§ I turn now to the Exchequer prospects for the coming year. The full figures will, as usual, be given in the White Paper circulated at the end of my speech.
§ On the basis of existing taxation, I expect to receive next year from Inland Revenue duties £3,280 million, an increase of £270 million over last year's out-turn. I put the revenue from Customs and Excise at £2,380 million, £98 million more than last year. I expect a further increase in receipts from motor duties, which I put at £113 million, or £5 million above last year. Other revenue I estimate at £185 million or £45 million less than last year, when we had special receipts in the shape of an advance payment of debt by Germany. Total revenue, therefore, I put at £5,958 million, or £328 million more than last year's out-turn.
§ On the expenditure side, Consolidated Fund services are expected to require £769 million, an increase of £41 million over last year's estimate. This is almost entirely due to the higher level of interest rates.
§ Total Supply expenditure, as already published in the Vote on Account and in the Defence White Paper, is put at £4,836 million, which is £341 million higher than last year's Budget estimate. After adjusting last year's figures to put them on a comparable basis, this represents additional expenditure of £85 million on the defence programme, and £256 million on civil expenditure. These are very large increases, the need for 47 which must be of concern to any Chancellor of the Exchequer. They certainly do not make my task this year any easier. I would, however, remind the Committee that the figure for defence, high as it is, is still lower in real terms than it was some years ago. On the civil side, the main increases are in grants to local authorities, mainly for education, and in the Health Service. I am satisfied that expenditure on this scale is necessary to enable us to carry out those policies which have so recently received the approval of the nation. The things the nation wants—better education, more up-to-date hospitals, new roads, and so on—are all expensive. And if we demand them, then we must be ready to pay for them.
§ As an offset to this increase in Supply expenditure there are two decreases. The first is one of £9 million on the agricultural Votes. Secondly, as a result of recalculations which have been made of the expenditure likely to be incurred by the Ministry of Aviation during the coming year, the Financial Statement will show a reduction of £10 million from the figure shown in the published Estimate. A revised Estimate will be issued shortly. These changes reduce the provision for Supply services to £4,817 million, and the increase over last year's Budget estimate to £322 million.
§ So we have a figure of £5,586 million for total ordinary expenditure to set against the figure I have already given of £5,958 million for ordinary revenue on the basis of existing taxation. The result is an above-the-line surplus of £372 million, which is £270 million more than I budgeted for last year, and £14 million less than the actual out-turn.
§ BELOW THE LINE
§ Below the line, I estimate payments £1,135 million, a reduction of £70 million as compared with last year's estimate and £49 million more than the out-turn. As the detailed figures in the Financial Statement will show, there are within the total a number of changes in either direction. For example, advances to the Coal Board are expected to be £62 million less than last year, but advances to the other nationalised industries £58 million more.48
§ I shall need further statutory powers to continue these advances and shall in due course be moving a special procedure Resolution to enable the matter to be dealt with in the Finance Bill. In the light of the Radcliffe Committee's recommendation I propose that the power should be taken for three years, and that it should be subject to whatever limits Parliament may place from time to time on the borrowing powers of the individual industries concerned. Taking into account repayments and other receipts, which will be slightly higher than last year, I expect the net total of below-the-line payments to be £703 million.
§ So, together with the above-the-line surplus of £372 million which I have already mentioned, I arrive at a net figure of £331 million to be met by borrowing, as compared with £314 million which was the out-turn last year. I should mention that in these calculations I have not taken account of any receipts which may come to the Exchequer from the Iron and Steel Realisation Account. I fully expect however that the Agency will be able to make significant progress during the year with sales of securities and that the Iron and Steel Realisation Account will yield some very substantial relief to the below-the-line burden on the Exchequer. —[HON. MEMBERS: "Hear, hear."] I cannot tell what that sum will be.
§ Before I leave the subject of expenditure, I must refer to two matters which cause me particular concern, and which I have had much in mind in formulating my proposals. First, we have to remember the prospect that, arising out of the Royal Commission on the pay of doctors and dentists, we shall have to face a further substantial increase in expenditure on the Health Service.
§ The second concerns the finances of the British Transport Commission. I have to mention here, first, the prospect of higher expenditure and, secondly, an important change which I propose in the method of financing the Commission.
§ In the calculations which I have so far made for the coming year I have included below the line a sum of £90 million for the expected deficit of the Commission in the year. I have, however, to bear in mind that, although this 49 figure includes the cost of the recent 5 per cent. interim increase in railway wages, it includes nothing in respect of any further increases which may result from the negotiations now in progress on the Guillebaud Report.
§ As the Committee is aware, the deficits of the Commission have, since the passing of the Transport (Railway Finances) Act, 1957, been financed by advances from the Exchequer. These have been on the basis that the Commission would eventually make profits out of which it could both pay interest on the advances and repay the principal. For this purpose the Treasury was given borrowing powers by Parliament. It has become apparent that the prospects of the railways and the Commission are not now such as to justify the continued financing of the deficit by repayable advances.
§ The treatment of such advances as have already been made, and the question of the future capital structure of the Commission, are matters which will be decided by the Government in connection with the measures foreshadowed in this House on 10th March by my right hon. Friend the Prime Minister. The working out of detailed proposals, and the preparation of the necessary legislation, will take time, and the Bill cannot be brought in until next Session. I have, nevertheless, thought it right to anticipate this in my Budget so far as concerns the method of financing the British Transport Commission in the coming year.
§ For the purposes of my Budget calculations I am accordingly transferring the sum of £90 million from below the line to above the line. The effect of this is that the amount of the deficit will have to be met from revenue, a sharp reminder of the harsh realities of a disturbing situation. My right hon. Friend the Minister of Transport will in due course submit a Supplementary Estimate for the necessary amount.
§ This important change reduces the above the line surplus by £90 million to £282 million and the below-the-line deficit by the same amount to £613 million leaving the same figure of £331 million to be met by borrowing.
§ In considering the borrowing problem for the coming year, my thoughts turn, naturally, to National Savings. I have 50 been thinking how I could further encourage small savers, and I have a number of practical proposals to make.
§ Since 1958, individual holdings in the current issue of National Savings Certificates have been limited to 1,000 15s. units, that is, to an investment of £750. I am proposing next Monday to increase this limit to 1,200 units costing £900.
§ The 5 per cent. Defence Bond has been so successful that it will be necessary to introduce a new issue with different dates for the interest payments. The new issue, which will otherwise carry the same terms as the old, will come out in June. When it is made I have decided that the limit on holdings shall be £5,000 instead of £2,000 as at present, and that this will be additional to holdings in the present or earlier issues.
§ I am also proposing to make a number of changes in the Premium Savings Bond scheme. Since this was introduced by my right hon. Friend the Prime Minister in 1956, a total of about £290 million has been invested of which no more than £38 million has been withdrawn, leaving a balance still invested of about £250 million. So there is no doubt that this new security has been remarkably successful. It has attracted this considerable volume of savings to the Exchequer in a way which has enabled millions of people, including, I trust, almost every hon. Member of this Committee, to spice their saving with a little mild excitement. However, it is not surprising that three years' experience should have given us some new ideas and I am proposing to improve the scheme in several ways.
§ First, the six months waiting period before a bond is eligible to be drawn for a prize may have proved rather a severe test of the average saver's patience. I propose to reduce this to three months.
§ Secondly, the allocation of prizes will be altered. I think that when the Premium Bond was launched my right hon. Friend was wise to regard this as a scheme in which it would not be right to pay enormous prizes. I still believe this, but I think that we could make it more attractive by introducing a few prizes of £5,000, and I propose to do so. At the same time, we shall increase the total number of prizes and in this way appreciably improve the chances which any one bond has of winning a prize. The details of the new prize 51 allocation will be given in the Financial Statement.
§ There has been a good deal of interest lately in this question of the chances. I think it likely that many—or even maybe most—hon. Members of the Committee are more familiar with the technicalities of calculating odds than I, in my innocence, am. Under the present method of calculating the prize fund, I am advised that the odds against winning a prize tend to lengthen with the passage of time. The extent of this has been very greatly exaggerated, but to dispose of the matter I propose that in future each bond will contribute one month's interest only to the prize fund for each draw, whether the bond is in the draw for the first time or not. At the same time, the rate of interest on which the prize fund is based will be increased from 4 per cent. to 4½ per cent. The effect of this, together with my proposal for increasing the number of prizes, will be that the odds will be both shortened and stabilised.
§ There are two other changes I propose. One is to increase from £500 to £800 the number of Premium Bonds which may be held. The other is some easement of the rule which makes a bond ineligible for a prize after the death of the holder. I have come across a number of cases where this rule seemed to me to work out rather hardly for the relatives. I propose to make bonds eligible for a prize in the first monthly draw after the death of the holder.
§ These changes cannot come into force until the expiry of the necessary six months' notice and will first apply to the prize draw on 1st November. I wish that it could come in earlier. From then on they will apply to all outstanding bonds purchased since the beginning of the scheme and not merely to bonds purchased in the future. Until the November draw the present terms will, of course, continue unchanged. I should like to emphasise that people who have Premium Bonds now do not have to take any action to secure the benefit of the new and attractive terms. All they have to do is hold on to their bonds.