HC Deb 15 April 1958 vol 586 cc87-116

18. Tithe annuities (redemption)

Motion made, and Question, That the limit of amount within which annuities under the Tithe Acts, 1936 and 1951, are compulsorily redeemable shall be extended.—[Mr. Amory.] put and agreed to.

19. Winding up of Treasury Chest Fund

Motion made, and Question, That the amount of the available balance of the Treasury Chest Fund as at the end of March. 1958, shall be paid into the Exchequer.—[Mr. Amory.] put and agreed to.

20. Amendment of Law

Motion made, and Question proposed, That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance.—[Mr. Amory.]

5.32 p.m.

Mr. Hugh Gaitskell (Leeds, South)

I rise in accordance with our usual custom to offer on behalf of the whole Committee our congratulations to the right hon. Gentleman the Chancellor of the Exchequer on surviving his first ordeal in presenting a Budget. That it is an ordeal, as one of his six predecessors who are Members of the House, I can certainly testify. I do not know whether the presence of five of those predecessors made it an even greater ordeal; perhaps that depends to some extent on whether one regards their presence here as merely a matter of longevity or the result of moving on very fast from the office which he now holds.

The right hon. Gentleman, whose courtesy and modesty always commend them selves to the House, gave us a typical speech in which the rather heavier elements, inevitable in a Budget presentation, were livened and lightened by frequent flashes of humour, and for that we are indeed most grateful. He presented a Budget which contains a large number of small elements. Many of these are welcome to us. We see no objection, not even the ex-Chancellors on this side of the Committee, to the bringing to an end of the Treasury Chest. We certainly welcome the tightening up of the law against tax evasion. We ourselves, I think, warned the right hon. Gentleman's predecessor that the proposals to deal with dividend stripping were not adequate and that further legislation would be necessary. We are glad that he is making that new legislation retrospective.

Although I am bound to say that I cannot see that there is a very strong case for lightening the duty on heavy wines, I do not feel myself disposed to object very strongly to it. I am sure it has the blessing of the Lord Privy Seal with his well-known taste for port wine, and those who like that particular form of alcohol will, no doubt, be very grateful to the right hon. Gentleman.

We certainly agree with the Chancellor that it is necessary to do something about the Entertainments Duty. We shall naturally wish to study with care the specific proposals that he has made, but that they are in the right direction certainly cannot be questioned if the cinema industry is to survive in this country.

As to Purchase Tax, we on this side of the Committee are glad that the right hon. Gentleman has rejected, and in such forthright language, the idea of a general sales tax. It has always seemed to us that such a tax, apart from being almost, one might say, impractical, would also be unfair. It would, in fact, involve increasing or imposing taxation on many necessities of life in order to reduce taxation upon luxuries. That, to us, seems to be exactly the wrong way to go about taxation. We are glad, too, that the Chancellor defended the present system of collecting Purchase Tax. I am sure that his predecessors would agree with him that all experience shows that an attempt to collect it at the retail stage would be extremely difficult if not impossible.

I come now to one proposal which the right hon. Gentleman has made and which I am afraid we cannot greet with any enthusiasm at all, and against which we have just voted. He has decided to amalgamate the two rates of Profits Tax and to end the discrimination in favour of reserves and against dividends. In our opinion, this is a mistaken move on his part. We believe that this must inevitably encourage the payment of larger dividends and, therefore, encourage consumption at a point in the economy when it is certainly least necessary and least deserved, and at the same time it is bound to have a deterrent effect on the accumulation of company reserves and the promotion of company saving.

It is quite correct that the majority of the Royal Commission on Taxation of Profits and Income recommended that the rates should be amalgamated. I do not propose this afternoon to rehearse or criticise the arguments which they put forward in that connection. The minority, it is true, also made a recommendation of this kind, but it was coupled with something to which the right hon. Gentleman has not referred at all in his Budget speech, namely the introduction of a capital gains tax. Had he come forward with a proposal of that kind, we might have taken a slightly different attitude. As it is, we feel that this move is really counter to the general impression which he created of what he wanted to do, and we very much regret that he has seen fit to do it.

It is my desire to speak for only a few moments today. In accordance with our usual custom, my right hon. Friend the Member for Huyton (Mr. H. Wilson) will develop tomorrow our main criticisms and comments upon the right hon. Gentleman's Budget, and no doubt deal with the economic situation as a whole. Before I sit down, however, I should like to make a brief reference to what seem to me to be the fundamental issues which face our country in the economic field at the present time. The right hon. Gentleman was at pains to emphasise that he was in favour of industrial expansion. He referred to the necessity of a temporary pause. It is becoming a rather long pause. Production is today very little above what it was two-and-a-half years ago. We have had, with some downs and some ups, virtual stagnation in this field for that period of time.

Moreover, we are undoubtedly faced today with a much less favourable em- ployment situation than we have had, at any rate, for the past five or six years. The right hon. Gentleman admitted that unemployment had increased. He did not say—I know he would admit it—that the number of persons seeking work today is twice the number of vacancies available, and if this process goes on very much longer, the situation will indeed become serious.

Quite apart from the numbers actually out of work, we have had a reduction in overtime and a very substantial increase in short-time working. I submit that in the face of this, in the face of the fact that there has been virtually no increase in production in the past two-and-a-half years, and that there has nevertheless been some increase in investment, there is very good ground for believing that there is spare capacity in our economy today, and we believe that it is unfortunate, to say the least, that the right hon. Gentleman should have been content apparently, judging by what he said, to allow production even to fall further this year, and certainly not to put forward any plans for its expansion. I beg him to realise how serious this must be for our economy and, indeed, for our community as a whole.

The right hon. Gentleman made little reference—indeed, practically no reference—to the wage problem which exists today. It is true that he made a brief appeal that wages should not rise faster than productivity. What is the good of making an appeal of that kind, whether it be to private enterprise or to the publicly owned industries, when the Government's own policy is making it impossible for production and productivity to rise? Surely, the right hon. Gentleman must agree that we cannot consider this problem of wages apart from productivity. If productivity is rising, we can have rising wages, but if it is stagnant or indeed falling, we may have a very serious position developing in terms of labour costs, even though wages rise not at all or only slightly.

We feel, therefore, looking at this Budget as a whole, that the right hon. Gentleman has missed a very great opportunity, because he is still clinging to the same kind of ideology which his immediate predecessor was at pains to put across. He believes that the only way of dealing with the problem of rising prices and the only way of stabilising the cost of living is by restriction, by cutting back, by keeping production down and preventing it from rising. On the contrary, we believe that all the experience of the last two or three years shows that even where there has been restriction, it has not prevented prices rising.

We believe that it would have been a wiser policy at this stage to encourage an increase in productivity and to try to reach agreement or arrangements with the trade unions in a better atmosphere and on a basis of policies which they can support, which would ensure that wages do not get hopelessly out of step with productivity. It is the right hon. Gentleman's failure to grasp that point and to follow policies which accord with it which we feel is most serious.

In that connection, I must mention one other point. We are all aware of the dangerous situation which is developing in the transport industry. None of us here wishes to see a strike. We should all like to see this business settled. We realise that the situation is delicate, and none of us would wish to say anything which might in any way create difficulties, but we were expecting and hoping that the Chancellor of the Exchequer, by this Budget, and by what he said, would make easier a settlement in the industry. I cannot honestly say that he has done so.

It was open to him today to take one simple step which I should have thought was not very difficult, in the light of the fact that he has given a certain amount away and of the fact that there is some slack in the economy. He could have allowed the British Transport Commission to go full steam ahead with its investment programme. He could have made possible a rise in productivity, which he himself says he wants in industry, and that at least would have been a gesture which might have made easier a settlement of this exceedingly difficult dispute.

I end as I began. With all sincerity I offer my congratulations to the right hon. Gentleman. I have had the pleasure of knowing him for a good many years, and, like most hon. Members, I appreciate his personal qualities. I very much regret that they could not have been used in support of a Budget which would have been more appropriate to the circumstances of the nation.

5.43 p.m.

Mr. Eric Johnson (Manchester, Blackley)

It is once again my good fortune to be the first hon. Member on this side of the Committee to catch your eye, Sir Gordon. to add my congratulations to those of the Leader of the Opposition to the Chancellor of the Exchequer on his Budget speech. I think I have been the first hon. Member on this side of the Committee to congratulate three of the previous six Chancellors to whom the Leader of the Opposition has referred, and I can only say that my right hon. Friend has fully lived up to the standard of those of his predecessors whom I have had the privilege of hearing making their Budget speeches.

My right hon. Friend has spoken with a clarity and lucidity which made it easy to follow what inevitably was a long and complicated statement, and I can have nothing but praise—and I am sure that the rest of the Committee is with me in this—for the way in which he presented his Budget. I think there will be very few people who will disagree with its contents.

If my right hon. Friend is right in sharing the opinion expressed in the second paragraph of the Economic Survey that one result of the successful measures taken by the Government to meet the threat to our economy last autumn was the growing public understanding of the country's economic difficulties, there can have been very few people who expected very much in the way of tax reductions in this Budget. I think it was generally agreed that we cannot afford to take any risks until we are safely through the summer and autumn, and that is all the more the case when so much depends on the future course of the business recession in the United States. Of course, another obvious reason for caution is that there is always an increased strain on our reserves in the summer and late autumn.

Despite these facts, it did seem that my right hon. Friend would have some small margin for tax reduction, and for my part I had hoped that he would apply this margin in such a way that the benefits would be most widely felt and so that they would assist those industries in which unemployment is above the national average.

For that reason, I am bound to say that I regret that it has not been possible to have some reduction in the tax on petrol and diesel oil. This seems to be a case in which the benefits would be very widely felt, because everything we buy and use is affected in some way or another by transport costs, and if it had been possible to bring down that tax in some small degree, I think that prices generally might have been able to be reduced.

I am sure that everyone will welcome what my right hon. Friend has done about Income Tax. Last year, it was those at the top end of the scale who got some benefit, and I think it is only fair that those at the bottom, and especially the old people, should have benefited this time. It is difficult to take in all the other tax changes as one listens to a Budget speech, and beyond saying that I welcome very much the proposal whereby Estate Duty is to be altered in the case in which two people die together, I do not propose to make any further comment on that aspect of the Budget speech.

There is no doubt that the cinema industry has been faced with increasing difficulties over many years, and we all felt that there was a very strong case for a reduction in Entertainments Duty. For my part, I had hoped that my right hon. Friend would be able to go the whole way and abolish the duty altogether, but the reduction he has made is, at any rate, a relief which is very badly needed. Cinema attendances dropped by no less than 22½ per cent. in the last quarter of 1957, as compared with the corresponding period of 1956.

The result of this has been that out of the 4,100 or so cinemas in the country, a very great many—more than a quarter—are operating at a loss after paying Entertainments Duty. Indeed, 417 were forced to close altogether during the past few years. I hope my right hon. Friend has done enough. It is perhaps not generally appreciated that the cinema industry makes a valuable contribution to our exports. It earned £3 million in the last year in foreign exchange, and it is also a valuable means of propaganda in displaying our way of life to other countries and thereby it earns our country a great deal of goodwill. It is undoubtedly threatened by the closure of cinemas, because it can- not export unless it has a fairly strong home market. I can only say that I hope that what my right hon. Friend has done will be enough.

In general, I firmly believe that the benefit of a concession of this kind should be passed on to the customer, but, in this case, I feel that people must not expect, at any rate in the small cinemas, to reap an advantage by paying less for their seats. It is not a matter of paying less to go in, but of whether the small cinemas can keep open at all. I hope that, with this reduction in the duty, they will be able to.

One would have to study the proposals about Purchase Tax with more time at one's disposal than I have had before making very many comments. Obviously, there was a strong case for doing something, if only to remove the many anomalies which undoubtedly existed. There was one anomaly to which I had intended to draw attention, namely, the tax on wallpaper. Wallpaper was omitted last year from the changes which applied to similar products, and it is, I believe, the only interior decorating material subject to Purchase Tax at all. The tax has now been reduced from 30 per cent. to 15 per cent., which will be very welcome in the industry, but I still believe that wallpaper will be at a disadvantage compared with other materials which compete with it in supplying a similar need.

I referred to industries where unemployment was above the national average. Two which I had particularly in mind were furniture and textiles. As regards furniture, there has been a very big fall in sales ever since 1954. This has been due not to any lack of demand for furniture, but to the restrictions on hire purchase and the abolition of what is known as the "add to" agreement in the furniture trade. My right hon. Friend said that he was sorry that the hire-purchase restrictions would have to be maintained, and I regret that he should have felt this to be necessary. When all is said and done, hire-purchase transactions account for only about 3 per cent. of total consumer expenditure, and a little relaxation to help the furniture trade would not really have been very inflationary.

It has for many years been an accepted method in the furniture trade more than in any other trade to buy on the hire-purchase system. It has undoubtedly helped people to buy furniture who could not otherwise afford it, and it has helped many young married couples to furnish their houses. I should have hoped that my right hon. Friend would have been able to do something. Undoubtedly, immediately after the restrictions were imposed—an initial deposit of 15 per cent. in 1955, increased to 20 per cent. in 1956, and the prohibition of the "add to" agreement—there was a very marked fall in the sale of furniture. It would be a very great help if the initial deposit, if it cannot be abolished altogether, could at any rate be reduced to 10 per cent.

As regards cotton, the industry could be helped, though, I admit, in only a small way, in the export of cotton yarn to Eastern Germany. This matter was discussed in the House not very long ago. My right hon. Friend referred to the need to foster the export trade, and there seems to be here a very simple way of doing it, at any rate to a small extent. Trade in cotton with Eastern Germany today is largely in the very valuable double yarn, but we are in a position of special difficulty because we are about the only potential suppliers who have not a trade agreement with Eastern Germany. The result is that the East Germans say that they must divert business to those countries with which they have, by their agreements, a quota to fill, or they say that they may have to spend money in putting in textile machinery of their own if they cannot get enough from us.

The trade with Eastern Germany is particularly valuable because there is no doubling machinery in the Eastern zone. When the doubling machinery was installed in what is now the Federal Republic of Germany, imports from this country were immediately confined to single yarn, and this deprived British cotton operatives in the doubling branch of a good deal of employment. I understand that the East Germans are prepared to take something like 2 million lbs. or more of double yarn a year from us, which would provide employment for about 800 people in Lancashire. I do not think that we shall get that business unless we have a trade agreement.

I am, of course, well aware that we do not recognise the Government of Eastern Germany, and I am not suggesting that we should. But we are not alone in not recognising the East German Government, though we are virtually alone in having no trade agreement. There is no need for a formal agreement between Governments; there might be some informal arrangement made, or an agreement between unofficial bodies like the Federation of British Industries and the East German Chamber of Trade. It seems that another obstacle is the fact that the East Germans want a trade office in this country and we will not let them have it. Last May, my right hon. and learned Friend the Foreign Secretary said that this was because we did not recognise their Government. If it is all right, as was said by my hon. Friend the Parliamentary Secretary to the Board of Trade recently, for the Federation of British Industries to negotiate with the East German Chamber of Trade, I cannot understand why it should be very wrong for the East Germans to open a trade office here. It seems to me rather like cutting off one's nose to spite one's face to say that they may not have a trade office because we do not like their Government if we are to lose a good deal of business and lose the opportunity of providing some employment in Lancashire.

I would like to make a few brief observations about the economic situation in general and more particularly about the report of the Cohen Committee. The Cohen Report has come in for a good deal of criticism, much of it, in my view, quite unfair. Indeed, some of the criticism suggested either a wilful misunderstanding of the Report or a very sketchy reading of it by the critics. In paragraphs 15 and 16 of the Report it is said that the post-war years have been years of economic progress in the United Kingdom, and the economy has provided jobs for all who wanted them, the actual quantity of goods produced rising in every year but two. But, we are told, there has been one big failure, the failure to prevent prices from rising". Prices have risen steadily, as we all know, ever since 1945.

Leaving out the question of the cost of our imported raw materials, I believe, quite frankly, that each one of us knows in his heart of hearts what should be done. Perhaps it is an over-simplification, but, surely, the solution is to increase productivity while increasing neither dividends nor wages, and to pass on the benefit of increased productivity to the customer through lower prices. We all agree about that, but the trouble is that everyone seems to wait for somebody else to do it first. Indeed, sometimes people do not even wait. On whatever side of industry they may be, they say, "Let us get in and get ours first, and then it will be all right". This attitude is rather like the attitude of the Soviet Union on the stopping of tests of nuclear weapons.

Lord Cohen said the other clay that his Committee had been accused of being hard on wages and soft on profits. He maintained that the policies which the Committee recommended would hit profits harder than wages. It is true that paragraph 140 of the Report states—and this paragraph has come in for some criticism—that the Committee hoped that if any wage increases are granted in 1958, they will be substantially lower than those of the past few years. However, I would remind the Committee that, despite the fact that dividends, even before tax, have less than doubled since 1938 while wages and salaries have increased fourfold, the Cohen Committee also said: The economy … might be in a healthier position if there were a greater diffusion of real income from the company qua company not merely to its shareholders … but to its customers". Those two statements seem to mean that it would be much better to devote the benefits of greater technical efficiency and productivity in business to reducing prices rather than to passing on those benefits in either increased wages or increased dividends. I believe that that applies equally to the nationalised industries. I am convinced that in the long run such a policy would benefit both the shareholders and the wage earners. It would benefit them immediately as consumers.

I am afraid that that policy does not always seem to commend itself to some of the largest of our great companies. I noticed that both this year and two years ago two very large companies not only increased their dividends—and I do not criticise them for doing that—but made an issue of bonus shares just before the Budget. These are two very good companies, and they are good employers. Far be it from me to tell the management of those companies how to run their affairs. But action of this kind is not altogether calculated to encourage restraint in making wage claims. On the other hand, in defence of these companies, they may possibly be influenced—in one instance, at any rate—by the threats of the party opposite to take over control of about 500 large firms if they get into office, and they may have yielded, not unnaturally, to the temptation of making hay while the sun shines.

Mr. Thomas Hubbard (Kirkaldy Burghs)

To follow the hon. Gentleman's argument, will he make clear to which companies he is referring?

Mr. Johnson

Yes, I am perfectly willing to do that. It applies to Shell Transport two years ago and to Imperial Chemical Industries this year. I did not want to mention them by name, but anyone can obtain the information by looking them up in the newspaper. The company has a large factory in my constituency which is doing very well and employing a great deal of labour. It has the reputation of being a very good employer indeed and, furthermore, it has given a fairly large issue of shares to its employees. I do not criticise the company. I say that, in my view, that is not the best way to encourage people not to make wage claims.

The Government policy to deal with the economic situation last autumn came in for a good deal of criticism at the time. But it has in my view—and I think that what the Chancellor has said has demonstrated this—gone a very long way towards achieving its object. No one would deny that confidence in sterling has been restored, and there has also been a very satisfactory increase in our reserves. The second paragraph of the Economic Survey to which I referred said that the whole process of strengthening confidence both abroad and at home has to go further if the country is to have a sound foundation for further economic development. I think that is absolutely true, and no one would challenge it.

I believe, therefore, that the Budget must be judged by the extent to which it consolidates the ground which has already been gained and by which it provides a springboard for further progress. When we look at my right hon. Friend's proposals tomorrow we ought to give less thought to whether they give us more money to spend now by reductions in taxation than to whether they are calculated to let us have better value for the money which we have already by bringing down prices at home and maintaining the stability of our currency abroad. I think that an impartial consideration of my right hon. Friend's Budget proposals would show that they measure up well to those standards, and as such I believe that they will win the commendation not only of the Committee but of the country.

6.7 p.m.

Mr. James H. Hoy (Edinburgh, Leith)

I want to concentrate mainly on one of the announcements made by the Chancellor about the black spots of employment in the country. It is extremely difficult to ask the people of Scotland to increase production when there is an. ever-increasing rise in the numbers of unemployed.

A large meeting was held at the end of last week in the constituency of my hon. Friend the Member for Kirkaldy Burghs (Mr. Hubbard), at which hundreds of people were present, because, once more, the livelihoods of hundreds of men were involved by the action of the Government, who, rightly or wrongly, are closing a very important naval yard. If the Government were interested in increasing production, one would have thought that, before taking the step of closing the yard, at least alternative employment would have been made available for these people.

That is not confined to only one part of Scotland. I am glad that the President of the Board of Trade is in the Committee, because in recent weeks it has been my duty, as the convener of the Employment and Industry Group in the Scottish Parliamentary Labour Party, to take delegations to the Secretary of State for Scotland, the President of the Board of Trade and the Minister of Labour about the ever-growing problem of unemployment in Scotland.

I was interested to hear the Chancellor say that one of the things he intended to do was to make resources available to areas outside those scheduled under the Distribution of Industry Act. During many debates on industrial employment in Scotland we have asked the representatives of the Government if this could be done, but we have always been repelled with the reply that if we spread the Distribution of Industry Act over more areas it would become less valuable. But I think that the announcement by the Chancellor that the Government are prepared to allow benefits obtainable in certain areas under the Distribution of Industry Act to spread over into areas where there is a particularly heavy employment is a distinct possibility. I think of areas like Dundee, where the unemployment figure has now reached over 5 per cent., Greenock, where unemployment now exceeds 8 per cent., and places in the North, like Stornoway, where unemployment is between 12 and 15 per cent. It will be seen, therefore, that not merely one area, but many areas, in Scotland are vitally interested in this problem.

The Chancellor did not give us a great deal of information when he made his announcement. I ask that the Government to say, not necessarily tonight, but, perhaps, in opening the debate tomorrow——

The President of the Board of Trade (Sir David Eccles) indicated assent.

Mr. Hoy

I gather that the President of the Board of Trade will open the debate tomorrow. I hope that he will tell us something more decisive and say that in areas where unemployment is two or three times higher than the level of the rest of Britain, these conditions will obtain. Such an assurance is vital to Scotland. We shall be grateful for any assistance from the Government to deal with this problem.

I join with the hon. Member for Blackley (Mr. E. Johnson) in one of his remarks about Purchase Tax. In view of his desire to create employment, I should have expected the Chancellor to wipe out altogether the tax on wallpaper. This is a commodity which affects those engaged in interior decoration, among whom unemployment is high. Anything that would have helped to reduce costs in this direction would have been of great benefit not only to the wallpaper industry itself, but to that section of building trade workers who, at present, are feeling the pinch of unemployment most sharply. These are the things which interest us in Scotland and we hope that when the Chancellor winds up our debates next week, he will make his proposals much more specific than they were when presented to us this afternoon.

6.12 p.m.

Mr. Thomas Hubbard (Kirkcaldy Burghs)

I do not intend at this stage to go into the whole detail of the Chancellor's Budget statement. It certainly requires a good deal of study. During the post-war years the country has felt the need of inspiration. Whatever way we look at today's Budget, nobody can describe it as inspiring. Indeed, nobody will be satisfied with it.

At the present time, when there is already an increasing volume of unemployment, when it would appear that we are on the eve of trouble in industry and at a time when it is essential to increase productivity, everything points to the fact that productivity is bound to go down. It is bound to do so if people are unemployed. Unemployment is never profitable to the country at any time. It grows like a snowball. Nothing which has been said this afternoon gives any indication that the Budget is likely even to stop the growing unemployment. There is, therefore, no inspiration in that direction.

A large number of various trade unions have put in claims for increased wages. I wish that sometimes in this Chamber we would get down to realism when talking about demands for increased wages. What the ordinary people engaged in production want is to maintain their standards. It must be obvious that the Government's deliberate policy of increasing the interest charges means that the money that the workers have been earning, in all industries, buys less. What they are asking for is not better conditions than they have had hitherto, but to be able to maintain the conditions for which they fought so long and which they enjoyed for a short period after the war.

It is not a question of the trade unions wanting to sabotage the country's economy. The shoe is on the other foot. It must have been crystal clear to the Government when they increased the interest rates and passed them on to the local authorities that there would be an increase in rents and rates. A 5s. a week increase in rent is equal to a 5s. reduction in wages or purchasing power and a further increase of 5s. for rates means yet another 5s. reduction in the value of wages. The only satisfactory method of evaluating an income is to assess the standard of living that it provides. We on this side have made it clear that unless something is done to offset the extra charges falling upon the great bulk of the people, including those in productive industry, they are bound to take the only other step open to them and ask for an increase in wages.

As I see it, the only alternative to increased wages is stabilisation of prices, but not one single part of the Government's policy has been directed towards stabilising prices. During the first six years after the war, we had increases in the cost of living because world prices were going up. We have had even steeper rises during the past six years, in spite of the fact that world prices have been falling. Therefore, when the housewife's money buys less, the only alternative is for wages to rise. This is one direction in which the Government could have given the country a stimulant.

Mr. E. Johnson

I know that the hon. Member would not want to create a false impression, but it is none the less a fact that the real value of earnings is higher today than in 1951, when the party opposite were in power.

Mr. Hubbard

The real value of wages is determined by what people can buy with them. It does not matter whether a worker takes home £5 or £10. The real value is in the amount of commodities that he can purchase. While it is true that the figure in terms of £ s. d. is higher, the purchasing power is no higher. Therefore, the workers are going back——

Mr. Johnson

I understand what the hon. Member means by the level of the value of wages, but is it not a fact that the worker in industry can today buy more with his earnings than when the party opposite were last in power?

Mr. Hubbard

If the hon. Member is referring to the availability of commodities, that may be true. When the Labour Government were in office, commodities were in short supply. Now they are in greater supply. It is, however, incorrect to say that in terms of purchasing power the worker is able to buy sufficient to live at a higher standard. One has only to inquire of the tradespeople in any town. The greater the proportion of wages that must go in rent and rates, the less there is for people to spend in the shops. The moment that unemployment starts to grow—and we have a large volume of it in Scotland—less and less money goes into the hands of the tradespeople. Fewer replacements are necessary from the factories. That is the position that we now face.

In the same way as the Government have to budget for the future and to raise money, the housewife also has to budget. To ensure that families maintain for themselves and for their children a decent standard of life compels them to seek an increase in wages.

Mr. E. Johnson indicated dissent.

Mr. Hubbard

The hon. Member shakes his head. It depends which way he looks at it. It must be remembered also that old-age pensioners have to budget and that the cost of living goes up for them, too, for the same reasons. If the price of coal goes up, the housewife has to pay more for it. If transport charges go up, she has to pay more for her goods because the increase is always passed on to the consumer. That may be all very well for those who gain compensation by ever-increasing increases in income, but it does not benefit those on fixed incomes, the old-age pensioners or those who are sick. Where is there one crumb of comfort for them in the Budget today?

There was much beating of the drum by the Government announcing what they were going to do for the old people. They were going to increase pensions for the old-age pensioners living in welfare homes. They were supposed to be giving them 2s. 6d. more pension to make their pension equivalent to that given to old-age pensioners living at home. However, by the withdrawal of the tobacco concession their net gain is only 2d. a week. I have here a letter from a number of old-age pensioners living in a welfare home at Methilhaven in Fifeshire confirming this. The hon. Member for Blackley (Mr. E. Johnson) and the Government must remember that this welfare home is not a mental institution or a Poor Law institution or a prison, and that the people who live in it are entitled to live as normal and as decent a life as anybody else. They are not confined; they go out. Because of the rise in the price of commodities which they want to buy when they go out, even if they want to buy entertainment, they are worse off now than they were before. Would the hon. Gentleman say that there is any equity in that? Will he say that this letter is lacking in realism? Does he not realise that the people at the bottom end of the income scale were looking to the Budget for some relief?

Perhaps he does not realise what the position is which we in Fife are facing, where the naval repair works are closing down. Because of that young apprentices were looking for some help from the Budget. They have to leave their homes in Fife to take jobs in the South of England. The Admiralty is prepared to pay apprentices 17s. a week for living away from home. Apprentices have to budget, too. I have an apprentice's budget here. A young apprentice working at Donibristle finds that the only place where he can obtain employment in his own trade is at Fleetlanes in the south of England, and he has to leave his home. A growing boy, he requires replacements of clothes and boots more often than an adult. At the end of the day he finds he is left with only 7s. in his pocket. Was he not entitled to look to this Budget for some help for his future? The whole of our future depends on the future of these boys.

Representing as I do a place where we pay tribute to Adam Smith. I would remind the Committee that the real wealth of the country is its capacity to produce, and any Government who do not make all the efforts they can to keep everyone in production and to encourage production are falling far short of what the country rightly expects of them, and that is what this Government are doing at this time. They are causing loss of production either through the closing down of works or by driving people to strike.

Local authorities also have to budget. They have no way of raising revenue other than through their local taxation, and the people are subject not only to the taxes levied by the Government but to local rates as well. The Government, by their dear money policy, are driving local authorities to increase their revenue by raising rates in order that they may carry out the functions, for instance in housing, which the Government have placed upon them. Increased rates are further inroads on the standard of living of the people, and they are especially severe in the areas where most has to be done.

There is direct Income Tax; there is local taxation; and there is indirect taxation. Of all the methods of taxation, indirect taxation I find the most abhorrent, and it ought to have been treated differently by the Chancellor of the Exchequer. When we realise that Purchase Tax even on necessary articles is paid by the poorest people at the same rates as are paid by the wealthiest people, then we see that this indirect taxation is the most unfair form of taxation.

The people who put most into the pool ought to be able to take the most out of it. The hon. Member for 131ackley mentioned Imperial Chemical Industries, but I can add the names of other companies which have been paying big dividends. The great Prudential Assurance Company showed a dividend of 150 per cent. just a few weeks ago, and the Pearl Assurance Company and other monopolies have paid great dividends. It is very difficult today to convince people whose standard of life has been reduced because of increased prices or because of Government policy that they ought to be patriotic and accept a lower standard of life and not demand increased wages when day by day they see published the high dividends paid by monopolies and cartels.

Even though I.C.I. may be very good to its workers it takes far too big a share for itself of the profits. It ought to pass on to the consumer more of the profits which it makes out of some of the commodities which it manufactures. Indeed, if the consumers could be advantaged by cheaper prices there would be less and less need for them to demand increased wages.

We want a little clear thinking about the way ahead. I have been on strike in my life. Ordinary people, ordinary workers never benefit from strikes. Nobody goes gladly into a strike, but there comes a time when people have to defend their standard of living. Should there be a strike in the transport industry it will be a disaster for those engaged in the industry whether on the buses or on the railways. If there were to be a strike in the coal mines it would be a disaster to the people in that industry. A strike would be not only a disaster to the workers but to the country as a whole and to the economy of the country, and at this time we feel—I, at any rate, feel most strongly—that the Government ought to take action to ease the difficulties.

For instance, if the duty on petrol were cut and the advantage of that were passed on to the consumers, that would be a help. Unfortunately, the cost of petrol has never recovered since the Suez issue and petrol is still far too dear. The big companies are still buying up smaller companies all over the country. On the one hand, we have rich people growing richer and, on the other, poor people becoming poorer. Industry, manufacturing and distribution, is falling into fewer hands, so that we are getting more and bigger monopolies and combines and cartels all over the country while the working people's standards are getting lower and lower and they are accused of not being patriotic if they demand a restoration of their standards.

They will feel miserable about this Budget. The dangers we were facing this morning we are still facing now tonight. This Budget does nothing to encourage production, or to relieve the dangers, or to facilitate the negotiations going on at this time.

The Chancellor talks of the gross national product and of the total amount of money, but he and his colleagues fail to recognise how unevenly it is distributed and how misleading it is to speak of it as though it were spread evenly, whereas it is concentrated in the hands of a small number of people. The only people who can save this country, who can save its economy, are those who are usefully employed, and the way to save the economy of the country is to ensure that the workers continue to be employed in industry and are working in conditions which are satisfactory to them. Whatever may be the position of the economy today, a few months of strikes in those great industries would have effects from which it would take us many years to recover, and I hope that consideration will be given to these things now in this debate and in the subsequent debates on the Finance Bill. Let the Government remember that it is one thing to sit on the benches in this House and talk about our economic position. It is quite another thing to be the wife of an unemployed man, or the mother of an unemployed son who sees little in store for him in the future. It is another thing to think in terms of some of the places in Scotland described by my hon. Friend the Member for Leith (Mr. Hoy), and in Wales as well. There are areas in Fife where, on the one hand, there is a developing coal area and, on the other, an industry in which there is unemployment.

From this point of view the Government have a duty not merely to look down on the problem, but to get down to its level and examine it properly, because if they do not do so there will not be much future for the country.

6.31 p.m.

Brigadier O. L. Prior-Palmer (Worthing)

I always listen with interest to the sincerity of the speeches made by the hon. Gentleman the Member for Kirkcaldy Burghs (Mr. Hubbard). May I recall to his mind the words of the Chancellor, not long ago, that he would do everything in his power to ensure that the level of unemployment in such areas is reduced? I am sure that the hon. Gentleman will agree with me that we must keep the total level of unemployment as low as possible and, at the same time, lower the level of unemployment in those areas and patches to that of the overall level in the country. Knowing my right hon. Friend as I do, and as he was in industry, I am certain that he will do everything in his power to bring that about.

I would like to follow one remark of the hon. Gentleman on the question of dividends. We have heard this one many times from the benches opposite. I implore hon. Gentlemen to realise, and to tell it to those people with whom they are in contact—because this is a misconception which is very prevalent in the country—that when there is published in the Press a dividend of, say, 35 per cent., it is not the case that the shareholders are being paid that amount, as is sometimes imagined. The 35 per cent. is on the original capital, and when the current price of the share is taken into consideration it will be found that the shareholder is receiving a dividend of, say, 7 per cent. or 8 per cent. Of course, there are cases of bonuses being paid, and the hon. Gentleman quoted one. I will say something about that in a minute.

I do not think anyone would suggest for a moment that this is a startling Budget. It is a tidying-up Budget. The Chancellor of the Exchequer has tidied up his "in tray". Certain anomalies are being abolished or modified but there is nothing very striking. I do not think that anyone in the country expected anything very striking. The Government have been pursuing a disinflationary policy and that policy is being continued. Therefore, there is little that can be done in the way of tax relief at this juncture, or until we have killed inflation and the cost of living begins to come down.

Now I will criticise my right hon. Friend. I am sorry that, once again, we have a Chancellor who has found it impossible to do anything for a section of our community which is harder hit by inflation than any other. I am referring to those who have retired on fixed incomes. I am thinking of people who have worked hard all their working lives, who have saved money for their old age and who have invested it in equities or in house property. I know that the word "landlord" is anathema to some hon. Gentlemen opposite, but these people have invested in, perhaps, a couple of houses because it was the fashion to do so at one time.

As we all know, these people are having a hard time. There are large numbers of them in my constituency. They have served their country well, they have retired in a very modest way and they are finding living extremely hard. I know of ladies who are trying to live on £150 a year. I wonder how many people would like to try to live in retirement on £150 a year in these times. It is not easy. I admit that it is difficult to know what to do for them. In successive Budgets the present Government have reduced taxation. In successive Budgets they have raised the basic level for the payment of Income Tax. At one moment 18 million people were absolved from paying it altogether. This helped them a little, and the older people are being helped once again in this Budget.

I still say, however, that there are things which could have been done to alleviate the lot of a large section of the people who are suffering from the effects of inflation. All the professional classes are suffering—doctors, dentists and lawyers. We must all agree that to a certain extent both the employers and the employees have contracted out of inflation. The employers have raised their prices and wage claims for the employees have come one after the other. It is true that some people are still earning too low wages. I quote the railwaymen as one group. By and large, however, the national average is not too bad —I think it is £12 a week—and in the steel works, in Sheffield, there are men who are taking home £18 and £24 a week. Good luck to them. They are making the finest steel in the world, at the lowest price. They have been contracting out of inflation, and those who are suffering intensely from it are those who comprise the professional classes and the older, retired people on small fixed incomes.

It might be said that we are taking measures to curb inflation and so to alleviate their lot, but I maintain that, in the meantime, something should have been done for them.

Mr. Hubbard

When the hon. and gallant Gentleman refers to the national level of wages, is he talking about the daily rate of wages or including overtime? Repeatedly I see figures in the newspapers of the average wage in specific industries which include the overtime being worked.

Brigadier Prior-Palmer

I think I am right in saying that the national average as published in statistics does not include overtime——

Mr. Hubbard

No, it includes overtime.

Brigadier Prior-Palmer

The people I am talking about cannot earn any more by working overtime. A doctor sometimes works all day and all night, but he gets no more for it. He has a certain number of panel patients and he can do nothing about inflation. Those are the people who are really suffering from the inflationary spiral, which has been with us for so long.

I hope that I shall not make hon. Gentlemen opposite angry by what I say now. I know that the party opposite is on record as having at one juncture seen the light. I suggest that those people who save the State money by educating their own children and so freeing places in the State schools, who are often retired officers, parsons, and so on, living on small incomes and depriving themselves to educate their children, should get a little tax relief. That would do no harm. It would help to empty some of the State schools where we have classes of 45, 50 or 60, which everybody realises is wrong and ought to be put right. That is one way of helping the people about whom I am talking.

The other day the Daily Telegraph was kind enough to publish an article of mine about the taxation of married women. I will not quote the whole article. I moved an Amendment on this subject to the Finance Bill last year—I got a very encouraging answer—and I propose to do so again this year. I hope that the Chancellor will look into the matter before the Finance Bill comes before us. To paraphrase my article, it seems intolerable to me that we should have able, brilliant women, perhaps with the highest university degrees, some of them technologists and technicians who, when they marry, are charged Surtax—not Income Tax, but Surtax—on the very first penny they earn. I have known cases where the husband has said, "No, dear, you are not going out to work." We are losing a great deal of ability because of this. I was supported by two hon. Ladies opposite last year, and I hope that the same will happen this time. I mention this in passing to give warning that I intend to raise the subject on the Finance Bill.

I omitted one matter from my article—after all, articles are limited—and I got letters from very cross ladies because I had not mentioned the perfectly true fact that a married woman is also taxed at the full rate of Income Tax however small her private income may be. She does not get the gradation in tax relief that a single woman or a single man gets. Because she is married she has to pay at the rate of 8s. 6d. in the £ on all her very small income. That is wrong. I hope that I shall be able to raise the matter on the Finance Bill.

There is something else which I wondered whether the Chancellor could not have done. There are people with large incomes who are living in council houses. Council houses were intended not for people with £1,000 and £2,000 a year, but for poorer people. Many council houses are cluttered up with people who could well afford to pay reasonable rents for other houses of a similar type. It is intolerable that a person should run a very expensive motor car—I could not begin to afford to run one—because he is saving money through living in a council house. Some local authorities have done something about this, but there are others which have done nothing. Why should not such people be taxed the amount of the subsidy? That would make them think again. This should apply to people over a certain income, I suggest. It would soon stop that sort of thing, and it would be extremely popular in the country, and many council houses would become available for the people for whom they were intended.

Finally, I want to make a plea in respect of the Rent Act. We all know that the full impact of this has not yet——

Mr. David Jones (The Hartlepools)

How would the hon. and gallant Gentleman deal with a man who was paying for the education of his children in a private school and was also living in a council house?

Brigadier Prior-Palmer

I should deal with him very severely. If there were such a thing as a tax relief for a person who was educating his own children at a private school, probably the way to do it would be to say that the individual should not get it if he was living in a council house. Again, this would apply over a certain income level. If a £5 a week railwayman decided to send his child to a private school, good luck to him. He should get the relief.

Mr. Hubbard

With regard to what the hon. and gallant Gentleman has said about advantage being taken of subsidies by people who can afford to pay bigger rents, would he apply the same principle to some of the other people who get subsidies, such as landlord farmers, who receive subsidies to the extent that they pay the total wage bill?

Brigadier Prior-Palmer

Farming subsidies constitute a very wide subject. I should like to argue the case for or against them with the hon. Gentleman at any other time, but I am not going into that subject now.

With regard to the Rent Act, I hoped most sincerely that the Chancellor would produce a scheme of low interest loans for people who wished to purchase their own houses. It is all very fine saying that local authorities can do this, but they cannot raise that sort of money and let it out at a low interest charge. I hope that we shall hear something more about this when the Finance Bill comes before us.

6.45 p.m.

Mr. Marcus Lipton (Brixton)

My main complaint against the Budget is that it does not face the basic long-term dilemma which must inevitably confront any Government in this country at present. The country is still trying to do far more than its resources will allow. That is the reason why we have had the recent outbreak of resignations, by the right hon. Member for Monmouth (Mr. P. Thorneycroft) and other right hon. and learned Gentlemen opposite. They had come to the conclusion honestly and sincerely—a conclusion with which I cannot quarrel—that we are still trying to do far more than we can afford.

There is nothing in the Budget to indicate that the Government are facing up to this fundamental problem. No one who has studied the economic facts of life will deny that we cannot carry the burden of defence in the nuclear age without jeopardising the policy of full employment. We can have either one or the other, but—I think that this is the reason for the recent resignations—we cannot have both. I wish there had been some indication in the Budget speech that the Government are applying their mind to this problem. But what do we find? We find a lot of fiddling, maybe virtuous, alterations of a minor character, but the Government do not face the real problem.

I was interested to note in the figures submitted to us that we are asked to make provision for £733 million for servicing the National Debt. I compared the other figures in the Budget statement. The £733 million which the taxpayers will have to find to pay interest on the National Debt during the next twelve months would pay for the whole of our National Health Service, plus war pensions, plus National Assistance, plus noncontributory old-age pensions. That will give some idea of the magnitude of the sacrifice that we are having to undergo to pay for past wars and—heaven forbid—to pay for future wars. When people talk about wasteful Government expenditure on the social services, I should like them to bear in mind the simple comparison that I have made, which shows that the interest on the National Debt exceeds the cost of the social services to which I have referred.

The only way in which the country will find economic salvation will be by increased production. Until we make full use of all the capital and labour available, we shall never be able to deal with the retired people living in the constituency of the hon. and gallant Member for Worthing (Brigadier Prior-Palmer), or anywhere else.

There are certain responsibilities which the community has to bear in respect of old people, retired people, poor people, sick people, but we cannot possibly bear that burden unless we make the fullest possible use of our production. An examination of the Budget and of the record of the Government during the past few years will show that British industry is producing no more today than in the autumn of 1955. Labour and capital are standing idle or are being wasted, and the increase in production in this country compares most unfavourably with that in Germany, France and many other Continental countries.

This is no accident. It is the result of deliberate policy on the part of the Government, who believe that the only way in which to deal with what they consider to to be an inflationary situation is to restrict credit and to apply other restrictive policies. At the same time as they apply those restrictive policies, they leave open wide gaps in our economic structure, gaps which make it all too easy for foreign speculators to take advantage of the absence of currency restrictions.

We do not have to go too far back. Does not the Committee remember the hundreds of millions of pounds lost through what is now known briefly as the Kuwait gap? That gap has now been closed. However, the Government are always running in a race to close gaps here and there, but there is still one which remains wide open. That is the support of the exchange rate for transferable sterling, as a result of which bankers in Zurich and elsewhere are drawing from our gold and dollar reserves.

Figures have been published to show that up to December last year, through those two gaps in our defences, the Kuwait gap, which has now been closed, and the transferable sterling gap, which is still open, we have lost up to £500 million. That is because the Government have a doctrinaire opposition to any kind of control, even if that means punishing the community to this very substantial extent.

There was nothing in today's Budget about the closing of this gap and we may find ourselves faced with an autumn crisis as the result of which there will have to be an autumn Budget. We are living from one crisis to another with our gold and dollar reserves, which are not adequate to enable us to be the bankers of the sterling area, simply because the Government will not take the necessary steps to close this gap and to exercise some proper control over our gold and dollar reserves.

That is the short point which I wanted to make. There may be other hon. Members wishing to speak in the limited time available, and I do not want to prevent anyone else from speaking. I hope that in the course of our debates over the next few days the Government will be able to give us some evidence of their desire to deal with what I described as this fundamental, basic problem of how we are to provide defence in a nuclear age with the preservation of the Welfare State and full employment. The two cannot be combined. The Government will have to make their choice. If they do not make their choice, the electors will make the choice for them at the next General Election.

6.55 p.m.

Mr. G. R. Howard (St. Ives)

It is too early to say very much about the Budget, and I shall, therefore, detain the Committee for only a few moments. I welcome the general tone of the Budget, and particularly what my right hon. Friend said about the unfortunate areas where local unemployment is higher than the national average. Unfortunately, in my part of the West Country, Cornwall, we have such areas because, as hon. Members know, this is a part of the country with a seasonal unemployment problem, with holiday makers coming in the summer, but with people unable to find work in the winter.

I was very glad to hear what my right hon. Friend had to say about dry docks. There is a small firm in my constituency, Holman's, of Penzance, which is doing well in this work and which wishes to expand, and I hope that the proposals of my right hon. Friend will help it. I wish that small farmers could have this form of credit extended to them.

I welcome what my right hon. Friend had to say about holding public expenditure. I am all for necessary expenditure, especially on defence, but we want to watch such expenditure very carefully to ensure that it is not more than it should be. There must be many ways in which we could cut it down. Some of us who are familiar with Service Departments know that the process of empire building often takes place. In the Navy, for example, the civilian element seems to grow larger and larger as the Navy gets smaller. We have made representations about that and I know that the Admiralty is watching the situation, but it must show that it is prepared to continue to make necessary cuts, however unpopular they may be.

I was also pleased to hear what my right hon. Friend had to say about the Commonwealth Economic Conference and about co-operation in the Commonwealth. I hope that that meant that during the economic conference in the autumn what is known as the Braithwaite Plan, or Commonwealth Bank Plan, will be considered.

I welcome the proposals to assist small cinemas because, particularly in my part of the country, small cinemas have suffered badly. I was also very glad to hear what my right hon. Friend said about reductions in tax on things such as cameras and greetings cards.

In conclusion, I congratulate the Chancellor on not giving way to much popular clamour, but for giving us what is perhaps a somewhat tough Budget which should show the country that the Government are prepared to give the leadership that the present situation appears to need.

6.58 p.m.

Mr. Harold Davies (Leek)

It is impossible, in the limited time at our disposal, to deal with all the aspects of the Budget, but I give notice that I shall move an Amendment to the Finance Bill dealing with Table IX of the Financial Statement, which slipped through the Committee apparently unnoticed. It is difficult to understand what the Chancellor intends. He wants increased production in the mines, yet miners' protective helmets and protective boots, which were formerly free of tax, are now to be taxed at 5 per cent. Who could have advised the Chancellor to do that? Protective boots for miners, quarrymen or moulders; clogs and other wooden-soled footwear are to be taxed at 5 per cent. whereas they were previously free of tax. Even babies' headwear will be taxed at 30 per cent. if it contains wool. I hope that my hon. Friends will vigorously oppose this tax on the miners.

I agree with my hon. Friend the Member for Brixton (Mr. Lipton) that constructive suggestions for dealing with the present economic situation have not been made. The Chancellor referred to the European Free Trade Area, but we have just lost £280 million worth of Far Eastern trade.

It being Seven o'clock, The CHAIRMAN left the Chair, further Proceeding standing postponed until after the consideration of Private Business set down by direction of The CHAIRMAN OF WAYS AND MEANS under Standing Order No. 7 (Time for taking Private Business).

Mr. SPEAKER resumed the Chair.