a year and over in 1947–48 are higher than during the years between 1947 and 1951 when a Labour Government was in office. Even the Socialists themselves were kinder to the£10,000 a year man than the Conservatives have been during the last six years. Quite obviously, the time has come for some further tax relief for the higher incomes.

I have been very surprised to hear the attack which has come from the other side of the Committee, for it seemed to me that some relaxation of taxation on high earned incomes was very much in line with Labour policy. I have not heard a single hon. Member opposite, for example, quote from the Labour Party's own booklet "Towards Equality", published by Transport House, in page 14 of which occurs this sentence: provided there is a decent minimum wage, we see no objection to a system of rewards which is related to the nature and difficulty of the work; the skills required; the responsibility borne and the special abilities possessed. Differences in earned income, based on these tests, make sense. My right hon. Friend the Chancellor must have read that carefully before he introduced his Budget this year.

I want to say a word about the desire of the party opposite to introduce a capital gains tax. That idea, I think, is bred by jealousy out of inferiority complex. It is bred from the mentality which says, "If all cannot have it, none shall have it." The party opposite, however, claims that it is fair-minded and I wonder whether in trying to sell the idea of a capital gains tax to their supporters up and down the country, hon. Members opposite have made it perfectly plain that when a capital gains tax is introduced, the winner of£30,000 in a football pool will find that 18s. 6d. in the£of his£30,000 is to be taken; that if somebody wins a newspaper competition and a lovely little "pub" at the seaside, tax at the appropriate rate will be charged upon the notional value of the "pub," or that if a beautiful girl wins a seaside bathing beauty competition, she will be charged tax on the value of her winnings. I wonder whether the party opposite has made this plain to its followers and, if so, what kind of enthusiastic response there has been. In fairness to the working people, hon. Members opposite should make it perfectly plain that any known form of capital gains tax would have just that result.

I have a few comments to make on other matters: first, the reduction in Purchase Tax. Already a number of my friends have asked me why the Chancellor did not take off the whole 30 per cent. in one action instead of taking off only half. That question illustrates the fearful difficulty in reducing Purchase Tax. To have done this would have gone far to make bankrupt every retailer of the various items, because they would be left with Purchase Tax-paid stocks on their hands and they would be able to get back only the lower price with the Purchase Tax taken off.

My right hon. Friend has been Chancellor only a very short time, and I did not expect him to adopt this suggestion this year, but I add my plea to those of other hon. Members that he should seriously consider a sales tax in substitution for the Purchase Tax, despite the fact that a sales tax would bring considerable administrative difficulties. I hope, too, that next year my right hon. Friend will be able to consider the Royal Commission's recommendations concerning the abolition of the differential rates of Profits Tax. I was delighted to hear him say that legislation was to be introduced in the Finance Bill to make provision for overseas trade corporations. This will stop the drift of United Kingdom registrations overseas and will help further capital investment in the Dominions and Colonies.

This is a good Budget. It is a Conservative Budget. There is much more to be done, but it will encourage British trade overseas and it will retain first-class brains in this country. It is a signpost, clear and distinct, to the opportunity State where all can reach the top and enjoy being there.

5.50 p.m.

Mr. Jack Jones (Rotherham)

I raise my voice in support of the opposition to the Budget. I was speaking last night on the telephone to a Surtax-paying friend of mine. He said, "What are you grumbling about? It is not that the Government are giving me any more, it is that they are taking less away from me." My answer is that what the Government are now not taking away from the Surtax payer could have been better employed in giving the humbler sections of our community a decent way of life. The treatment of old-age pensioners has teen nothing but atrocious. It will go down in history as one of the worst day's work that a Conservative Chancellor ever did.

I have listened with great care to the debate and I was delighted with what my hon. Friend the Member for Sowerby (Mr. Houghton) said. He, like myself, has been giving considerable thought not just to the days immediately ahead, but to the future of this great island. I agree with the Chancellor that when we get down to bedrock, and not to the mathematical computations, it does not matter who did what in the 'eighties and who said or did something and whether he ought to have said or done something else. All that water has gone under the bridge long ago, and will never return. We have to concern ourselves with where we go from here, and how we get there.

I take no credit for it, but I speak as one who went out to fight to preserve our country. Five out of six of my children did the same in the last war, and to me this country is the finest place under God's sun and is worth preserving, it can be preserved only if the best elements get together and decide that preservation it must be. We have great potential enemies. Some of them come out in the full glare of the public gaze and we know what is going on. I have not been round this world for nothing and have not been behind the Iron Curtain four times in the last few years and not seen what is going on there. I have made dozens of trips into Western Germany. What is going on there is nobody's business. Western and Eastern Germany, America and undemocratic Russia, Japan and other countries are laughing at our situation. Moscow, Tokyo, Hamburg and New York are smiling at the position of this country, and I am not surprised.

The Chancellor told us yesterday that our job was to produce more. After all, we can only eat and wear and spend as a result of what we earn. Do not let us make any more mistakes about that. Our standard of living is conditioned by the amount of work that every individual, from the very top to the very bottom, puts in. Many get more than their fair share.

Mr. Arthur Lewis (West Ham, North) indicated assent.

Mr. Jones

My hon. Friend does not get the salary that I should like him to have, but he does not seem to be doing too badly on the money that he is getting. The more interruptions I get the longer I shall speak. I intend to take my time and say all that I want to say.

The situation is parlous. My right hon. Friend the Member for Huyton (Mr. H. Wilson), in a fine speech yesterday, took as his theme more and more production. He said: What we ought to be expanding is the machine-tool industry. There was a very important and significant article in the Manchester Guardian about it last week. It said that this capacity is increasing by only 3½ per cent. per year, yet order books are long and orders have been lost. Similarly, the steel industry should have expanded more rapidly over the past years."—[OFFICIAL REPORT, 10th April. 1957 t Vol. 568, c. 1145.] Nobody has said more in the House of Commons about the defects of the steel industry than I have. Nobody here at the moment has lived in the industry as I have, and as my father did before me.

The industry has great defects and has made mistakes. Industry has made no provision for a period of full employment in a changing world pattern. When we on this side of the Committee were in power we did all we could to alter that. If I may say so humbly, I played no small part in taking the great steel industry into public ownership. Now there is industrial unrest in the country. No one ought to be surprised at that when skilled engineers in many shops in the industry are expected to take home only the basic rate of£8 12s. a week. I personally quarrel with that. If it is any help to members of the A.E.U. who are present, I can provide them with the pay cards from the place with which I am associated, and at which the women cleaners are paid almost as much as that.

I have said for years that the best possible conditions and wages should he provided, but on one condition—that the best possible return shall be given by those who earn the wages. I want to speak about that, and I want to be very forthright. My hon. Friend the Member for Sowerby asked what was the matter with the country. In my opinion, relatively speaking and having regard to what is going on in the places that I have mentioned, everybody knows in his heart, and particularly those who have talked with men on the workshop floor, that this country, to a considerable extent, has gone lazy.

It is a serious thing to say, but hon. Members should go to any factory gate and watch the people going in and coming out. They should note the times when they come out and when they go to the canteens for the tea breaks. I am not blaming the people who do that. I blame the system, which constantly says that the rich shall have more and the poor shall have less. The average working fellow says "Why bother?" He could not care less when he sees what is going on around him. This Budget will accentuate rather than remedy that state of affairs.

I should like to say something about capacity. I came to the House a long time ago from a very fine steel corporation. I make no apology to anybody when I say that the facts prove that over a considerable number of years that corporation has been the best employer in the country. I say that without dubiety and defy contradiction. I happen to be a journalist, though I have never mentioned the fact in this Chamber before. I am the editor of what I think is a very decent works magazine. In an editorial which I wrote a few weeks ago, I said: As a nation we saw serious troubles in the East, which could affect us here at Irlam quite seriously if not remedied, and it would be idle to suggest that any one of us has not had to give very serious thought to the future of our great industry because of the problems which have beset us. More and more we see intensive Continental competition, ever-increasing steel production in all parts of the world, all of which makes it necessary to pay serious attention to our own situation within our great steel industry. and our own works in particular. I talked about the debit side, the lack of oil, the troubles in the East. Then I spoke about the credit side, about our new steel plant. I wrote: So much for the debit side of 1956, but we can also pause and reflect on brighter matters. Cur new Steel Plant came into operation, and everyone hopes that it will continue to give us that type and quantity of steel which will strengthen our economic position. The new Blast Furnace came into operation also, and after a rather fractious start in her career should also help to produce that material in quantity and quality upon which we are so dependent. Those were the utterances of an ordinary, humble, steel fellow, trying to paint for good men a picture—and they are good men—of our national situation, to encourage them to do that which is right.

Then we ran into industrial troubles. After a period of nine months stagnation, of to-ing and fro-ing, of statements made by people who, in my opinion, did no service to this country, we found the Shipbuilding and Employers' Confederation saying that if they, the unions in that Confederation, went forward with a pay claim, there would be "nothing doing". The man who made that statement on behalf of the shipbuilding and engineering employers did a great disservice to this country. No employer has a right to say, before a case is presented, that no matter how good, how bad or how indifferent it may be, no notice will be taken, and that there shall be no adjustment of the wage scale. It was a serious, and, in my opinion, deliberate, statement which should never have been made.

I have no quarrel whatever with the claim that was made. Before I came to this House I enjoyed wages of up to£30 a week, paid on production through sweat and toil, of course. I have said before, and I say again with emphasis, that skilled men in this day and generation deserve better, and better they must have. Please God, when the arbitration claim is settled, better they will have. Better still, if they can prove that they are earning it, because that is the important factor.

I come now to the breakdown in negotiations. The trade unions concerned decided to strike. I do not like the word "strike". I have had some. I am not ashamed to tell the Committee and the country that as a result of a strike I pawned my wife's engagement ring to feed my children. and I had bought that ring with the war gratuity which I earned in the 1914 to 1918 war.

Strikes get no one anywhere. At the end of the day, they have to be settled. It is to be deplored that this fight was necessary. Big sticks wielded either by employers or employees only create bruises and broken heads which have to be healed and repaired, and when they have been repaired on both sides none of the persons concerned is one whit the better. Generally, both are worse off, and the nation suffers.

With that claim I did not quarrel. It was justifiable. It was merited. It is the aftermath that mattered to me. It was decided that there should be a snowball strike. As a boy I have taken part in rolling snowballs. They get so big that they are unwieldy and difficult to handle, and by the morning, when you go into the garden, they have disintegrated and left a smudge. This snowball strike has left one grievous smudge, and it has left it in the place that I love dearly.

The area district committee of the Confederation received its instructions. With them I do not quarrel. It is none of my business and I agree with any A.E.U.-sponsored Members of Parliament or employers who are prepared to say, and rightly, "Mind your own business". It was none of my business. It was none of my union's business. The decision that there should be an area stoppage was no concern of ours. We were not involved. The British Iron and Steel Trades' Confederation and its workers were not involved. By executive decision they received on the Wednesday instructions to have nothing to do with the strike, to take no part in it. That is an historical document which nobody can refute.

Now the sequel. The area committee decided to appoint its strike committee. These strike committees are where the real trouble of this country start. It lies in their composition—not the good lad, not the fellow who knows the situation at the bench, not the chap with a conscientious desire to do on behalf of his members that which is right and in accordance with trade union tradition. Those are a great body of good men. I know them. They are better than I am. They are younger. They have had a better education and a better chance of life.

Having been appointed, the strike committee "went to town" and issued its instructions. That is where the trouble started, and I defy contradiction. One must not say these things in Britain—one dare not—unless they can be proved. On the Saturday morning, twenty-seven minutes before twelve o'clock stopping time in that great works, employing over 4,000, with labour relations second to none, which has never had half an hour's strike in its history since it commenced in 1913, up to that Saturday except for the General Strike, with wages top of the scale, production as good as the next, labour relations and social welfare second to none in the world; at fifty-seven minutes before stopping time, that treat organisation received this letter: Having received instructions from the Manchester & District Confederation of Shipbuilding & Engineering Unions "— Please note that this was from the Manchester and District Confederation, not the National Executive, not the parent body, not the body in whom is vested these decisions—or, if they are not, they should be, because it is the parent body and the national executive of unions who should call strikes and see that they are conducted rightly, and who should issue instructions where they are to be held. No, the Manchester and District Confederation of Shipbuilding and Engineering Unions wrote: … we have to advise you that the labour of all members of the above will be withdrawn from 12.00 noon, Saturday, March 23rd, 1957. Down came the hammer on the power house, the great blast furnaces, the great steel furnaces—a£16 million project. Down came the hammer on the whole "shooting match". Not a plumber, not a joiner, not a painter, not a fitter, not a driller, not a foundryman, not a miller, not one safety man was left in that great organisation.

Through a coincidence I have here something which was printed weeks ago, a photograph of a new piece of equipment. It is all very well for the Opposition to talk about expanding industry. I have in my hand a photograph of a great expansion in blast furnaces; it is, the new Talbot furnace, tapping for the first time. It started three weeks ago to produce 2,500 tons of steel a week, not for itself, not for its employees, but for this nation's economic survival. It provides the raw material for the engineers when this strike is settled. That great new plant is shut down. It is cold. It is derelict, with the men sacked because there is no further use for them. Men earning up to£30 a week with thirty-seven years' service have had to go.

It is a tragic situation. That blast furnace and ancillaries, costing£24 million, has been in commission since last November. It was just getting through its teething troubles. Now it has stopped. It is derelict, cold, producing nothing, producing no iron to feed those steel furnaces which, in turn, feed the engineers. It is a tragic state of affairs. That corporation carried 207 old men. We are proud of our old men. I am proud to own the only illuminated address given to a Member of Parliament by old-age pensioners for work done for them, not inside the works, but outside.

There are pensioners' halls. My hon. Friend the Member for Newton (Mr. Lee) has been in them, for they are in his constituency. The workers have been treated second to none in this country. They have been given pensions, sick pay, superannuation, death benefit, recreation grounds—all the things that men demand those people have had. That is the sort of place which, because of a Communist-inspired resolution, has to stop. It is a tragic situation. The end is not yet. There are men who will have had to leave the area, because we cannot keep good, fit young men with families where there is no employment for them. Then one has to bring in what people one can.

The person responsible for the Communist-inspired resolution "got cracking" again. On the Wednesday after the resumption of work, after Mr. Carron had put his signature to the instruction for the resumption of work —all credit to him—another resolution came along. A telephone call came from the same person as before. I propose to name him in the House. He is Hugh Scanlon, the Secretary of the Manchester Area Committee, a known Communist, and a disrupter all his life. I can think of A. V. Roe and Metropolitan-Vickers as examples. There has been a record of disruption whenever he has come into an area. This sort of thing is tragic. It is becoming something akin to cancer in the human frame. It is creeping into our industrial society, and it has one aim and object.

It is all very well to say to me, as some hon. Members have done, "Keep quiet ". My hon. Friend the Member for Sowerby said, "You must keep quiet and not interfere. Sit back and say nothing. Allow these things to happen." I could easily have sat back and said nothing—that would have been the easiest thing in the world—but I happen to be a Britisher before everything else.

I have seen the Iron Curtain at work. In the last few months I have seen men at work in the new steel city of Stalinstat, just behind the Iron Curtain, on the Oder, where men gaoled on being convicted of rape have been sent at the point of the tommy gun into the steel works to work side by side with the men whose daughters they had raped. I have seen that sort of thing during the last few months, and I am having none of it. This island of ours is worth fighting for, and these things must be brought to the light of day. It is all very well coming along later on and saying that there was a misunderstanding, or that someone misused a word.

On the Saturday when our workers were brought out, and the firm was stopped, the same people tried it on at a rubber works in Manchester. However, that threatened strike was stopped. An hon. Member can give evidence to that effect. I do not propose to name him. He is, however, the general secretary of the organisation concerned. He got on the telephone and stopped it. They also tried it with the Ship Canal, but the area officials stopped it. Instructions had been given by Sir Tom Williamson that all men engaged on maintenance work in those concerns were to be left alone.

I give credit to the Confederation for that. When negotiating with the employers on the Tuesday, they issued an instruction—I have the original document here; it cannot tell any lies—that maintenance engineers at rubber works should be left alone. But apparently great steel concerns, vital to the country's economy, could be smashed and irreparably damaged, not in respect of their fabric and not in respect of the loss of steel production, but in respect of the fact that faith has irreparably gone, for managers can no longer have faith in their men.

The instructions were distorted and twisted. The men concerned are good men, members of the organisation with which my hon. Friend the Member for Newton is concerned. They were tricked. They had no complaint with our firm. There is talk about men with£8 a week asking for a 10 per cent. increase. That is "chicken feed" compared with what the engineers engaged in steel production are getting. I made a spot check of the men in the shops of the Lancashire Steel Company and I found that over the 50 weeks before the strike started their earnings averaged£17 12s. per week. Men in the maintenance and production departments have been getting£19 6s. a week. These figures cannot be denied. Yet, an employer of that type, an organisation of that type with a great Christian heart controlling it, gets a kick in the teeth and Britain suffers. That concern cannot now get into full production for a considerable time. It is just not possible.

Those people tried it again. Sixty-five fitters, etc., came back because the company wanted them. The same day that they came back a resolution was moved for strike action at five o'clock. It was at the instigation of the same person again, the person who made the original telephone call. This cannot be denied. Sixty hands went up against the resolution, thank God, and the hands of five Reds went up for it.

I am sorry to have had to bring this matter before the Committee. I am sorry, as an old trade unionist and still a Socialist at heart, that it is necessary that these things should have to be brought into the light of day, but somebody has got to do it. This sort of thing is going on all over Britain. All over Britain there are these cells of small numbers of people. Because of the apathy of the decent chaps with decent wages and full bellies, anybody can have the trade union representation job today. When there were 3 million unemployed, each receiving 18s. dole and 2s. 6d. for the wife, men used to clamour for such jobs to try to put things right. Today, we have the other side of the picture.

I know that some of the things that I have said may have hurt some of my colleagues. If that is so, I am sorry. It has not been done on a personal basis at all. I want to see Socialism work properly. I want to see trade unionism functioning properly. I want to see trade unionists act not as the owners of trade union cards, but as trade unionists, which is a completely different thing. There are too many people in this country with trade union cards who are not trade unionists. There are still too many bad employers, but there are also still too many—there are tens of thousands—of bone lazy owners of trade union cards who are not trade unionists, who are not good men who are not trying to give of their best. Many do, but a lot do not. The point about this is that it is easy for the good man, who gets the same wages as a bad one, to slip down to the level of the bad one. That is part of our great economic industrial trouble.

I apologise for delaying the Committee. The documents to which I have referred can be seen. I have here the instructions from the Confederation, and they were added to by the area committee. I have here the instructions given by Sir Tom Williamson and others. A question arose at the T.U.C. meeting on the Wednesday morning, when Ted Hill. in the presence of my hon. Friend the Member for Nottingham, West (Sir T. O'Brien)—as my hon. Friend was present, what was said can be confirmed; it is here in documentary evidence, also—said that the steel industry should be left alone. Whatever was the cause, and whatever or whoever is to blame, is a serious matter for this nation. I am convinced that the watering down of responsibility, when in the hands of a few of the irresponsibles, causes great tragedy.

We do not finish with cold furnaces, loss of production, cancellation of sick pay schemes and loss of other benefits. We finish with death in the place. Most hon. Members will have seen the recent reports in the Press. I had the privilege, six weeks ago, as the person responsible for letting company houses, to allot a house to a good ex-Service lad. He had served this nation. He had a child, 21 months old. He had twins seven months old, and I have a warm corner in my heart for twins because I am a twin.

This man's wife was four and a half months pregnant. The couple came to me in dire straits for a house and I was able to fix them up. They went out and bought the furniture, but on the Monday he was out of work, not through striking, but unemployed because of the strike. What happened has yet to he sorted out in the courts, but his wife came back, after having a cup of tea with her mother-in-law, and found the seven months' old twins murdered. That is one of the things arising from the strike.

Whoever was the person responsible for moving the resolution to put out of production that great and fine works, striving to serve its men, to serve itself, to serve this nation and to serve the world, should be thoroughly ashamed of himself Almighty God may forgive him; I, personally, never will.

6.20 p.m.

Sir Robert Cary (Manchester, Withington)

Hon. Members always enjoy the vigorous speeches of the hon. Member for Rotherham (Mr. Jack Jones). He is not afraid to speak the truth, even though some of his friends may be hurt by his words. He remains, as he told the Committee, a good Socialist, but there is something else for which I admire him much more. It is that he is immensely proud of his country. He has played a great part in the steel industry in the past, and he believes in the future of the country. I was reminded, by his opening words, of what the present Prime Minister said in his first television broadcast to the nation as Prime Minister, that Britain "was great, is great, and will remain great." If the hon. Member for Rotherham had his way in the world of trade unions, there would be an immense rally to the sentiments expressed by the Prime Minister.

The Committee also enjoyed the objective and excellent speech of the hon. Member for Sowerby (Mr. Houghton), who said something that is very true. It was that if this country is to expand to a higher standard of living, it will make an impact upon resources, industrial and social, many of which, if a Chancellor of the Exchequer were brutal, would be diverted into the export trade. His speech showed that on many points the Committee was not divided and that there was much common ground between the two sides.

The right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker) described the Budget as a Chief Whip's Budget. If that be true, I hope that the Chief Whip will survive in his office for a long time—

Mr. Gordon Walker

He may become Chancellor.

Sir R. Cary

—for beyond the point of the next General Election. Certainly, a Chief Whip's Budget is a far superior operation to the "cabin'd, cribb'd, confin'd" operations which the nation had to suffer between 1945 and 1951, when hon. Members opposite converted national existence into an experimental workshop for Socialism. They failed utterly. and their failure led to the return of the Conservative Government in 1951.

I am glad that the right hon. Gentleman the Member for Smethwick is in his place, because I want to say a few words about the extra Is. petrol tax and to praise my right hon. Friend the Chancellor of the Exchequer for the step he has taken in consequence of the undertaking given in discussion of the Hydrocarbon Oil Duties (Temporary Increase) Act, in December, that the extra Is. tax would be lifted with the ending of rationing. That rationing has almost come to an end and the Government have chosen the occasion of the Budget to relieve the taxpayer of that tax.

However, it appears to me that there will be an unhappy sequel. The Budget has had an excellent effect upon public mood but that effect will he utterly destroyed if the public feels that it has been cheated by the oil companies or by the transport industry. I put it rather tersely, because it ought to be so put at this stage. The taxi-cab men say that they cannot take off their 6d. because it was not imposed until a month after the additional 1s. was imposed. The great transport fleets say that at the moment they cannot think in terms of reducing fares because the oil companies are charging an additional 6½ d.

When the Prime Minister introduced this tax, he was quite fair to the nation about it. He put it forward not as part of the tax structure, but invited the nation to consider it merely as an inconvenient surcharge to be disposed of the moment it became convenient so to do. I think that a great mistake is being made by the oil companies in remaining, silent and voiceless in these last three days.

Mr. Lewis

The hon. Member will, of course, appreciate that the oil companies have taken off ld., although there is still another 5½ d. to come. Only tonight one of the biggest petroleum companies, Shell B.P., announced an increased dividend of 18¾ per cent. tax-free, and increased profits. Perhaps the hon. Member can develop his argument by dealing with that.

Sir R. Cary

The hon. Member will forgive me, but that is slightly immacerial to the point I am trying to make.

The oil companies and their directors may be full of the best intentions, but they do not have a centralised structure like Treasury control, so that one single order or direction can be given to bring immediate obedience. I am not making any charge in this matter, but I am only anxious that the great oil interests do not spoil the public's good mood which the Budget has created.

I put it to the Government that: here is a way by which they can proceed in this matter. The British Petroleum Company has an issued capital£133 million of which the British Government own£56 million of ordinary stock, and a small amount of first preference stock. The Government are represented on the board by two Government-nominated directors, Sir Gordon Munro and Mr. F. E. Harmer. I invite the Government to instruct their two nominees to see that as expeditiously as possible a report is made to the Treasury on the intentions of the oil companies about the additional 6½ d. Perhaps the answer can be supplied before the conclusion of the debate at ten o'clock on Monday night.

That is important, because we know the difficulties against which the fare increases were imposed and the operating costs of the transport industry. We know, too, of the difficulties momentarily suffered by the smaller units of the taxicab operators, but, at the same time, the key to this matter is that the move should come from the oil companies themselves.

I want now to deal with another matter. The hon. Member for Rotherham referred to old-age pensioners. Hon. Members opposite are making a great mistake in trying to tie the claim of old-age pensioners to the Budget. One of the most unlikable things in public life is the fact that the needs of old-age pensioners have not long since been lifted out of party politics and been dealt with on a national basis.

Sir Frederick Messer (Tottenham)

They would get nothing at all.

Sir R. Cary

That is not the point. The point is that the old-age pensioners, whose claims go on and on in a slightly inflating economy as the years pass, have to remain the subject of party exchanges in the House of Commons.

In fairness to the Government, I must remind the Committee that there is such a Minister as the Minister of Pensions and National Insurance. The slavish tying of old-age pensioners to the Budget does them a disservice. It fills them with despondency and depression. I have no doubt that many hon. Members saw the cartoon in last night's Evening Standard, under the heading of. "Reliefs, Cuts and Thorny Points", which was, no doubt, intended to be a pun on the part of the caption writer. The cartoon showed two old-age pensioners leaving a post office, and one was saying to the other, "Maybe it is his first Budget, but can we last until his second?"

As chairman of the all-party committee concerned with the affairs of the British Limbless Ex-Servicemen's Association, during the last two years I have had a long battle in trying to advance their claim on behalf of my colleagues in the House. That claim was never tied to any presentation of the Budget, and at the beginning of this year the Minister of Pensions and National Insurance was able to take a most helpful step forward in connection with that claim.

The Government would have been quite justified in postponing action until the Budget debate, but the Minister responsible was placed by the Government in a position to act freely, and I hope that before this Session is over he may again be placed in a position to meet, either in full or in part, the claim that is now being brought by the old-age pensioners, in respect of which every hon. Member is subject to an immense petition.

I do not ask the Government to make a statement upon the matter now, and I believe that it was wrong for one hon. Member opposite to say that my right hon. Friend the Chancellor was churlish in the extreme in not even mentioning one single word about the claim of the old-age pensioners in his Budget speech. The fact that he did not mention it only serves to inspire me with the idea that he may have every intention of leaving that matter to his right hon. Friend the Minister of Pensions and National Insurance.

Sir F. Messer

He cannot do it if the Chancellor does not get the money.

Sir R. Cary

I have one word to say about the Budget. It is very difficult to find the exact adjective to describe any Budget. This was supposed to be a special one. Some hon. Members may recall that a few years ago, printed at the bottom of the menu in the Members' Dining Room, were the words: Coffee, 6d. Special Coffee, 1s. and it was said by many Members that the only thing worth drinking in the House was that special coffee at 1 s.

Mr. Lewis

And no one could afford it.

Sir R. Cary

The moment came when one hon. Member who was particularly interested in coffee made a journey into the kitchen to discover how this special liquid was made, only to find that it came from a communal container in the kitchen, the difference being that the coffee poured into the silver pot was sold at 6d. a cup and that which was poured into the earthenware pot was sold at 1s. a cup. It was really the same turgid liquid.

I believe that this really is a special Budget. It is a shrewed Budget. This is my right hon. Friend's first Budget, and it must have been a matter of great importance for him. It must have meant the expenditure of a great deal of nervous energy. Its presentation was a great parliamentary hurdle, but he has jumped it with great success. The adjective I have used to describe it is the right one. It—

Mr. Jay

—is a tragedy.

Sir R. Cary

—is a shrewd Budget. My right hon. Friend is the pathfinder in our endeavour to make the country richer, and we shall need every scrap of shrewdness we can get in this highly competitive world in years to come. If my right hon. Friend remains Chancellor of the Exchequer he may be able to improve upon the position that he was able to unfold in his Budget speech. If we want to make our country richer we must have shrewdness and, as the hon. Member for Rotherham said, the absence of complete laziness in the workshops—

Mr. Lewis

And in the House.

Sir R. Cary

—besides the removal of all the malpractices which go on at factory level.

Above all, we shall require as a rallying point a Prime Minister with courage and determination, like my right hon. Friend who now has the privilege of leading the Government. In the old days trade followed the flag. It now follows the broadcast receiver, the television screen and, as the President of the Board of Trade reminded us yesterday, the sweet, beguiling, come-hither looks of the modern salesgirl. Selling has become a social as well as a business operation, and I wish my right hon. Friend well in his work at the Treasury.

There have been occasions in the past when I would have asked the Chancellor to meet further claims in his Finance Bill, but on this occasion I think that he has taken a great risk in giving between£100 million and£130 million to the nation. In doing so he has been concerned not only with the material niceties, in terms of balancing the national economy, but also with the mood. The mood is as important as the material factor, and in that respect my right hon. Friend's Budget speech was a great one. The Budget that he has produced may be the keynote to a succession of Budgets which will take this country forward not only to a higher standard of living over the next twenty-five years, but to levels of prosperity and wealth that we have never known before.

6.38 p.m.

Mr. Frederick Lee (Newton)

I am sure that the Committee will be grateful to the hon. Member for Withington (Sir R. Cary) for his dramatic illustration of the way in which private enterprise works in the selling of coffee. If it can get away with that sort of thing with sophisticated, hard-boiled politicians, what about the 40 million people outside who are being taken in? I hope that the moral will sink home.

Before I turn to my criticisms of the Budget, I want to say a few words in reply to my hon. Friend the Member for Rotherham (Mr. Jack Jones) who spoke of the Lancashire Steel Corporation, which has its works in my constituency and the vast majority of whose workers are my constituents. I agree entirely with him as to the type of men they are—whether they be engineers or steel men. Many are my personal friends, and I am proud to have the opportunity to represent such people.

I am also a member of the Amalgamated Engineering Union, and chairman of the Engineering Group in the House. My objection is not that my hon. Friend is wrong to be incensed about something which he feels to be a great tragedy but that I do not believe that the House is competent to settle such issues.

Mr. Jack Jones

The public should know.

Mr. Lee

We know of the lines we try to draw between those who work on the political side and those on the industrial side. I am quite certain that, from the industrial angle, there are very many competent, experienced negotiators at national level. I am thinking of men like Mr. Carron, Mr. Brotherton and Mr. Cow ins. people of that kind on the side of the Confederation, and Mr. Harry Douglass, the secretary of the Iron and Steel Trades Confederation. On an issue of this kind I should have thought that there would certainly be means of communication between the leaders of the Confederation of Shipbuilding and Engineering Unions and Mr. Douglass in order to clarify any issue which arises in any part of the country, if Mr. Douglass felt that the instructions of the National Executive of the Confederation were not being carried out.

Naturally, both from a constituency point of view and because of a long association with my own union, I have made inquiries on this point. I am assured by Mr. Carron, president of the A.E.U., that there has been no approach whatever from Mr. Douglas on behalf of the Iron and Steel Trades Confederation on the question of the Lancashire Steel Corporation.

Mr. Jones

My hon. Friend cannot have had access to this letter sent to Mr. Martin, secretary of the Confederation, which called this strike, on 28th March, laying out completely and thoroughly what was said by the T.U.C. and what happened. It was sent on 28th March, and up to five o'clock today no reply had been received.

Mr. Lee

By whom was it sent?

Mr. Jones

By Mr. Harry Douglass, of the Iron and Steel Trades Confederation and Mr. J. O' Hagan of the National Union of Blastfurnacemen.

Mr. Lee

It does not affect the point I am making that Mr. Canon, who is president of the A.E.U., has been in touch with Mr. Douglass on every issue concerning the steel side of the industry in which there have been certain complications arising from this strike. But on this issue, although as I have said, Mr. Douglass and Mr. Carroll have been in discussion, Mr. Douglass has not chosen to raise the issue of the Lancashire Steel Corporation.

May I put this point to the Committee, because it explains some of the complications which can arise? There was confusion in a number of steel works during the strike which has now concluded. So much depends on the degree of engineering which we have in steel works. In quite a number of them the steel owners themselves are members of the Engineering Employers Federation against which body the strike was directed. Therefore, there is the complication of overlapping as between steel and engineering which has resulted in some of the employers being members of the organisation against which the strike was directed. That kind of thing was inevitable under such circumstances.

I join with my hon. Friend in the tribute which he paid to the work both of the management and the men at Irlam. I appreciate what has been done outside the firm itself—to which my hon. Friend referred—in connection with old-age pension organisations and help for people of that type. I hope that the things which have happened there will not result in a lack of harmony between workers in the steel works, because, as was said by my hon. Friend, and I confirm it. basically they are the same type of men engaged in work of great importance on which we all depend so much for our existence as a nation.

I now turn to the matters in the Budget which I desire to discuss. I have listened to all the speeches made by hon. Members opposite speeches in which it has been said that much of the gain which will accrue to the£10,000-a-year class of men, and so on, will result in increased savings. That has been the theme of speeches from hon. Members opposite. It reminds me of nothing so much as the suggestion of Oscar Wilde: Each class preaches the importance of those virtues it need not exercise. The rich harp on the value of thrift, the idle grow eloquent over the dignity of labour. My right hon. Friend the Member for Huyton (Mr. H. Wilson) was right in pointing out that in this Budget the Chancellor seems to snap his fingers at the efforts of the trade unions to get a decent share of the national product for their members. I was interested in what was said by my hon. Friend the Member for Sowerby (Mr. Houghton). With much of it I agree except that I had to swallow a little hard when he said that supertax payers were workers who had been a bit more successful than others. I will not argue too much about that. I hope that trade unions will be successful in getting a few more of their members into the supertax class before long, more especially as the present Chancellor seems to have a weakness for those sort of workers.

My hon. Friend the Member for Sowerby raised an important issue about our future industrial position. He commented on the attitude of the House of Commons towards these grave industrial matters. I have been a Member of this House for long enough to know that one should never try to preach here, and I have never attempted to do so before; but I believe that we in this House would do a far better service to the nation were we to interest ourselves more in industrial affairs at times when there is no struggle in industry. It may be that it is because I like to specialise in these matters, but it appears to me that the House of Commons is never seriously concerned about industrial matters until trouble arises. Then we are all worried for fear that great strikes may break out, and for a time interest is shown. There are very many grave issues on the industrial front which afford hon. Members scope for thought if we are to help in bridging this very serious period through which we are passing.

The background to the Budget is a period in which we have seen our share of world trade gradually declining, and in which industrial production has become completely stagnant. I believe that the economic policies of the Government are largely to blame for this unfortunate position. I should have thought that the Chancellor would have had that fact at the back of his mind when he began to draw up the outlines of his Budget. Against that background there are only two words with which to describe this Budget. They are "irrelevant" and provocative". How any serious-minded person can believe that, witnessing this kind of give-away to those least in need of it, trade unions can now agree to restrain their own legitimate demands on the economy, is beyond my comprehension. It would appear that the element among the employers who have, I think, decided on an industrial show-down with the trade unions, now feel that their case has somewhat misfired and that they should defer it to a more suitable date.

If the Budget had been drawn on the assumption that it would spark off a round of wage demands I could understand it, but if that is not so, it is a revelation of industrial illiteracy of staggering proportions. It would be interesting if the Minister of Labour and National Service could speak for the Government and give us the benefit of his opinions on the subject.

We are now coming into the period in which the annual meetings of trade unions will take place, namely, from Easter onwards. Decisions on wages policy will be taken at these conferences. An atmosphere will prevail, created by the knowledge that the present Chancellor of the Exchequer has given the larger proportion of his reliefs to those receiving between£2,000 and£10,000 a year. No body of men meeting in that atmosphere, and knowing that the other policies of the Government, such as the Rent Bill, will force the cost of living to rise, dare ignore the consequences in unofficial outbursts of restricting their demands on the national economy. It was a great tragedy that the right hon. Gentleman decided to cast his Budget in this mould.

The strike situation has been recently discussed, and on many occasions we have heard the suggestion that the strike weapon is now almost indecent. Let me preface what I have to say on this subject with these words: in my little way I have worked as well as I could inside the trade union movement in the hope of achieving the position in which the strike weapon would never again need to be used. I can look back upon my own trade union and realise that almost from the moment of its inception in 1920 it has never had to organise a strike on a national basis.

In 1922, we were locked out and starved to our knees. We had to mortgage every stick of the union's property. We were driven back and had to suspend the payment of benefits. except for superannuation. We were driven back to a further three weeks without payment of any description. The price of failure was another 16s. 6d. off the wage packet. making 32s. 11d. over twelve months. One recalls that with bitterness. Despite that. we hoped that we had reached a civilised period between the two sides and the Government, when we would never again sec that kind of thing.

One is concerned now at the sort of criticism being levelled against people who are driven to striking. Almost inevitably, criticism by the people I am thinking of is not only of the principle concerned. It becomes violent when it examines the detrimental effect of the strike on the national economy, and at some stage of the discourse the right of the workman to strike is thrown in as a preliminary to a diatribe of abuse against those who avail themselves of that right. The logic of the argument would be that those employed in an industry vita to the well-being of the nation should retain the right to strike as a theory to which it is proper to pay lip-service on condition that they never use it.

If the real point of that opposition is that the strike weapon in such industries is far too expensive for use, that forms an additional reason why the full weight of public criticism should be directed against the anomalies that lead to strikes. I have never found any evidence that strikers give up the right to draw wages out of a fiendish desire to exist under those adverse strike conditions, and nobody with even a little knowledge of the subject has ever found it either.

We appear to be reaching a phase in which the basic right of the worker to withhold his labour may be threatened. I know that is not stated in those terms, but to damn with faint praise is an old method of beginning an assault upon an apparently impregnable position. "Brutas is an honourable man" has had many parallels since the death of Mark Antony.

We should reaffirm the right of the workers to withdraw their labour because it is as fundamental a part of the democratic concept as the right of freedom of speech. For stunters who know little about the nature of industrial disputes to indulge in what one can only call the "character assassination" of trade unionists and their officials is not only disgraceful in itself but it brings bitterness into negotiations and sours the whole of industrial relations.

When we are discussing our loss as a result of strikes we should remember that our position is a very good one. There are very few comparable industrial nations in the democratic world where so few hours have been lost as the result of strike action. It is as well that we should show to the world that although we have our industrial troubles we also have a great record of stability and knowledge. I hope that it is the intention of all people in public life who are interested in these matters to try in every way to get over as shortly as possible the interim period in which we may have difficulties to surmount. I want to discuss a few of those difficulties.

I was interested the other day to learn that the Liberal Party has issued a document in connection with the recent strike. One of the points it made was that wages must be determined by the profit rate in the given industry. I can think of nothing more detrimental to the interests of the nation. The Liberal Party is not present in the Chamber at the moment. I do not know where it is. I wonder how its members defend that position. Will they tell me how we would keep our essential people working in the railway industry? The railways cannot make profits because of the very nature of the industry. I do not know that any railway system in the world can make a profit.

If we say that the profit rate must determine the wage rate, many essential services will be denuded of their personnel and the plums will go to the luxury and gambling industries. I can assure the Chancellor that the production of more fur coats and betting slips will not assist him very much with his balance of payments problem. I have used that illustration deliberately, because I feel that we have now come to one of the issues which my hon. Friend the Member for Sowerby was hinting at. Because of the present inadequate and completely crazy wage structure in many of our vital industries, I believe that with all the good will in the world we cannot give men the rewards to which they are entitled by their increased effort. Let me give one or two illustrations.

The right hon. Gentleman, and the Labour Chancellors before him, laid emphasis on the need for increased earnings to be reflected from increased production and in general I see the force of that argument. But are not there millions of workers who, no matter how much they increase their effort, cannot increase their wage packets in proportion, or at all? There are thousands of labourers, clerical workers and people of that type who are in no way working on a production bonus scheme. Indeed the harder those on production bonus schemes work, the harder the labourer has to work without getting a ½ d. more for doing it, and he has no possible chance on the basis of increased effort to earn an increased pay packet.

We are coming into the period broadly described as "automation". In the main, I believe that we are in a period in which an increasing number of people will have their production rate determined for them by agencies completely outside their control, by automatic machinery and so on. They cannot control the pace at which they work. How can they increase their pay packets by trying to work harder? I believe that before we can get down to answering the questions posed by my hon. Friend the Member for Sowerby we must have a new wage structure in many of our industries related to the new conditions of production.

Mr. William Shepherd (Cheadle)

The hon. Gentleman says—and I accept this fully—that many workers in some industries do not get what they should from their efforts, and that some attempt should be made to bring about a greater degree of equity. Why do not the unions set out to remedy those conditions instead of always insisting on overall wage increases, so that the greedy men who are already getting a lot—perhaps more than their share—can have more?

Mr. Lee

I was not talking about equity. I was trying to convey to the Committee the utter frustration that must come to men who are listening to exhortations to increase their productive effort, and thereby increase their earnings, when the physical conditions in which they work will not permit them to increase their productivity or their earnings. It is because we are advancing more and more into mechanical work, which predetermines production levels, that that argument no longer applies. I was with the late Sir Stafford Cripps when we first discussed this question, and I tried to put this point to him. He never intended that idea as a permanency. It was to get over a difficult time.

We now arrive at a point when we cannot implement that policy unless there is a change in the wage structure so that men can earn more as the result of their physical efforts. I come to what the hon. Member for Cheadle (Mr. Shepherd) was asking. In 1944 I was a member of the National Committee of the A.E.U. In engineering, as the hon. Gentleman knows, there are hundreds of silly differentials, some varying by as little as 6d. and 1 s. How is one to decide the difference in skill which justifies these differentials? These differentials have been added to as new processes of engineering came into existence.

Therefore, in 1944 we tried, instead of working for a flat rate of advance, to boil down the number of basic rates to about five. Once we achieved that position we could give proper differentials on the basis of skill and effort, dirty and dangerous work and the rest of it. That suggestion of the unions was never accepted. I know that there were complications within it, but I feel that to refuse was a very great mistake. If the employers had then accepted the need to get round a table to discuss a new wage structure, some of the problems with which the industry is now faced would never have arisen.

Mr. Lewis

Is not it also true, to bring it more up-to-date, that even in this year 1957 the engineering unions have suggested a national joint industrial council and the employers have turned that down?

Mr. Lee

That is perfectly true. I agree with what my hon. Friend says. I am trying to put it to the Committee that it is not possible to achieve the objectives we all have in mind unless we first make it possible for these things to happen.

I hope that the Chancellor will take note of this, because I believe that without it we cannot make the necessary progress and get away from the stagnation about which he is concerned. As to arbitration, frankly I am getting to the point when I am very much afraid of arbitration, although not for some of the reasons advanced. I think that in many industries collective bargaining has long since broken down. I do not blame those who have to negotiate in industry for putting a kind of blanket of mysticism around collective bargaining. It is a secret. I can tell hon. Members, fiat this is just horse-dealing and it has no relation to skill and ability. It is sheer horse-dealing and we cannot afford fiat at this stage.

We must get to the point where we must have a wages policy that can reflect effort, industrial skill and that kind of thing. I am not thinking about the problems just past. The very fact that both sides know that a dispute will finally go to arbitration has resulted in slipshod negotiations without any real effort to get a settlement.

One can think back to the railway disputes which fortunately did not come to strikes though they looked like doing so. I counted the number of stages which the unions and the Transport Executive went through. They failed to agree when they had their general discussions. First, there was voluntary arbitration. then a court of inquiry, then a court of conciliation—all of which were no good—and finally a referee was decided upon. Is that collective bargaining? Five stages along the road from collective bargaining had been followed and yet we say with awe-stricken voices that the' sanctity of collective bargaining must be maintained. I do not want to go further with that argument; but I believe that, if we are to get through the great industrial crisis which we face, the necessity for refurbishing our industries, modernising them and doing all the things necessary for survival will fail unless we make it possible to have a wages structure within those industries which can satisfy the men that they will get a fair deal for the work which they produce.

I should have thought that these were matters which both sides of the Committee, and certainly the trade union movement and the employers as a whole, could now be getting round a table to analyse. I may be biased, but I feel very strongly that if we are to witness many more of the rather disgraceful things which we have had, from the engineering employers recently, I see no hope of increasing production in Britain and of establishing a firm economic foundation. There was provocation at its very worst. There was the attempt to refuse to discuss the issues even before they were posed. What I felt to be a terribly bad thing was the suspension of the whole of the agreements under which those vast industries function—industries covering more than 3 million people.

I am not saying that I think the "York Memo." as it is called, is adequate in the days in which we live, but deliberately to suspend it and to leave the industries without any form of discussion was almost criminal and tragic. Certainly it was quite irresponsible. I hope it will be realised that it is not enough in this Committee to discuss all the finer issues of dollar balances, import-export prices, terms of trade and the like. We have to get into this some of the flesh and blood and some of the guts which are reflected in industry and get down to analysing how we can help industry to get through the terrific change-over period we now face. If we do not do that there will be a desire by people who are worried about the future to hang on to old methods and practices of the past. We should try to remember that these men who have given years to apprenticeship have suddenly seen what they thought was their security disappear.

We can help by trying to analyse their problems sympathetically and with understanding and by trying to get them to realise that. far from going back to the old phase of cut-throat competition between the parties, or between employer and trade union, Britain can gain if we get together and solve these problems.

7.13 p.m.

Mr. Julian Ridsdale (Harwich)

I rather hoped that I should follow the hon. Member for Rotherham (Mr. Jack Jones), as I was in his constituency last week. I should like to congratulate him personally on his very courageous speech. I was coming back from the Master Cutlers' banquet and noticed in the Master Cutlers' Hall. in Sheffield. that there is a quotation which says: Unsurpassed provided he has the will to do. Not only do we want to see that the man who is making steel and other things in this country today has the will to do, but also the means to do.

The hon. Member for Newton (Mr. Lee) talked of the Budget as being irrelevant and provocative, setting up another round of wage increases. My answer is that which I gave to Mr. Ted Hill, who is one of my constituents, "Think of your neighbours, especially the old-age pensioners and those living on fixed incomes."

Mr. Lewis

What about the Chancellor? Has he thought of them?

Mr. Ridsdale

Government supporters have welcomed this Budget and I shall not he an exception. Particularly do I welcome the proposal for elderly people on fixed incomes, who have been having such a difficult time thanks to the inflation of the post-war years, which was worse by far under the Labour Government than under the present Administration.

I know that many people would like to see something more done for the elderly and the retired, for it is they more than anyone who have had to pay the price for inflation since the war. Yet, for my part, I am convinced that what makes the elderly despair today is the endless round of wage increases, granted particularly in the nationalised industries, without a corresponding increase in production. They see capital being poured into those industries, coming in part out of their pockets, and all it means to them is higher prices and high taxes.

The question I want to raise this evening is whether the method of raising capital out of taxes is the right one. I was sorry not to hear the hon. Member for Orkney and Shetland (Mr. Grimond) and my hon. Friend the Member for Walsall. South (Sir H. d'Avigdor-Goldsmid) yesterday, when they referred to this matter. I know it is Socialist philosophy, but are we, as a Government who believe in the use of the monetary weapon as our form of Government influence on the economy, doing enough to see that the monetary weapon can work? Are we not running the danger of falling between two stools?

I do not believe that there is more than a temporary half-way house between Socialism and a free economy. I am certain that our mistake in the last few years has been to stay at that half-way house for too long. That is why I welcome the reliefs given in the Budget to the managerial class. Alas, what a pity those reliefs were not given in 1952 instead of 1957. When hon. Members opposite complain about those reliefs they should look at the rewards given to the managerial class since 1952. It will he seen that they have been very slender indeed.

That is why I am sad not to see at least an arrow pointing towards lower death duties which, at their present rate, I consider to be such a disincentive to saving. That is why I was disappointed not to sec in the Budget an arrow pointing in the direction of combining the rates of Profits Tax, which at present are 3 per cent. on retained profits and 30 per cent. on distributed profits. I am sure that we should do as was suggested by the Royal Commission on the Taxation of Profits and Income, combine the two in a single tax. I suggest, also, that a flat-rate Profits Tax and company Income Tax might be combined into a single corporation tax for companies. I know that the Royal Commission mentioned the disadvantages of that. but in my view they would be small compared with the freedom which this change would give to the Chancellor to alter personal and company tax separately.

I am convinced that if a free economy is to work the Government have to trust the people and lower taxation still further, so that the public will be able to save. Because of the Socialist policy of nationalisation we have inherited this form of financing for the nationalised industries which means collecting every year about£550 million for a Budget surplus or else, by pure inflationary finance, printing more Treasury bills. The time has come when we should reorganise this.

Perhaps steel provides a good example. The raising of capital for the steel industry has been successful to a degree. It is now only the threat of renationalistion which prevents a much wider and vital investment in that industry. I am sure that if the Opposition was to take away the threat of renationalisation more capital would be forthcoming at once.

That is my answer to the right hon. Member for Smethwick (Mr. Gordon Walker), who said that the only way to get a surge forward was by a deliberate guide. Unfortunately, this threat hovering over the steel industry means that we are not able to get the capital for the industry to expand production, and so make the monetary weapon work.

In this Budget no less than£508 million is to he raised for capital account and, also,£100 million is going in loans to local authorities. As the Prime Minister said so rightly last year, the idea of raising excessive taxes to cover capital items is justified in an emergency, but it ought not to be erected into a permanent system. I believe that the whole philosophy of Budget surpluses in order to invest in capital projects is wrong. It is putting the cart before the horse. The result is that we get no modern roads on which to run it.

Surely our first task in trying to stop inflation must be to deal with the volume of money as much as the amount circulating. The volume can be dealt with only by raising long-term interest rates and cutting back on immediate Government expenditure, that is, Treasury bills, a large part of which are used for financing the nationalised industries.

I only hope that before the next Budget we shall be able to get a lot of our long-term requirements for these industries met by long-term funded loans subscribed by the public. If it means that, to do that, we may have to find a loan which can be converted into equities at a later date, then I think that we should explore that possibility. But, in my view, funding is the only real way to finance these undertakings. If they cannot be financed in this way, we should proceed more slowly with them or, better still, reorganise these industries until such a funding operation is possible.

I am convinced that this problem of financing the nationalised industries is the chief economic problem which we face in the coming year. The only answer is to accept what so many people in the country realise—that nationalisation is a failure—and, therefore, to work for decentralisation as quickly as possible. While accepting the Budget as an arrow-pointing one, I therefore urge on the Chancellor that we should press on as speedily as possible to a free economy unshackled by the nationalisation policy of the Socialists which, in my opinion, is the basic root trouble of our post-war inflation and one of the chief causes of the difficulties of the old people today.

7.23 p.m.

Mr. A. E. Hunter (Feltham)

In following the hon. Member for Harwich (Mr. Ridsdale), I do not want to be led into a debate on the nationalised industries, but I should like to remind him that the miners of this country produce the largest output of coal per man in Europe and that coal is cheaper in this country than in any other European country. if the hon. Member examines the price per unit for electricity in 1939 and in 1957 and compares it with the price of similar services. he will find that the electricity industry has a very good record indeed. The hon. Member will do well to study these facts.

We have listened to some brilliant speeches this evening. I imagine that two of the most brilliant speeches today were those by my hon. Friend the Member for Sowerby (Mr. Houghton) and my right hon. Friend the Member for Smethwick (Mr. Gordon Walker), who gave, in my opinion, a brilliant examination of the Chancellor's proposals. I make no apology for the fact that in speaking from this side of the Committee I speak for the lower income groups. We on this side of the Committee do not pretend to speak for the£5,000 or£10,000 a year men; I imagine that they have many spokesmen on the Government side. As has been admitted from the Government side of the Committee, this is mainly a Budget to give relief to those in the higher income groups, and the Government must, therefore, expect criticism from us.

I do not imagine that the Chancellor thinks that the nation will consider this a popular Budget. It may be popular with a section of his party—the wealthier section—but the Conservative Party has members in the factories, in commerce and in industry, and I believe in these ranks of the Conservative Party there is open criticism of the Chancellor's proposals. However much one may argue about room at the top, the fact will remain for the majority of people in this country—clerks, miners, engineers, managers, railwaymen, transport workers and others—that over£100 million has been given away in tax reliefs and none of it has been given to a person earning less than£40 a week. However much hon. Members may talk about room at the top, this bare fact remains. The only exception is the reduction in Purchase Tax and petrol duty, and I will deal with that later. With the exception of child allowances, the increase of which we welcome, no person receives Income Tax relief from the Budget unless he earns over£40 a week.

In my opinion, a fairer way to distribute the tax reliefs so that all in industry and commerce would receive some benefit would be to raise the personal allowance of£140 a year and to raise the earned income allowance of two-ninths to at least one-quarter. That would give relief not only to those earning over£2,000 a year, but also to all workers in industry and commerce who are paying Income Tax. On those grounds alone, I feel that the Chancellor's proposals have been most unfair to the majority of the nation who pay Income Tax on salaries and wages much less than£40 per week.

While I welcome the removal of part of the tax on petrol, I would point out to the Chancellor that he is only removing a tax which the Government imposed recently and ought never to have been imposed. The same remark applies to the Purchase Tax on hardware, carpets, linoleum and other floor coverings, for this was a tax which the then Chancellor imposed in 1955.

I want to deal, next, with another tax change. I imagine that all hon. Members welcome the removal of the Entertainments Duty from the living theatre. The living theatre is a great cultural asset to this country. All independent entertainment, whether in the cinema or television. comes originally from the living theatre. In the past year, theatres have been closed not only in London but in provincial towns, and we therefore welcome the belated change in taxation on the living theatres which will help them in theilr difficulties. Some relief has been given to cinemas, but as I understand the cinema industry informed the Chancellor that it needed at least£21 million to help it out of its present difficulties, I imagine that it is not satisfied with his proposals which give the industry approximately£6½ million.

Personally, I believe that the imposition of an entertainment tax on television is unfair. It is a great mistake to start a new entertainments duty in this way. We want to get rid of the tax on the theatre and the cinema, but the Chancellor is not spending a penny out of the national income in removing the tax from the living theatre and in giving some relief to cinemas, because he has placed the burden of that tax upon the television viewer.

This new imposition is most unfair. It may tempt other Chancellors in the future to add some more. I see that the Economic Secretary is smiling; I think he sees the point. Next year, the Chancellor may say. "We will give the cinemas another£6 million", and there will be another£1 on television. My advice to televiewers is to watch this tax with great suspicion, because it may not stop at£1. In my view, it is a great mistake to begin this new Entertainments Tax.

The subject of post-war credits has been referred to many times by hon. Members on both sides. Post-war credits began in 1941 or 1942, when there were compulsory deductions made each week from the earnings of all workers within a certain range of income. That was a long time ago. We are now in 1957. The Labour Government made a start. Sir Stafford Cripps, the then Chancellor, commenced repayment of post-war credits at the age of sixty-five. That was done at a very difficult time; we had to set the export trade going again, demobilise men from the Navy, Army and Air Force, get the building industry going, and put the nation on its feet. Yet what the Labour Government started those many years ago has not, except for one small alteration, been improved upon by the present Government.

The value of post-war credits has dropped. In an Answer given to me two or three weeks ago by one of the Treasury Ministers. I was told that£100 of postwar credits in 1942 is now worth£58 or£59. In purchasing power and real value, the holders of post-war credits have lost nearly half of what was deducted from their wages years ago during the war. In the 1951 General Election, a broadcast was made on behalf of the Conservative Party by the present Chancellor of the Duchy of Lancaster attacking the Labour Government for not paying out more on the post-war credits. We are now in 1957. Is it not high time that the Chancellor gave this matter proper consideration? We do not expect him to repay all the post-war credits at once, but why can he not make a start by repaying at the age of sixty-four, sixty-three or sixty-two? After all, it is a debt of honour on the part of the nation. The thousands of people who have held post-war credits for some fifteen years know that£100 million is being given in tax reliefs to people earning£40,£60, and up to£200 a week. Surely, the Chancellor could at least make a start by paying on post-war credits at the age of sixty-three or sixty-four.

The matter about which I feel most keenly I have left till last. I am very concerned about the position of old-age pensioners. Any Member of Parliament who takes a keen interest, as I have done, in their welfare should raise his voice tonight at the way in which the Chancellor has rejected the claims of the old-age pensioners for an increase in their pensions. We do not envy the wealthy: we do not envy those earnings£5,000 or£10,000 a year. We want to raise living standards. But we realise that some of them are getting as much as£10 a week in relief and the old-age pensioner has only£104 a year basic pension.

Mr. T. L. Iremonger (Ilford, North)

Retirement pensioners.

Mr. Hunter

Yes, retirement pensioners on£104 per year, or, in plain words,£2 per week. I know that there are supplementary pensions from the National Assistance Board; but the reliefs given to those who earn so very much more are 50 per cent, of what these old people get to live on. Millions of pounds by way of tax relief is given to people earning£60,£100 and£200 per week.

The majority of old people are outside the range of Income Tax reliefs, which affect only a very small number. I protest at the way the Chancellor has passed these old people by. I shall not argue about 1947. 1948 or 1949. We are now in the year 1957. The Economic Secretary knows the price of bread in 1951 was 6d. a loaf. It is 1s. today. My right hon. Friend the Member for Smethwick gave us the figure of£130 million for milk and bread subsidies which were removed and taken from the old people, providing for Income Tax reliefs mainly to people in the upper range of income. The Chancellor did not even offer one word of regret. He never even said, "I am sorry: we cannot do anything for the old-age pensioners at present, but we may be able to do something next year".

Quite frankly, this is a truly Conservative Budget. The majority of people, those in offices and shops, the commercial travellers, engineers, railwaymen, transport workers and the rest, will regard it as a typically Conservative Budget. If there were a General Election, the nation would reject it, for the Budget is mainly in the interests of a very small section of the community, whilst we stand for the nation.

7.39 p.m.

Mr. T. L. Iremonger (Ilford, North)

I am glad to follow the hon. Member for Feltham (Mr. Hunter), because some of his comments were particularly interesting in the context in which I first wanted to consider the Budget. I proposed to ask the Committee to consider with me what are the criteria by which one should judge a Budget.

One becomes aware, in talking to one's friends about the country, that the ordinary reaction to a Budget is to judge it by the question, "What is there in it for me?" That is perfectly reasonable and understandable, and it would not be human to judge it in any other way; but in this Committee we have to judge it by a somewhat different standard, and I submit that at this moment in our economic history the standard by which each successive Budget should be judged is on how it stands up to the question, "What does this Budget do to strengthen the£abroad?"

If a Budget really strengthens the£abroad, then it cannot fail to do positive good right through the shunting process from the international market down to the humblest home. I think, therefore, that we have to look at this Budget in that context, and not to judge it so very much from the point of view of individual gain or lack of gain among those who may have had hopes about it in the past.

In trying to assess how far a Budget helps to strengthen the£we have to use three criteria—we have to ask three possibly somewhat sophisticated and remote questions. The first question is, "What demand does this Budget make, in effect, upon the men and materials which are all we have with which to make our livelihood in this island?" By materials I mean the earth, which we have tilled for generations until we have turned it from an arid tract into the most productive soil in the world, and our coal, and very little else—except our imports from other countries.

Secondly, we should judge each Budget by how far it helps or hinders an increase of real production. I do not mean production in the sense of the Blue Book. I do not mean national product. which is only another way of classifying national expenditure and national income. I mean what we should get if we could put everything—manufactured goods, time, entertainment—into a mincing machine, mince it up and serve it out in a solid block. That is the real, absolute, actual product. If a Budget tends in any way to increase that, it is good: if it does not, it is bad.

There is a third question. How far does the Budget actually increase the national product in the Blue Book sense —in the sense of the black angel side of its personality in the form of the national product of income and expenditure and the money which we use to measure what we actually produce? As this third element lengthens in proportion to the second, so our£goes down here and in the world markets. Those, I am sure, are the standards by which we should judge a Budget, and the standards by which we should try, heaven help us, to influence other people to judge a Budget.

Every Budget proposal should also have to pass these tests. We should have to ask, how far does this actually increase consumption here at home? How far does this actually encourage or discourage saving—or refraining from consuming? How far does this encourage or discourage the conversion of any saving there may be into actual positive investment and the creation of wealth? How far is it likely to increase what we can sell abroad from our national product? if a Budget can be judged as successful by those standards then the reward will be, as we have said so often that it has become almost platitudinous, expansion, prosperity and power.

Power is very important. Someone will always have power, whether in the country or in the world, and if one has ally faith in one's own country and in one's own people—as has the hon. Gentleman the Member for Rotherham (Mr. Jack Jones)—then I think one should want one's own country and people to have the power; and power is nothing but wealth. That is really why the Budgets we consider here are very important international events.

Of course, if the Chancellor's policy as embodied in his Budget is a failure, then sooner or later the£will be devalued, and sooner or later the power and influence of this country will decline. Some might welcome that hut, frankly, I would not.

With those considerations in mind, I want to look at only two of the Budget proposals. I want to say a word about the decision to remove part of the Purchase Tax put on in the 1955 autumn Budget of my right hon. Friend the Lord Privy Seal, the relief from which has been extended in scope, as the Financial Secretary pointed out this afternoon.

When that Purchase Tax was put on, it was put on for a specific purpose, and I maintain that that purpose has been achieved. I supported the Budget in which that Purchase Tax was imposed. I am glad that it has now been taken off, but I do not think that its having been taken off is in any way an argument, as some people have been suggesting in the last few days, that the policy which nut it on was a failure. Whether or not that policy was a failure can be seen in the degree by which our exports have increased, and the lesser degree by which our imports have increased.

The imposition of that Purchase Tax was a measure to strengthen the£I therefore think that it was good and justified. It has worked, and it is now possible to take it off. Those of us who supported the Purchase Tax measure in this House recognised that it was unpleasant but necessary, hut, now that it has done its job, we are glad to see it reduced. Its relaxation is justified provided, but only provided. that every ounce—or whatever measure is used—of extra demand that the release of purchasing power makes upon our men and materials is balanced by extra earnings from exports abroad. If that balance is not achieved, then the Purchase Tax should not have been taken off.

The second proposal on which I want to comment briefly is the decision to increase the Income Tax allowances for children. About any concession that the Chancellor of the Exchequer makes we should ask whether it is inflationary or not. Prima facie any concession is inflationary, but I think that, in the long run, no concession can be more productive, no Government expenditure more, in the real sense, all investment than a concession or expenditure which tends to keep children at school and improve the educational standard of those whom we turn out into the productive life of the country.

Apart from the Budget proposals, I welcome three features of the general economic background. One has not been mentioned in the debate but it will be dealt with very fully in the next few days. It is defence, which has a bigger bearing than anything else upon our economic situation. I welcome, more than anything in the Economic Survey or in the Chancellor's survey or in the Budget proposals, the positive move that is being made to cut Government expenditure on defence. There can be no more inflationary expenditure than expenditure on defence.

If we spend our time and money on defence we shall be in the position of the farmer who spends his whole life scaring away the crows. We shall not grow anything and not achieve anything. I am not saying that it is not important to scare the crows. I am not saying that the cure for too much expenditure on defence may not often be worse than the disease. I believe that right hon. Gentlemen opposite, who took the responsibility for the Government rearmament plan after the Korean war, took a right and courageous decision. In politics a "courageous" decision means one that is opposed by one's friends.

If right hon. Gentlemen opposite had not done what they did, we should have paid much more dearly for our failure to protect ourselves than we have done by the undoubted economically adverse effect of that rearmament. I am thankful that the time has now come when we can cease to waste our substance on a policy which in the long run cannot possibly bring us any good and whose only virtue was that, with God's help, it might have avoided something worse. The Defence White Paper is a sign of hope and salvation for our economic future.

I welcome the proposals to introduce more stringent control of banking finance by the Capital Issues Committee, because I think that it will definitely limit the quantity of money in the system. The quantity is important, otherwise the Government's whole monetary policy makes nonsense. It will go a long way towards creating savings and ensuring that those savings are invested. The Chancellor has made a right decision in spotting a loophole there and stopping it.

Mr. Gordon Walker

A loophole opened by the Government in 1953. It is, therefore, not very clever of them to close it now.

Mr. Iremonger

I hope that the right hon. Gentleman will brief one of his hon. Friends to deploy that point later.

Mr. Gordon Walker

I have just deployed it myself.

Mr. Iremonger

The third feature of the economic background that I welcome is the proposed inquiry by the Radcliffe Committee into the working of our monetary and credit system. I make the suggestion to my right hon. Friend, which ties in with my earlier observation that it is a great pity that the majority of our people judge the Budget by such a narrow and purely personal standard. It would be most useful not only if the Radcliffe Committee could issue its Report but if, through the agency of the Treasury's economic information division, the Government could boil down and reproduce the Report in a way that would make sense to ordinary people.

The monetary policy of any Government is enormously important. It would be most helpful if it could be understood by ordinary people. Nobody, unless he be a professional economist or proposing to follow a career in banking, has any idea what it is all about. People think that it is all slightly fishy because it has something to do with the money market. They do not see how it can possibly have any effect on their ordinary lives. Their horizon is bound by taxes, whereas to some extent taxes are a secondary and minor part of the Government's economic and financial policy. If the Radcliffe Committee manages to sort out from the mess something which can be presented in a logical and coherent way, the general public should be given the benefit of its deliberations. I am thinking of something on a less highbrow level than the "Bulletin for Industry" published by the Treasury, which so regularly presents the realities of the situation with first-class clarity of expression and really brilliant exposition by diagrams and literary illustration. Something like that would be very helpful. I hope that the Chancellor will consider that suggestion.

I should also like to know whether the Radcliffe Committee's terms of reference include or, if they do not include, could be extended to provide for, an inquiry into the financial structure and outlook of the sterling area as a whole, now and in the future. We are moving into a difficult period in which some of our "children", who have been out working but living at home and bringing home their pay-packets, will toddle off on their own. Ghana and Malaya, who have been substantial contributors to the family budget, may take a slightly different view of their family responsibilities when they get older.

The Radcliffe Committee would do well to examine the ramifications and implications of the sterling area as a whole, because the monetary policy of this country cannot be regarded in isolation. It is essentially part of the monetary policy of half the world. Upon that half depends our prosperity, whilst the prosperity of that half in turn depends upon ours. I hope that the Radcliffe Committee's terms of reference will not be too narrow or, if they are, that they will be extended in the way I suggest.

Why stop at the monetary system? My right hon. Friend has been at the Treasury three months. Some of us think that he has three years to go. He is a new broom and I hope that he will take the opportunity to spring clean. This would be a good time to set about a thorough spring cleaning of the national economic household. I will not give my hon. Friend the Financial Secretary to the Treasury a long list, but I should like to give him two objects in a list of objects which might come under the broom. He might go round the furniture a little and move some of the larger objects and look behind them.

Mr. George Thomas (Cardiff, West)

Too much wood there?

Mr. Iremonger

If the hon. Member wants to be funny he might think of a spring cleaning at Transport House and do something about the portrait of Karl Marx which is a white elephant above the mantelpiece there.

My hon. Friend might remove some of the cumbersome furniture in the taxation system on which the dust has begun to collect. If earning and rewards of earning are on the whole good things, and if consumption and spending and failure to invest are on the whole bad things, it seems slightly crazy that the whole emphasis of the tax system should be on earning and only a very minor part of it should be on spending.

I am not sure that one would not be better to start from the conception that we should abolish Income Tax altogether, and impose all taxation on what people spend. That is obviously an absurd length to which to take the argument, but if one starts from that point of view and works back, and asks to what extent should we pay Income Tax at all, that might be starting at the right end. At any rate, in the spring cleaning that is something at which the Chancellor might look.

The other thing which it would he good to look at on the scale of the Radcliffe Committee is the whole question of wages, productivity and prices. Here I hope that hon. Gentlemen opposite will not jump down my throat, because I am about to mention the trade unions, and that is considered to be sacrilege on the part of anyone on this side of the Committee. I want to make my position clear. I do not regard the business of the trade unions as being the prerogative of any side or of any section of the House of Commons. They are a fundamental part of our national economy, and anything they do or do not do is of enormous importance to everyone else in the country.

I am merely an amateur in the matter. looking at it from the outside, but there are certain aspects which are brought home to me through the attitude of constituents of mine who pin me down upon it, and so I have to bring my mind to bear upon it. This matter affects the Chancellor, because it goes to the root of our national prosperity and economy.

I do not think it would he regarded as unacceptable to either side of the Committee if one said that the attitude of trade unions and employers is outdated and irrelevant to the situation of today. I have a suspicion, too, that the entire organisation of the trade union movement is utterly inadequate to the industrial circumstances of today. I think that the organisation by district branches is ineffective when we think that the real power seems to lie with the shop stewards who, as far as I can make out, are not answerable in a disciplinary way to their district committees or to any part of the trade union hierarchy. I must say that if the hon. Member for Rotherham (Mr. Jack Jones) was as typical of the entire trade union movement as he is typical of the best part of it, our production problems would be solved instantly—

Mr. Ian Mikardo (Reading)

There are bad employers.

Mr. Iremonger

I am not arguing that there are not bad employers, but I am suggesting that the same inquiry should be made into the subject of labour relations as is to be made into the subject of monetary policy and credit. It might then become apparent that we have within the walls of our city the Trojan horse containing the enemy, for the trade union movement is a Trojan horse which is loaded with the agents of our principal competitors and of our sworn and implacable enemies. I do not think any hon. Member would dispute that, and it is no discredit to any loyal trade unionist to say that this is so. Much as they may resent anyone but themselves pointing it out, I do not believe they are complacent about it.

I think it is time that some initiative was taken, and I believe that the trade union movement itself would welcome this as much as anybody, because we are today in the position of a man who started out on a long journey in a snowstorm wearing his overcoat but who is now trying to finish the journey in a heat wave. We are trying to deal with conditions of boom—which has its problems just as much as slump—with the mentality of the slump, and the relationship between trade unions and employers all too often is conditioned by the mentality of the slump. Frankly, I do not wonder. If I had been involved, I should feel the same to a certain extent; but it is not good enough, and it is having a bad effect on the national economy.

It is very difficult to persuade people that the enemy now is not low wages, that the enemy now is not unemployment. The enemy is no less frightful for the nation as a whole and no less frightful for individual members of it. The enemy is inflation, which will eventually end in devaluation. So long as it is merely inflation, it will only hurt some. When it comes to devaluation, it will hurt us all.

I am very well aware of the peculiar malignancy of the problems of boom. It is very nasty. The victims of a boom, during which money falls in value and prices rise, are the people living on small fixed incomes, and the retired people about whom we hear so much. The victims of slump are the unemployed outside the employment exchanges, with empty hands, whose lives are ruined by years of idleness and misery.

Yet both situations have their victims, and the trouble today is that the victims of yesterday are all right but getting still all the sympathy, whereas the real victims of today are still regarded as the idle and comfortable rich, though they are actually feeling all the pinch. One of the most interesting things I have found in ten years' active interest in politics is this. When I first went on to public platforms and faced my political opponents, many of whom were supporters of the right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker), I could not help being shocked at the peculiar kind of pathological bitterness which had obviously been ground into their souls, not by the Tory Party but by the circumstances they had suffered. They were not open to reason or to argument. Their souls were soured and their minds were poisoned by bitterness. There was nothing one could do about it except to notice it and, if possible, to try to feel some compassion for them.

Dr. Horace King (Southampton, Itchen)

Thanks very much.

Mr. Iremonger

I am not blaming them. I am an Englishman and they are my fellow countrymen. If they suffer, I suffer. If my attempts to help them are unsuccessful or are scorned, I take the blame for it but I feel no bitterness about it.

Today, what is interesting is that just that kind of utterly irrational, poisonous bitterness is now beginning to show its head among the kind of people who, in the thirties, were the good boys, the lucky boys, the snug boys and the retired people. They are not very rich people. They are comfortable, decent middle-class people with no malice in their hearts, who just happened not to be the victims of the circumstances of which the other chaps were victims. Now they are the victims. Now, year after year, they are finding that they cannot quite get by any more, and so they are having to sell things. They are no longer able to maintain their standard of living. It may not be the stark tragedy which stalks into the homes of those on the bread line but in this imperfect world it does not make people less bitter. One finds in the type of person who is now suffering that same kind of passionate, irrational bitterness, which shows that something is wrong and that they are really suffering.

Therefore, I say to my right hon. Friend the Chancellor as I conclude that the battle is not only the battle for the£and for national survival, but it is the battle for the balance, the well-being, the mental harmony of an important section of our people. If there is poisonous bitterness in the souls of any one important section of our people, it embitters and poisons the soul of the nation as a whole, and that is as important a consideration as the value of the£Ultimately it is more important even in practical terms than the actual physical and tangible results of the economy which it is the duty of the Chancellor to protect.

8.10 p.m.

Dr. Horace King (Southampton, Itchen)

The hon. Member for Ilford, North (Mr. Iremonger) has raised such a number of fascinating topics that I am tempted to follow him for the rest of the evening. I can refer, in passing, to only one or two. I would ask him not to imagine that it is purely by chance that hon. Members on this side of the Committee claim a special interest in the trade union movement and have been interested throughout its existence. The Labour Party was formed by the trade union movement about sixty years ago to protect the movement against the political parties of the day. and especially against the Conservative Party.

Mr. Iremonger

I am not trying to make a party point, but I think that, in all fairness, the hon. Gentleman might concede, in so far as I am a Conservative, that what he and his hon. Friends fought against, if one must put it in mean party terms, were the Whigs.

Dr. King

It was not only the Whigs. It was also in this century. The hon. Gentleman must refer to the period between the wars and look at the Trade Disputes and Trade Unions Act. He must go back to the beginning of the century and see how two anti-trade union Acts passed in the House of Commons created the Labour Party and brought the trade unionists out of the Liberal Party to support the independent-Socialist move ment of Keir Hardie and built up this great, new independent political force. When he speaks of the bitterness of some of the constituents whom he represents in the House of Commons, I would ask him sincerely not to be patronising.

Mr. Ede (South Shields)

Hear, hear.

Dr. King

Let the hon. Member remember the behaviour of members of his own party at his own party conference, when an hon. Member was attempting to state the case for the abolition of capital punishment, and the bitterness on this subject shown there. Let him not be mealy-mouthed, either. We fight a political battle in the House of Commons and from one end of the country to the other, and that fight is inside a common belief in democracy, and apart from that common belief in democracy, the fight must continue to be a frank and sometimes angry, one on each side. If it has become more bitter in recent months, those of us who regret the intensification of the bitterness charge the Government with being the cause of much of it.

I agree with the hon. Gentleman that we ought to think about the Budget from the point of view of its effects on Britain. The whole of the debate so far today has been on that aspect. The trouble is that we have different opinions about what is good for Britain. One hon. Member opposite said that the Budget gives£100 million to the nation. The view of this side of the Committee is that it has taken£100 million from a great part of the nation and has given it to a small part. The Budget is merely continuing the process of the redistribution of the national income as between class and class, and in favour of the richer group.

I gather from his speech that the hon. Member takes the view that when financial concessions are given to Surtax payers more spending money in the hands of Surtax payers is not inflationary, but that to leave money in the hands of the mass of the people is inflationary. The hon. Gentleman welcomes the gift to the Surtax payers. Last year, he voted for the withdrawal of spending money from the mass of the people in supporting the Purchase Tax imposed in the last Budget, he now welcomes the reversal of that Purchase Tax policy. I would remind him that the Government have taken off only half of the Purchase Tax which they imposed last year.

What the hon. Gentleman said about defence was utterly sound. If there is one thing that all economists in every country in the world agree upon it is that defence expenditure is inflationary, is wasteful, and that the trouble with the economies of the world is that they carry a burden of useless expenditure in respect of men and materials when that expenditure could be applied to something much more profitable. We, too, wish to reduce the burden of defence.

Whenever I intervene in a debate on taxation I feel that both sides of the House of Commons are stating their case with all the passions of party that they possess and that my hon. Friend the Member for Sowerby (Mr. Houghton) acts as a kind of moderator, for no hon. Member has vaster experience and wiser judgment an taxation problems than he has. As he spoke today about the virtues of the Surtax concession, I felt a little relief as I do when I read a Galsworthy play. I find Galsworthy frighteningly impartial. He even-handedly states the case for both sides, but finally comes down on the side of social justice and the weak. I was relieved when, at the end of his speech, my hon. Friend came down on the side of the case for the Opposition.

The hon. Member for Bodmin (Mr. D. Marshall) stated in simple form the Chancellor's and the Government's case for the Surtax concession. Roughly speaking, it is that the greatness of Britain has been built up, and will be saved in the future, by the efforts of a handful of men of outstanding ability, a sort of heroic conception of history. It is believed that the handful of able people are all rich and are at the moment to be found in the top level of the Surtax group, and that, if we are to save Britain's economy, this is the time to do something to benefit that group. The Government argue that men of outstanding ability need a cash inducement if they are to give the country all they have to give.

I put against that almost the converse view. I do not read British history as being the achievement merely of outstanding figures. It is an old story that in wars Britons lose every battle except the last, the exception to which was the recent Suez venture, in which we won the single battle first and then lost, and shall continue to lose bitterly for a long time yet, what followed that battle. If we won the last battle in our wars, it was not because of the brilliance of our achievements and not because of men of outstanding ability so much as because of the character and determination of our people. It was said that we won an eighteenth century battle against the French, although we were beaten by all the rules of war, because, as the French general lamented, "The British never know when they are beaten".

If Britain has survived and is to survive the bitter economic struggle that she is facing today she will do so not only because of the efforts of her most able men, but also through the efforts of ordinary, average people who have made their contribution in every incident involving the survival of this country during the last century. Many of those ordinary people are the old-age pensioners, for whom I hope to say a word before I finish.

I would also say, in answer to the Government's case, that not all the most able people are in the rich category which is getting millions of pounds out of the Budget. Not all the rich people who will benefit by the Budget are even able, unless, in ability, we include the ability to choose the right kind of parent and the ability to get into a favourable financial set of circumstances.

The people on whom Britain depends to get her through, the most able people, even on the Government's own argument, are not all in this Surtax category. I go further. The men of great ability in this country who have their contribution to make to the saving of Britain, the great men of Britain, will continue to make that contribution under the minor irritants of what they regard as excessive Surtax.

We could not stop Elgar composing symphonies because he did not get enough financial rewards; we could not stop Lord Nuffield being a captain of industry because he did not like the Labour Party's taxation schemes under Sir Stafford Cripps. Indeed, Nuffield is a case in point, because he went on working tremendously hard, although he did not know what to do with the money that he was getting in spite of the taxes he had to pay.

No Budget incentive would have made Fleming a greater man than he was. No incentive in the Budget will make the young scientist a greater scientist than he would have been, if he really is a great scientist. What Surtax concession would have added to the incentive, added the necessary urge to the right hon. Friend of all of us, the Member for Woodford (Sir W. Churchill) in those years when he had the major direction of this country in a war for survival? Indeed, can the Chancellor lay his hand on his heart and say that as a result of the incentives which he gets, the cash benefit which he gets out of this Budget he will be a better Chancellor than he would have been if he had not provided this incentive for himself?

We shall be saved not only by ability and by leadership, but also by the mass ability of our people, by the mass character of our people. The climate in which the character of the British people will develop best is a socially just climate, and as the Budget continues the process of moving us away from the degree of social justice which we achieved up to 1950 it is a bad Budget. If those are the two conceptions of what is good for Britain which divide the House of Commons and which make us sit opposite each other. as two parties always have done in the House of Commons, then we believe that our case is proved by the economic achievements of Britain under the Socialist Chancellor. the late Sir Stafford Cripps.

It was as we moved in the sense of building a more socially just Britain and directing the nations' efforts, as we thought, in the interests of the mass of the people even if they conflicted with the interests of the very rich people, that Britain built an economic strength after the war on which Tory Chancellors since 1950 have had to continue with their work.

It would be unfair not to congratulate the Chancellor on the good things in the Budget before I return to the topic of Surtax. I welcome the abolition of Entertainments Duty on the live theatre. It is a step in the right direction and I hope that when we get down to the Finance Bill we can interest the Chancellor in destroying all the remnants in our taxation system of anti-cultural taxation.

One of these is the tax on musical instruments, which is bad for music arid bad for a little industry which, purely on the economic side, is building up an important export trade; and it is bad for all musicians, the last of the professions which has to pay a tax on the tools of its trade. I hope that some of the theatres which have been closing down in the last years will now open again. I think that both sides of the Committee enjoyed seeing a bill outside a London theatre which said that the theatre, which had closed down because of entertainments tax, was now to be opened again.

Britain still plays a not inconsiderable rô le in the world of music, drama, acting and ballet. Against the competition of the mechanical reproduction of art forms, the "live" artist is engaged in a desperate struggle, particularly the "live" little artist, the ordinary, average artist. No Chancellor, no matter how Philistine he might be, could, by his Budgets, interfere with the success of an Olivier or a Fonteyn, but the ordinary little fellow in the music world, the little fellow in the theatre, the little creative artist, the one who is not a Shakespeare we do not have a Shakespeare at the moment—the minor dramatist, those are the people who are engaged in a life and death struggle for existence.

Hon. Members will remember that theatres used to run at a loss merely for the privilege of acting as voluntary tax collectors on behalf of Her Majesty's Government. Entertainments tax was helping to strangle the theatre. I hope that the theatre will now take some encouragement. I go further. I hope that some day it will be possible more positively to help "live" entertainment, "live" culture, the enjoyment of arts which are outside the mechanical arts and which face a very difficult time in the next thirty or forty years.

I am glad about the increased children's allowances and very glad indeed that the Royal Commission's recommendations in favour of fiscally trying to help the married man with children are being adopted by the Government. I must point out, however, that I regard it as characteristic of the Government that the man who is to be helped with the education of his child is the man who can provide that education with the least sacrifice to himself.

I will not enter into party political arguments as to whether he ought to want to provide it himself when the State offers him everything free in the way of education. but even assuming that he despises the State system and wants to have his child educated in the private sector—which includes bits of the public sector which has been stolen by the private sector; consisting of some of the older public schools—there is no comparison between the sacrifice made by the man earning£10,000 a year, who sends his hon to an expensive private school, and that made by very poor parents who allow their able son to stay on at grammar school when he might be earning his own living—and earning a fantastically exaggerated wage.

I wish that all parties and all sections of the community had conspired to keep down the wages of young people. because at least one of the causes of youthful delinquency is the fact that young children of 16 and 17 years of age are receiving adults' wages and really do not know what to do with them. The sacrifice made by the poor parent who allows his child to remain at grammar school, or to go to a university, is very often far greater than that made by the rich man who is helped by the Budget. That is why my right hon. Friend yesterday referred to the need for an increase in the maintenance grants to children in grammar schools. If the Chancellor had£100 million to throw away he might have devoted£2 million or£3 million to this worthy purpose, seeing that he was prepared to help richer people educate their children.

I would remind the Chancellor that if it was not this Government it was its predecessor, of the same colour, which lowered the income level at which parents are compelled to contribute to the education of their children at universities. We all welcome a provision which will help a man, even a rich man, to send his children to school, but it was a Tory Government which lowered the university grant scale and made some of the lower income groups make a contribution to the cost of sending their children to college.

We are gradually introducing—some of us think that it is rather too gradual a process—all kinds of recommendations made by the Royal Commission and the experts who have been examining our fiscal system. I will mention only one very tiny detail to the Chancellor. I ask him to remember that among the detailed recommendations of the Commission was the suggestion that the teacher, as a professional man, had a case when he asked for an expense allowance for his necessary yearly expenditure upon books. The tools of the trade of the teacher are his books, but he is not allowed to make any claim for that necessary expenditure, which is part of the expenses of his profession. He is almost alone among the professions in that respect.

I am delighted that the Chancellor has relieved some of the financial burdens of one group of old-age pensioners by lifting the£5 a week pensioner out of the range of Income Tax altogether. I have been one of those who have asked for this concession for a long time, and even now I think that during our discussion of the Finance Bill we might consider whether that£250 might not be raised to£300. Let us remember that most of this group arc people who are watching their incomes steadily shrink. Ever since they retired their incomes have shrunk, from what were comfortable pensions to less than half their original value.

I was surprised when an hon. Member opposite suggested that these people were worse off under the Labour Government, when every hon. Member knows, as a matter of mathematics and not of politics, that the worth of the fixed pension has steadily decreased as the Government have failed to implement their promise to make the£worth more than it was when they took over office. They have made it worth less and now console themselves by saying that the speed at which it is reducing in value is slowing down.

I admire the work which has been done by the hon. Member for Tynemouth (Dame Irene Ward), month in and month out, on behalf of people with fixed incomes, and I warmly and sincerely congratulate the Chancellor for doing something for them. But what an inconsistent Government this is—I am almost inclined to say what a dishonest Government this is. This tax relief gives back only a fraction of what some of even this very small group of old-age pensioners will be robbed of by the Rent Bill which we passed three or four weeks ago.

During the Third Reading debate on that Bill I quoted the sad case of two old-age pensioners in Southampton, a man of 76, a permanent invalid, and a woman of 70, who is crippled for half the year. Hon. Members opposite were shocked, and tried to comfort me with the thought that these old people did not have to face the moderate increase in their rent which I had thought that they would have to face.

I now find that these old-age pensioners, who were paying£52 a year—£1 a week—in rent will have to pay£72 a year in rent; that the Rent Bill adds£20 a year to their finance burden. The financial policy of the Government has added to their rate burden and the removal of the food subsidies has added to their food costs. What this Government give—I am sure most generously and in a very kindly way—on the one hand, is taken away before it has been given.

Even though this group is to benefit by the Budget concession, what many of them will receive is more than wiped out by other political acts of the same Government. Let us be clear about the fact that during the last 12 months the measures of this Government have depressed the standard of living of the very group of people whom the Prime Minister. in his speech on the radio at the time he took office, said he wanted to help, and whom the Chancellor has helped by his Budget, unless they are people on fixed incomes who derive their incomes from investment and properties. But there is a much bigger and worse off group. Some of the hardest hit, the real sufferers from this last year of Tory policy, are the ordinary old-age pensioners who, on looking for bread, have been cast a stone by the Government in the form of this Budget.

I can assure the Chancellor that some of the old-age pensioners who saw his television broadcast thought that there was something for them in this Budget. It was not until they read the newspapers the following morning that they realised that this Budget did not affect them at all. I know that the Budget is not the instrument to use to increase pensions or National Assistance, but it is the instrument by which Parliament will—I hope very soon—provide the money for improving the conditions of pensioners. After all, this is the great money-providing occasion; this is the occasion when the Chancellor should have said some-thing to bring a gleam of hope and some real satisfaction to millions of people who are petitioning nearly every Member of Parliament. I understand that, through hon. Members on both sides of the Committee, the Minister of Pensions and National Insurance is receiving humble petitions from hundreds of thousands of people on behalf of the old-age pensioners.

The cleavage between us is the fact that, to the Government, in the forefront of the queue at present stands Noel Coward's "Poor little rich man." It is the woes of the rich people which have softened the heart of the Chancellor. While he gives£4 million in tax relief to that group of old people with fixed incomes, he can give six or seven times that amount of money in the form of Surtax concessions to people who were already doing not so badly.

Why does the right hon. Gentleman do it? It is on the argument, which we have heard running through the whole of the debate, that it is done in the sacred name of "incentive." Ever since the Tory Industrial Charter was printed—I admire it as a political document and I hope that at some time it will become the policy of the Conservative Party—the word "incentive" has, to a Tory, meant an incentive for the rich to become richer. We heard the argument this afternoon from the hon. Member for Harwich (Mr. Ridsdale)—who is not in the Committee now—that if steel shares bore a fixed interest of 3½ per cent. there was no incentive to produce steel. Far this reason the Government denationalised steel so that it could join its companions in the racket of dividends, capital gains and bonus shares, which the Conservative Party thinks was laid down in the Decalogue as the ideal way of running our economy.

Hon. Members argue that if a man with a nominal income of£200 per week is allowed to draw only£120 a week he will not wish to work so hard. As an incentive to work hard he must, therefore, be given a whacking tax relief in the Budget, although he has already received a number of concessions in previous Conservative Budgets. On the other hand, if a worker seeks a rise in the real wages which he receives for his labour he has to be resisted, even if the economy is jeopardised by bitter industrial disputes. There is no talk of incentives in that connection.

I was interested to hear this very point naively expressed by the hon. Member for Harwich, who, apparently, has Ted Hill as one of his constituents. He wants to be able to say to Ted Hill, "Do not oppose this Budget and be moderate in your wage demands." I can imagine what Ted Hill would say to the hon. Member. I can imagine what the workers whose interests Ted Hill has to protect would say to Ted Hill if he said to them, "In the name of incentives, we must pour out millions of pounds to the Surtax payer, but you must not apply the same argument to yourselves. High wages are the kind of incentive which the Government would not approve of."

Another interesting feature of the Surtax concessions must be mentioned. I do not like the words "middle class." I hope that some day we shall build a classless society. Incidentally we are much nearer to it than is the Soviet Union. Some day we shall build a society in which there are no vestiges of class structure such as still linger in this country. Things being as they are, most people who are not labourers or mechanics like to think that they belong to the middle class. The average Conservative voter does not like to think of the Conservative Party as a party of plutocrats, aristocrats, big businesses and finance corporations, but as the party of the great middle class to which he belongs and to which the respectable if misguided trade unionist sometimes belongs.

The little shop man earning£10 or£l1 a week, the schoolmaster, the professor, the little factory manager, the scientist, the musician and even the Member of Parliament, each thinks that he, too, belongs to the great middle class, which sings its own praises effectively with a certain amount of justification. The class includes the clergyman. Some day somebody, somewhere, will do something for the clergy, who must be among the most underpaid section of the old lower middle class. The two worst paid workers are the shepherds of souls and the shepherds of sheep, Pastors and farm workers are grossly underpaid.

The Budget hives off what the Government think is the true middle class, the real people of Britain, the backbone of the country. It has been said that Waterloo was won on the playing fields of Eton. Perish the thought ", says the Chancellor of the Exchequer. "It was won by the men who earn more than£2,000 a year. The true worth of a man is his financial position".

Britain faces a fierce economic struggle. I am just back from Western Germany, which is pulling herself up by her own bootstrings and is staging a magnificent recovery. If we are to compete with Western Germany or, even more important if we are to co-operate with Western Germany and France in the European community, it will no doubt be partly due to the number of first-class brains we manage to produce and, having produced them, allow them to function, even if they are in one of the wrong stratas of society. It will also depend on giving full opportunity to the second and third-class brains, to the skilled hand and eye, to those with physical strength whose gift to the community is just that, and to the ordinary chap whose only gift to the community is the best he has got—an honest day's work. Those need incentives just as much as the richest Surtax payer in the country.

I believe that the best incentive of all is social justice and that the best incentive at this moment to the workers of Britain would be to care adequately for our old people. The best incentive that we could give for years ahead is the provision of a socially just pension scheme so that every citizen who had poured himself out in the service of the community could look to the evening of his life with some degree of confidence.

A Chancellor with money to give away at this moment should give it to the whole of Britain, through better social services, better insurance provision, better distribution of the goods produced by the workers, or give it to the poorest people in Britain, to the old people whose work in the past fifty years and in two wars have made it possible for any Chancellor to present any Budget at all.

Instead of doing that the Chancellor has selected as his beneficiaries the people who get as much in a week as the old-age pensioner gets in a year, whether they earn it or not. Whether some of them earn it could be questioned. He hands them in tax relief alone more than the old-age pensioner gets to live on.

A favourite question about the Budget is whether it is an Election Budget. I believe that it is not unconnected with the next Election. I believe that this Budget shows that the Tory Party thinks that it will lose the next Election. The redistribution of the national income which it began very timidly when it had a small majority in the House of Commons—a trickle in its first years of policy—has developed into a stream this last year which is to be continued as rapidly as possible so long as it has the support of the majority of the House of Commons and, I believe, to the anger and the opposition of the vast majority of the electors.

Whatever the Government do in this matter, I do not think that they can reconcile with their own consciences the handing of this gift to the Surtax payer unless they do something to relieve the need of the old-age pensioners who are petitioning them in such great numbers, and do it at once.

8.48 p.m.

Mr. John Hall (Wycombe)

The hon. Member for Itchen (Dr. King) finished his speech by suggesting that this Budget, and especially that part of it which deals with relief to Surtax payers, may not be altogether unconnected with the next Election. It has been said that there are some 300,000 Surtax payers, and as some of those Surtax payers happen to be on the other side of the Committee we are not likely to get any votes from them. I do not think we are likely to get much electoral advantage out of the Budget.

Dr. King

The hon. Gentleman has not understood what I said. I said that it is because the Government know that they have lost the next Election that they are carrying out as much redistribution of the national wealth as they can while the going is good.

Mr. Hall

The hon. Member must think this Government give up very quickly, because we have several years to go before we need face the electorate again. By that time the success of the Government's measures will make sure that we win the next Election and are back in power for the third time.

When listening to the hon. Member, I searched for some point of agreement with him. It is always better to have some point upon which we can agree. I must confess that I found it difficult, but I join with him in welcoming the abolition of Entertainments Duty on the living theatre. I support him in his plea for the abolition of Purchase Tax on musical instruments. I always support the abolition of Purchase Tax on anything, and certainly on musical instruments. I found it difficult to find anything else on which I could agree with the hon. Member in his speech.

The hon. Member mentioned child allowances and said that the greatest benefit would go to the wealthiest who were most able to pay—if they wished to pay—for the education of their children. It has been said in the debate that 80 per cent. of those who will get relief under the Surtax concessions are those receiving between£2,000 and£4,000 a year incomes. The hon. Member, who has a great connection with the educational world, will know that many people whose incomes are between£2,000 or£4,000 find it impossible to send their sons or daughters to university, especially if they have more than one. because they are outside the category of those who receive grants given for university scholarships. They find that people with lessor incomes are able to send two or more children who have been successful in passing examinations to university, whereas those with greater incomes are unable to do so. Those people will now get some small relief.

It is a well-known saying that it is the duty of the Opposition to oppose. Certainly over the last two or three days the Opposition has accepted that duty with out any noticeable reluctance. In fact, one or two right hon. and hon. Members opposite, particularly the right hen. Member for Huyton (Mr. H. Wilson) in his speech yesterday, accepted that duty not only with gusto but with every evidence of great personal enjoyment.

I do not think any Chancellor need ever worry about the risk of getting a swollen head. Whatever he does he is bound to be severely criticised. If he takes tax off it is either too little or too much, or it is taken off the wrong things. If he puts tax on his personal unpopularity graph rises steeply, unless he increases taxation so savagely that he is called in the Press, "The Iron Chancellor." Then he gains the great respect and honour which the British people give to anyone who hits them hard. I have often thought that if the Archangel Gabriel presented a Budget, though through his personality and commanding presence he might awe the Committee into silence and stifle criticism of the Budget, he would certainly need the help of the heavenly host to get it through the Division Lobby.

Mr. Houghton

It is because he does not introduce Budgets that he is the Archangel Gabriel.

Mr. Hall

There may be other reasons which I shall not go into at the moment. I am sure my right hon. Friend is not disappointed that he has been criticised in that way. He has been criticised by the Opposition and by representatives of sectional interests who feel that their particular interests have not received the attention they deserve. On the other hand, I think, his Budget has been welcomed by more responsible opinion throughout the country as another step in the right direction.

The greater part of the debate today, when it has not been dealing with industrial relations, has dealt with the question of Surtax. As one who proposed an Amendment to the Finance Bill last year in which I suggested that personal allowances, child allowances and earned income relief might be carried through to Surtax ranges, I naturally welcome the Chancellor's proposals. They have gone rather further in one direction than I anticipated, or even asked last year that they should. and have not gone so far in another direction. Nevertheless, there are some capable and energetic people who must welcome this relief. They are a very small number, and that shows the courage the Government have displayed, as this proposal is something which was almost bound to attract opposition and does not provide a great electoral advantage.

I wish people would stop talking about those earning£2,000 a year as being rich men. When we remember that£2,000 a year today is equivalent to little more than£600 a year in 1938 and that£3,000 a year is equivalent to no more than£800 a year in 1938, we can hardly describe this class of people as rich men. We have heard that the greater benefits will go to those between£2,000 and£4,000 a year, since these are the greatest number of people concerned, and it is therefore in no sense a class Budget or a Budget designed to help those whom we call wealthy men. The hon. Member for Sowerby dealt fairly with the point this afternoon, and I thought he introduced a sense of proportion into this matter.

The line of attack which has been followed by the Opposition is quite obvious. In addition to their attacking the Budget as one in favour of the so-called rich men, we have had the cry from the heart about the plight of the old-age pensioner and the fact that he has not been mentioned at all in the Budget. I am as well aware as any hon. Member. I think, of the difficulties which face the old-age pensioner who has little or nothing apart from his pension on which to live. Those who have nothing but their pensions also receive National Assistance relief, but there are very many people who find life a very great struggle.

Nevertheless. hon. Members must not run away with the idea that all old-age pensioners are in that plight. Any one of us here is entitled to draw the old-age pension when he retires at 65. I do not imagine that the right hon. Member for Vauxhall (Mr. G. R. Strauss) or the right hon. Member for Ipswich (Mr. Stokes) will find it very difficult to live on the old-age pension when he reaches the age of 65 and retires. It is only those people who have little or no income apart from the old-age pension who feel the real pinch.

When we discuss the whole question of old-age pensions, we must remember that the problem which will face this country not very far ahead will be very great. As the proportion of the population beyond retirement age increases in relation to the proportion at working age, we shall face a very serious economic challenge, which will not be easy to meet. It seems to me that we ought to reconsider the whole machinery and the method of providing for and paying old-age pensions. We ought to consider whether we should have a different pension scheme tied to existing industrial schemes which could relate the retirement pension more closely to the salary or earnings at the time men stop work and which would not be a continuing and ever-increasing burden on the Exchequer but would be paid for out of industrial and personal contributions throughout the lifetime of the worker.

I do not want to develop the point now, and I refer to it merely because I believe the problem of old-age pensions is outside this Budget. We should not try to condemn the Chancellor for not having mentioned old-age pensions in a Budget of this kind when we know full well that the subject is dealt with in another form of legislation.

May I deal with one or two omissions from the Budget and one or two points which I should have liked to have seen developed slightly differently? First, there is the question of Purchase Tax reliefs. Hon. Members opposite have pointed out that these represent only removing part of what was previously imposed, but the reliefs go much further than that and remove half of Purchase Tax from many items which had not been relieved previously. One amongst these to which I want to refer is furniture contained in Group 11, on which the Purchase Tax rate is reduced from 30 per cent. to 15 per cent. and which includes office and hall furniture. I find it difficult to understand why hall furniture should be included in a group which still pays 15 per cent. Purchase Tax when the rest of the furniture in the house, excluding garden furniture—which is in Group 16, with which I will deal in a moment—pays 5 per cent. What is there about a hat stand or an umbrella stand or a coat rack which attracts a 15 per cent. tax to it, whereas the rest of the furniture attracts only a 5 per cent. tax? I wish my right hon. Friend would look at that again to see whether that class of furniture could not be brought into the general group of furniture which attracts a tax of 5 per cent.

Garden furniture is in Group 16, and the tax on this is left at 30 per cent. for some reason beyond my comprehension. Why should we leave that class alone and not reduce the tax on it in common with others? There are many forms of garden furniture, much of which is used for domestic purposes, quite apart from use in the garden or in hotels. I hope this point will be considered in Committee.

During the course of his speech, the Chancellor referred to Estate Duty and said that he was stopping a loophole which at present existed. I agree that that loophole should be stopped; it has allowed a certain amount of evasion of tax, and some correction was very much needed. I was, however, rather surprised and a little sorry that he did not go a little further. Estate Duty, as it operates today, is not only penal in its effect but is destructive of real capital. I much prefer the form of legacy duty, which was, I think, brought to an end by the late Sir Stafford Cripps, under which duty was paid upon the legacy in the hand of the legatee. The present system means that we destroy capital. The legacy duty system means that one spreads one's property over a larger number of people, which is, I feel, more in accordance with the Conservative philosophy of a property-owning democracy.

I should like to quote some words of Professor Robbins, who puts the matter much more exactly than any words of mine: I have great objection to a system which simply appropriates property, uses the proceeds for current expenditure, and leaves more and more of the functions which used to be discharged by property to be discharged, if they are discharged at all, by the State. One other feature of the present Estate Duty system is the "five-year gamble." At the present moment, if a gift is made to an individual, and the donor dies within five years, duty has to be paid on the total value of the gift at the date of the death. This can lead to a great deal of hardship and difficulty. I should like to develop the suggestion which has been made, that duty should be payable in proportion to the number of years between the date of the gift and the date of the death. Such a method would help to overcome an injustice which occurs from time to time, when a gift is made, which is then sold or disposed of in some way shortly afterwards at one price arid then, when valued at the date of the death, is found to have doubled, trebled, or even quadrupled in price so that the duty at the date of the death is far more than the amount received in the original gift. That is an anomaly which should be removed.

My right hon. Friend the Chancellor referred to his direction to the Capital Issues Committee, saying that he wished to direct them that, unless they were satisfied that there were exceptional features in an application for capital which made it impossible for the applicant to raise the loan from non-banking sources, that capital should be raised in the ordinary funding operation, by going to the market. That is how I understood it. There are certain difficulties here. A small firm, especially a private company, has difficulty in going to the market to raise money. Its difficulties are added to by the fact that, if it raises money by, let us say, a share issue, it has to pay not only interest on the loan in dividend but has also to pay distributed profits tax on the dividend, thus adding to the cost of the borrowing. One might overcome that if one of the suggestions which was examined by the Royal Commission were adopted, that is, if in addition to debenture interest being allowable as a charge to be set against distributed profits tax interest on preference shares should be allowed also.

Finally, I wonder if my right hon. Friend really thinks it right to leave this complex problem of distributed Profits Tax and undistributed Profits Tax unresolved. It is very complicated, I know, but the present system creates many anomalies. To mention but one, in many companies there has been a building up of a very heavy liability for undistributed Profits Tax which will give some companies a great shock at some time in the future. There is a very strong case for abolishing the two kinds of Profits Tax and having one in their place.

In general, I welcome the Budget, and particularly I applaud the way in which my right hon. Friend put it across to the House in his speech, which I thought wholly admirable. The country will not take the view of the Budget which has been taken by some hon. Gentlemen opposite. In fact, their difficulty in mounting really trenchant arguments against it are shown by the fact that the debate today has taken a form different from direct criticism of the Budget, but has been largely devoted to a consideration of matters of very grave national importance. that is to say, industrial relations, on which, indeed, any Budget must depend. What it has shown, I think, is a certain bankruptcy of ideas as to what form the attack should take. I think that the Budget will be welcomed as a step towards further liberation, and a step towards a further reduction of the general burden of taxation on the country as a whole, and for that reason I support it.

9.5 p.m.

Mr. Ian Mikardo (Reading)

I shall take only a very few minutes, as I have only a single point to make. The hon. Member for Wycombe (Mr. John Hall), like others of his hon. Friends, spoke of the tax reliefs which are being given to the people in the£2,000-a-year class and upwards as being an incentive, and, therefore, in the national interest.

I want to say a word about the class of people who are, I think, extremely important to our productive effort and economy and who feel particularly aggrieved by this Budget. They are the ranks of junior management the young technicians, the young scientists, the really productive people, the vital spot at the heart of our economy, most of whom are in the salary range between£1,200 and£2,000 a year. Most of them already feel themselves to be in a process of being rapidly disadvantaged both in relation to the workers whom they supervised, at one end of the scale, and in relation to higher management at the other end of the scale. They will now see the higher management getting a great deal more money, on the ground of incentive, while they themselves are being left out.

At this stage, I do not make any cornment—many of my hon. Friends have done so, and have done it better than I could—about the social injustice of many features of the Budget. Although I share the views of my hon. Friends that this is socially a grossly unjust Budget, I am now entering the arena that right hon. and hon. Members opposite themselves have chosen. What they say, in fact, is. "We know that there is a measure of social injustice in this Budget. We cannot help it. We think that the task of the country must be to increase the efficiency of our industry, the zip in our economy, and, therefore, we intend to do something for the small number of highly-creative people, even at the cost of gross social injustice."

Even on their own grounds, I want to tell them that they have not done the job properly: that by what they have done they will create more frustrations—and hence put greater brakes upon efficiency —than they will confer benefits. I certainly do not believe that the Chancellor, before deciding on his Income Tax reliefs, looked at the industrial structure and the industrial hierarchy to see who were the men who were doing the important jobs, and what money they were earning.

I want to put this to the Financial Secretary. The largest salaries are earned, generally speaking, not in industry but in commerce. It is very often the man who runs a business with an entrepô t function and a commercial function who is more likely to be in the class most benefited by the Surtax remissions than is the man running a manufacturing business. Secondly, even in manufacturing industry itself, it is a fact that, by and large, it is the commercial men rather than the technicians who are getting the big money.

The most valuable member of the upper staff of the large industrial company today is not the man who knows how to plan production, but the man who knows how best to plan the layout of the annual accounts in order to attract least taxation. He is the man who gets the big money, though he is not contributing 1 per cent. of one horse-power to the real productive effectiveness of The organisation.

I am talking about the necessity for keeping up the heart and spirits of the 25 to 35 or 40 years age group of junior management, the scientists and technicians. They will not be advantaged at all. We have talked a great deal about industrial relations between management and men, but I remind the Committee that one of the great inhibitions on increasing efficiency in British industry is the difficulties in inter-management relations, in the relations between one sector of management and another. The tensions in many organisations between management and management are very great indeed. The war between the administrator and the technician is as tough as between the townsman and the countryman. There is, indeed, great tension of this kind in many organisations.

Above all, there are those in the£1,200 to£2,000 a year junior management sector, who feel very aggrieved indeed. The workers below them have increased their wages and I hope that we shall find, as my hon. Friend the Member for Sowerby (Mr. Houghton) pointed out, that some day we can find a way of doing that without the strikes which we have had. While I am delighted that they have increased their share, the differential between them and the men just above them has narrowed to a point at which the incentive to accept promotion in industry has gone.

Among many of these men there is a good deal of feeling that there are men above them who have passed the peak of productive usefulness and who make a purely financial rather than a production contribution to the organisation, but who get much more money and who are now to have great benefit. If the Government are worrying about incentives and efficiency in British industry, the range of incomes which they should be thinking about, leaving aside the question of social justice for old-age pensioners and other groups, is not the£2,000 to£10,000 range but the£1,200 to£2.000 range. In not doing that, the Government have made, even from their own point of view, a very great mistake.

9.12 p.m.

Mr. Geoffrey Hirst (Shipley)

The hon. Member for Reading (Mr. Mikardo) has made a very good point, but I do not think that he could have been present a little earlier in the debate when it was very fully answered by the Financial Secretary to the Treasury. There is, of course, no incentive in the Budget for the man in the£1,200 to£1,500 a year group, which is a very important group, embracing a large number of technologists and scientists, but, as the Financial Secretary pointed out with the figures which he produced, an enormous amount had been done in previous Budgets by way of tax remissions below the Surtax level.

The argument of emigration has occasionally got out of gear. do not think that a vast number of those who emigrate are in the top Surtax grade. I will not try to argue the need for these measures on that ground, but the fact is that there has been a sort of disincentive at the top. A man might say, "If I am going to be successful and going to he one of those people who, starting in humble circumstances, take themselves by their own efforts into the Surtax group, I want to have a better opportunity when I get there than the country's taxation system has provided up to now."

I have been present throughout almost the whole of the two days of this very interesting debate. I have enjoyed it and learned a great deal but, having been present on all similar occasions during the last seven years, I must say that I have not previously heard a couple of days' debate in which the Budget per se has been so little mentioned. That is some tribute to the fact that it is not quite as bad as hon. and right hon. Gentlemen would make out.

Mr. Arthur Moyle (Oldbury and Halesowen)

If the hon. Gentleman wants the answer, it is that the Budget has so little to do with the national economy that it does not really warrant very much reference if we are concerned with the national economy.

Mr. Hirst

I wish that the hon. Gentleman had been here as long as I have. because then he would not have needed to make that interjection. I want to compliment my hon. Friend the Financial Secretary on his brilliant speech this afternoon. He knows already that I am an admirer of his, but that will not stop me from being slightly critical in one or two respects.

It is quite right to say that the main theme of my right hon. Friend's Budget is that it is a family Budget, but my hon. Friend should not be in too much of a hurry to assume, as his speech seemed to imply, that bachelors have not their responsibilities, too. Incidentally, that applies to spinsters also, who are sometimes forgotten. It applies to the Surtax grade particularly, because people in that grade have a little more money than some other people, and so they have responsibilities placed upon them which they would otherwise not have. I know of many such cases. I am not quarrelling with him, but I do not think the Budget is quite as comprehensive as my hon. Friend appeared to make out in his speech.

Now I pass to Entertainments Duty. I am as delighted as anybody at the measures taken and am particularly grateful about the full concession to the theatre and sport. The actual amount involved was not large and it would have been a great mistake to fiddle it away. Also, I am naturally grateful for what has been done for the cinema, but I think that my hon. Friend must be satisfied in his own mind that this must be of a temporary character, because there is no question of its solving the problem of the cinema entertainment world.

The position will still be that about 15 per cent. of the cinemas will be operating at a loss and, as I have pointed out on other occasions, as I am interested in this subject, it is the fact that a large number of the smaller cinemas which discharge a social as well as an economic and business function, have been carrying on because they are often ancillaries to other businesses which are more profitable. The owners have left them open in the hope that something fundamental would be done to put the cinema industry on its own feet.

I think that the approach made by the All-Industry Tax Committee time after time is right. They ask to be placed, from a tax point of view, in an equivalent position with the competition from America which they have to face, where the tax is only 10 per cent. I do not want to mislead those outside who may pay any attention to what I say on this subject, for I do not think that the claim made for£21 million in one year. is anything more than living in cloud cuckoo land. I do not think it is possible within the framework of 'the Budget, and the amount the Chancellor is prepared to give away, for such a vast amount to be considered. I personally will accept—I do not think they will—that what has been done this year is, within this framework, substantial, but none the less it is only an instalment towards the solution of that problem.

Now about Purchase Tax. Of course. I am grateful that something has been done to retrace the step taken in the emergency Budget of October, 1955. [HON. MEMBERS: "Hear, hear."] I did not support the Government on that occasion, because I did not approve of it. I do not approve of it still. It is quite wrong economically. I am glad, however, that much has been done to remedy the situation. Taking a broad view and trying to be not too parochial or testy about it, the Chancellor's decision not to go the whole hog in one direction but to spread what he can give away over a wider field is very beneficial from the point of view of the housewife and also trade.

Our companies have not come out too well, except in respect of the overseas tax position, a measure which will be helpful. Having some slight experience in this matter, I feel that the right hon. Member for Huyton (Mr. H. Wilson) is right in saying that we must very carefully watch legislation relating to this subject. I know one or two loopholes. I have no doubt the Treasury will close them. If it does not, I shall be honest and tell it about them.

I am sorry that nothing has been done to reform the valuation basis for Estate Duty in respect of director-controlled companies, a matter which is an old sore. The businesses concerned are often the large businesses of the future, and people in such a position are inclined not to expand their businesses as much as they could do because they do not want their wives to be left in an embarrassing situation in the event of their death. The importance of the matter is brought home to one when one realises the extent to which such businesses are responsible for risk taking and pioneering and how they develop into larger businesses and provide possibilities of future large-scale employment. The cost would be only£3 million or£4 million, and the reform would be well worth while.

I am grateful for what has been done in respect of the petrol tax. Some while ago I made a sticky speech on the subject, for I thought the increased tax was entirely wrong economically. I am confident that the lesson is being learnt. and one of the most cheering things in my right hon. Friend's approach is the new look in this direction. If we are to have Powell's law. I infinitely prefer it to Boyle's law.

It is in connection with the Surtax provisions that I wish to have a little private, friendly quarrel with the Financial Secretary. I cannot in justice accept his views about unearned income. The term "unearned income" should be banished. If we need a term at all, such income should be called "investment income". The present definition is absolutely wrong. If I may use trade union language, the idea that earned income is white and unearned income is black is absolute nonsense. There must be a partnership. Where should we be if we did not have the collective investment from people who have the capacity to contribute to industry and employment? The idea that unearned income is rather shameful and that one ought to keep quiet about it is nonsense.

It is part of our Tory philosophy hat we want every one gradually, as much as possible, to have some investment and some property. I should like to see some schemes developed towards that end. We are backward in this respect. I am impressed by the facilities in America for workers to invest in industry. I do not see how the average wage earner in this country could in a hurry walk into a stockbroker's office and fiddle about with transfer forms, which are frightening documents to many people.

I should like to pose the idea to the Government that great value is to be gained from wage earners' participation in investment in industrial equities, and facilities should be made easy for them. I do not see why there should not be industrial bearer bonds, as a friend suggested to me. I have sometimes heard about workers' trusts or unit trusts, but that is backing the stable and I want, if possible that they should be allowed to back the horse. The more we can get participation of the ordinary wage earner in investment in industry in an ordinary way and not by these fancy schemes, under which special shares are allotted and handed back at a stated value at the end, the better. Those latter schemes are no encouragement for realisation of the partnership in industry.

I admire my right hon. Friend for tackling Surtax provisions. There has been a lot of screaming about it, but it must be borne in mind that Surtax payers have had no concession for thirty years. The value of money has changed and one needs encouragement at the top as much as at the bottom. While my right hon. Friend was at it, I think that he should have raised the starting limit from£2,000 to£3,000. As we go on, there will be a danger that the actual incidence of Surtax will be a form of disincentive at those levels.

Even now, it is sometimes said that the weekly wage earner feels that the demand for taxes, at any rate at the higher level, is a disincentive against overtime. Undeniably, many workers in the past were not used to paying such taxes and they are finding that to be taxed at the higher rates is an irritation and annoyance. We do not need much imagination to see that more and more scientists and technicians will gradually get into the Surtax level, even though they do not have an investment incomke. It is the only income they have and then they suddenly find after a couple of years that they have to meet a demand for£70, or whatever it may be, for Surtax and that is a disincentive. It would be very nice if we could get rid of that.

There is one matter in connection with Purchase Tax to which I want to refer. Whatever else may be said of my comments tonight, I feel that this will have the support of the right hon. Gentleman the Member for Battersea, North (Mr. Jay). I greatly regret that in making these Purchase Tax changes my right hon. Friend has not thought fit to correct the discrimination against the Purchase Tax on wool, a matter on which all parties were agreed and which would be a matter of only£1 million or£2 million. I do not think that the Budget would have been more or less disinflationary if the surplus had been£460 million or£462 million above the line.

The matter has been discussed in Parliament for a long time. It dates back in effect to April, 1955, when a very large concession was made to the cotton textile industry. Later that concession was extended by removing tax from all textiles materials sold in the piece, with the exception of wool. Wool carries 10 per cent. Purchase Tax, something which the trade feels to be a grave injustice. The matter has been advanced time after time by the Wool Textile Delegation, which is an association of all the trade associations in the industry, and which carries a very considerable degree of respect in the Board of Trade and in the Treasury. It has been refused. If I can rather savagely mutilate Tennyson's lines: Chancellors come and Chancellors go But injustice goes on for ever. I feel that it should be changed.

There are two main points in respect of which I have never had a proper answer. First, the Treasury insists that the small, unregistered tailor is supposed to be a menace in the wool trade and almost a blessing in the others. That argument cannot be sustained in fact. The other point concerns the question of counter trade. The Treasury view is that the volume of wool sold over the counter in respect of which 10 per cent. Purchase Tax is paid is negligible, and that no damage to the trade is done.

I warn the Government tonight that not only have they no data for these statements but that the trade association with which I am co-operating has positive evidence upon the matter to contradict their views, and I shall produce it. I ask for reasonable justice to be done.

9.30 p.m.

Mr. Douglas Jay (Battersea, North)

The Financial Secretary took pride in the fact that nobody had criticised the reduction in Entertainments Duty in regard to cinemas. I must tell him, as did the hon. Member for Shipley (Mr. Hirst), that after the glowing expectations aroused by the President of the Board of Trade and the Prime Minister last year the cinema industry is far from being fully satisfied with what the Chancellor has done, and I have no doubt that we shall need to discuss this question in much more detail on the Finance Bill.

The debate has proved three things. First, the action that the Government took in the Budget followed in no way from his analysis of the situation or the economic facts. Secondly, the reliefs which he has given have been more inequitable and reactionary than in any Budget I can remember since the war. Thirdly, the Chancellor seems to have. taken grave risks with the gold reserve at a time when it is distressingly low. The Chancellor made not even a flimsy attempt to base his proposals upon an analysis of the facts; and the Parliamentary Secretary this afternoon seemed to me positively frightening in arguing as if the Budget should merely be based upon narrow financial figures, without any relation to real savings, investment and production.

Let us see how the Chancellor's actions follow from his words. In his Budget speech he said: I reject unequivocably the view that the sole duty of a Chancellor is to remove taxation at whatever risk to the economy and without regard to the consequent inflation that would certainly result. He then hands over tens of millions of£s of spending power, not to industry for investment, but for spending by those who least need it. He went on to say: A money income raised prematurely beyond the real resources we possess is at best only a partial and ephemeral gain to the man who gets it and it is another blow to those who are living on fixed incomes,"—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 970-87.] He then gives between£500 and£600 a year to those with incomes of between£5,000 and£10,000 a year.

The distribution of reliefs in the Budget is extraordinary, and is certainly more reactionary than in any Budget since the war. I agree with my hon. Friend the Member for Sowerby (Mr. Houghton) that there was a case for some modest relief to some Surtax payers—and I said so in the February economic debate—but there is certainly not a case for the reliefs which the Chancellor has given. He has taken about£30 million a year in higher Insurance contributions from employees, and he now gives nearly the same amount away to those with incomes of£2,000 a year and over.

Why is it good for incentive that every wage and salary earner should pay an extra 8½ d. a week tax, and also good for incentive that the£10,000 a year man should pay£12 a week less? What is the Chancellor's authority for thinking that incentives begin to operate only at above the£2,000 a year level?

The Royal Commission—which included Lord Radcliffe and Lord Hey-worth, who are not declared Socialists so far as I know—said this: If we are asked to infer that heavy rates "— that is, of tax— have particular disincentive effects on the receivers of the higher levels of income, so as to justify the shifting of the existing rate of taxation from these ranges to lower levels of income, we are bound to reply that we see no evidence that the higher income earners are specially influenced by disincentive. I believe that any honest person must agree with Lord Radcliffe and Lord Heyworth. To give this£30 million extracted from the wage earners and salary earners solely to Surtax payers and to refuse anything whatever to the old-age pensioners seems to me an indefensible injustice.

The Chancellor takes his taxes from the whole of the community at a flat rate and gives 25 per cent. of it in relief to barely 2 per cent. of the community on the principle of the richest getting the most. Never in the history of recent Budgets can so much have been taken from so many and given to so few.

In addition to that, the middle class, the salaried man and woman, gets almost nothing from this Budget. As the Chancellor said during his television interview that he was giving relief where the shoe pinched most, I find it hard to believe that he really knew exactly what he was doing. Did he look at the tax tables in detail before reaching a decision?

Take a family consisting of a husband, wife and two children under twelve with all their income earned, quite a typical household. It works like this. At£10,000 a year, that household gets£580 from tie Budget. At£5,000 a year it gets£302. At£2,000 a year it gets nothing at all; at£1,500 nothing and at£800 nothing.

How can that be fair? How can it be defended, either in the name of incentive or equity? Why should the£800,£1,200 or£1,500 man or woman get nothing at all, unless they have children over the age of twelve, while the£4,000,£5,000 and£6,000 people get huge reliefs, whether they have children over twelve or not? How does the Chancellor defend that? Did he really intend that the£1,200 a year executive, to whom the hon. Member for Louth (Mr. Osborne) referred yesterday, with a wife and three young children, should get nothing, while a single man with, say,£8,000 a year gets£470 relief from this Budget?

This seems to be simply a cynical slap in the face for the great majority of salaried people and for the really hardworking middle class in this country. Apparently, the "Opportunity State" only starts at£2,000 a year. It seems that the young are excluded from the "Opportunity State". This Budget is designed only to revive the flagging energies of the middle-aged. After all, how many men or women under thirty does the Chancellor think there are who have children over twelve or are earning over£2,000 a year?

In his attitude to the gold reserve and to investment, the Chancellor seemed to me so sketchy as to be almost frivolous and the President of the Board of Trade seemed to be so complacent as to be positively alarming. After all, the gold reserve today is£31 million lower than when the Lord Privy Seal introduced the "pots and pans tax" in order to protect it. It is£43 million lower than a year ago, when the present Prime Minister withdrew the investment allowance and raised the Tobacco Duty; and it is£170 million lower than in October, 1951. Of that reserve of£789 million, at least£200 million, in the words of the Chancellor, is "mobilised," or, in plain English, borrowed at short-term rates to be repaid. I think the right hon. Gentleman will agree, by 1959.

I could understand the right hon. Gentleman's restoring the investment allowances in these circumstances if he based it on some rational estimate of the sterling area's dollar prospects and the internal balance of resources. But to hand out tens of millions of purchasing power in the form best calculated to divert Jaguar cars from exports to home markets without any such review, given to the Committee anyway, strikes us as even more frivolous than the Lord Privy Seal.

The Chancellor does this just at the time of the year when, on all experience, pressure on the gold reserves is likely to intensify in the months ahead. Unless there are favourable factors which the Chancellor has so far been withholding from the Committee, it seems to me to be little short—to use again the language of the hon. Member for Louth—of gambling with the remaining unmortgaged portion of our gold reserves.

It was said of the present Chancellor of the Exchequer in his youth that he was not so much a twentieth-century Disraeli as a nineteenth-century Noel Coward. It may be that the Lord Privy Seal first said that; it is the kind of thing he does say. One might almost ask whether Mr. Noel Coward is the real inspiration of this Budget. I must say to the Chancellor that if one of his objects is to induce the other Mr. Coward back to the white cliffs of England, he will be as unsuccessful as in his attempt to purchase middle-class votes by giving all this largesse to 2 per cent. of the population.

If we look at the substance of the speeches from Government benches since Tuesday, we shall find that the Government have no proposals or plan for economic expansion, and no policy for building up the gold reserves or even for checking the wage-price spiral. The " Opportunity State" is in a state of stagnation, and for all the ideas of the Chancellor that is where it seems likely to stay.

Let us look dispassionately at the record and ask the Government what their policy really is on production, on the cost-of-living spiral and on the gold reserves. Is the Chancellor's Budget intended to re-start a rise in total production this year? Or is it not? Presumably he knows. If not, how has he been able to make the estimates of revenue which he has put before us? Does he still agree with the statement in the Tory Election Manifesto of 1955, which was prophetically called, "United for Peace and Progress" As long as we conduct our affairs wisely and get on with the job of raising the national product year by year, the country can be twice as well off in twenty-five years as it is now. " If we conduct our affairs wisely and raise production every year." Yet not merely has production stood still for nearly twenty months, but it has been going up in nearly every other country during the same period. The President of the Board of Trade said that it was unfair to cite Germany, as special forces were at work there. There is no need to cite Germany. Since October, 1955, when Tory policy ushered in the "Stagnation State" here, production has gone on rising materially in all the following countries: Canada, Denmark, France, Italy, Japan, Norway, Sweden, Holland and the United States. That is a pretty good variety of industrial countries.

I ventured to say in last year's debate that the policy of the then Chancellor of the Exchequer would prevent any rise in production. He said I was a terrible pessimist. The then Economic Secretary said there was going to be an appreciable rise in production during 1956. It seems typical of the defeatism of the present Government, whether in foreign defence or in economic policy, that they simply sit by and watch our production record decline month by month relative to that of other countries. Surely the worst aspect of this "Stagnation State" is that we lost£750 million or so in production in 1956; and this year, if stagnation goes on, we shall lose what we ought to have had, something like£1,500 million of production. That means, incidentally, that tax rates have to be higher to yield the same revenue. What is the good of indulging in all this extra investment at great sacrifice if we do not use the extra investment for increased production?

Mr. Stevens

Has the right hon. Gentleman noticed that the value and volume of our exports in March, 1957, were an all-time record?

Mr. Jay

I am coming to that. They usually are pretty high in March.

Worse still, this rate of output means less investment, less consumption and incidentally less for defence. We are told that we cannot afford such and such resources for investment, defence or whatever it is. If we are under-producing, as we are, that is not serious economics at all. It is just another example of the defeatism of the party opposite.

Last year the then Chancellor of the Exchequer, the present Prime Minister, in his Budget broadcast said that his object was all part of a "big plan." The present Chancellor did not tell us about this "big plan" yesterday. 1 should like to ask him, Is it still in force? Or has it gone the way of all flesh, like the Suez Canal, Lord Salisbury, North Lewisham and the gold reserve?

We cannot even argue that stagnation has effectively redeployed, to use the Government's favourite word, our labour force or even given us a really decisive upward spurt in exports. Even, if we accept the rather odd pet theory of the Minister of Labour that, although production in every other country goes up, in this country it has to stop altogether every few years in order to rearrange the labour force. that would be a counsel of despair. But in fact it has not worked.

The Economic Survey shows that the main effect of this stagnation of manpower has been to drive 70,000 women out of the manufacturing industry altogether and the main adjustment was that the manufacturing labour force fell by 125.000. The chief gainers were the distributive trades, the professional, financial and miscellaneous services, which no doubt cover a multitude of sins. The "Opportunity State", is also apparently now limited to the distributive, professional, financial and miscellaneous services. The hon. Member for Lang-stone (Mr. Stevens) asked about exports, and the Chancellor boasted quite correctly of a 6 per cent. rise in the volume of United Kingdom exports last year, but do hon. Members opposite realise that the volume of United Kingdom exports in 1956, after that 6 per cent. rise, was only 12 per cent. higher than in 1950, and that that whole percentage rise in volume in those six years was less flan the average every year under the Labour Government? And these last few years have been years of very rapidly rising world trade, as the Chancellor will agree.

On the cost of living, can we know what is the Government's policy towards the wage-price spiral? Have they really any plan or intention of stopping the fatal decline in the internal value of the£which the Minister of Supply the other day, rather tactlessly, I thought, said might lead to external devaluation? Between January, 1956, and January, 1957, there was a further 4. 4 per cent. rise in the cost-of-living index. The Prime Minister calls that a plateau, but the Lord Privy Seal, who, I think, comes of a more distinguished mathematical family, will agree that at that rate we shall double the cost of living, not in twenty-five years, but in less than twenty.

As the Financial Secretary today was talking about what happened before 1951, here is the simple record of prices up-to-date. From 1946 to 1951, United Kingdom import prices rose by 103. 6 per cent. and cost of living rose by 31. 8 per cent. From 1951 to January, 1957, import prices fell by 3 per cent. and the cost of living rose by 28. 1 per cent.

Did the Government really think in the past year they could go on raising living costs and the insurance contribution by a policy of cuts without provoking industrial strife? I ask the Chancellor to consider this. What they have been doing in the last two years has been to deflate demand on the one hand and to inflate costs on the other. That, as anyone could tell them—indeed did tell them—must have two effects; first, to stop production rising and, secondly. to stir up industrial strife.

Did the Government think they could wilfully start a free-for-all in prices and dividends and not have a free-for-all in wages at the same time? Do they understand, even now after the grievous engineering crisis, that they cannot force an unjust division of the national income on the wage earner? Do they realise that today this Budget is bound to be taken by wage earners, and many salary earners, as a direct challenge for new wage claims?

Already, before the new share-out, the distribution of rewards had been getting steadily more unfair under the Tory Government. The Economic Survey also shows that between 1952 and 1956 total wages rose by 34 per cent. and total dividends rose by 50 per cent.

The last two years have proved not merely that we must have restraint on spending if the economy is to work, but if the Government try to impose restraint unfairly they will inevitably provoke wage claims pushed to the point of strikes. Therefore, the only hope of internal stability is collective restraint fairly distributed. That is the one thing we seem never likely to get from the party opposite.

Thirdly, what is the policy of the Government for building up the reserve? If we exclude short-term borrowing since November, the reserve today is barely half the October, 1951, figure. It has been going down, while in the words of the Economic Survey: The outflow of gold and dollars from the United States … was maintained last year. After the speeches of the Chancellor and the President of the Board of Trade in this debate, I still ask what plan the Government have for building up, other than by borrowing short-term dollars from the United States whenever we are in temporary difficulties.

The Chancellor has, of course, lost many valuable advisers since last year. The Middle Class Alliance has ended in fission. Sir Bernard Docker has retired from public life, Lord Salisbury is sulking in the backwoods and, unkindest cut of all, the previous Economic Secretary has been convicted of heresy. We have a new Financial Secretary who reminds me not so much of Rasputin as Torquemada. I am sure he will make some very ingenious contributions to our debates.

There is no dispute why production has stopped rising in these last two years. It is not because of heavy taxation, or because for some mysterious reason everyone became lazy in 1955. It is because the Lord Privy Seal and the present Prime Minister deliberately decided in 1955 to hold production back by deflating demand. because that was the only way to check imports unless we were prepared to do so by rather more direct restraint. The reason goods trains on British Railways still run more slowly than on more modern railway systems is not that they have not enough power, but that they have not enough brakes. This is the obsolete state to which the Government have reduced our economy. Until we instal a modern system of brakes, we shall simply alternate between stagnation and crisis.

There are two other fatal superstitions in the minds of hon. Members opposite which seems to me to block expansion and progress. One is that everything can be put right by reducing Government expenditure; and the other is that the first priority all the time is a cut in direct taxation. In the other Tory manifesto, "Britain Strong and Free "the Conservative Party said, in 1951: We know that we can save many millions. Since then Government expenditure has risen, on the Financial Secretary's figures, by£1,611 million. The same document said that big reductions in taxation would be possible. Since then, the total raised in taxation has risen by£1,180 million a year. I think that that should be said because hon. Members opposite go round claiming that they have reduced taxation in the last few years.

The real priority, I believe, in the national interest, is to put production, exports, investment and the gold reserves first. But the trouble is that the Tory Party has become so hopelessly, I believe genuinely, victims to its own propaganda about Government expenditure. Surtax and the burden of taxation that it has bemused itself as well as its own bewildered supporters. How right Bernard Shaw was when he defined Conservatism as opening one's mouth and shutting one's eyes.

Finally, I should like to ask the Chancellor, how do the Government think that the economy will be kept in balance over the coming months? The President of the Board of Trade said yesterday that production shows signs of expanding. The Chancellor apparently thinks that investment and consumption are also expanding. How, then, are we to pay for the increasing imports? If the Government have a plan for limiting them, why did they not use it two years ago and avoid two years of stagnation? If they have not yet a plan, what do they intend to do this summer and autumn to limit increasing imports?

In our view, the first essential step towards expansion and towards saving the internal value of the£is to reach some understanding between the Government, the trade unions and the other sections of the community for agreed restraint all round, affecting prices, profits and dividends as well as wages. But does anybody now think, after this Budget that we shall get any sort of agreement of that kind from the present witless, nerveless, gutless and hopeless Government?

Whereupon Motion made, and Question That the Chairman do report Progress and ask leave to sit again.—[Colonel J. H. Harrison]—put and agreed to

Committee report Progress; to sit again upon Monday next

ADJOURNMENT

Resolved, That this House do now adjourn—[Colonel J. H. Harrison.]

Adjourned accordingly at one minute to Ten o'clock