§ 4.7 p.m.
§ The Economic Secretary to the Treasury (Mr. Anthony Barber)
Before turning to some of the wider issues in the Budget proposals, there is one matter that I would like to mention. Yesterday, the right hon. Gentleman the Leader of the Opposition and the right hon. Member for Huyton (Mr. H. Wilson) suggested that the economic affairs of the country had been so arranged as to provide an easy Budget before the election and what the right hon. Gentleman called a tough Budget after the election. [HON. MEMBERS: "Hear, hear."] Perhaps they and their hon. Friends who are jeering will allow me to say this: they may think in all sincerity that my right hon. Friend the Chancellor of the Exchequer's judgment was at fault last year, or that it is at fault this year. They may consider his assessment of economic trends to be wrong, but I think that anyone who knows my right hon. Friend will also know that in acting as he did he would not be motivated by any other consideration than the best interests of the country.
§ Hon. Members: Oh.
§ Mr. Barber
Members opposite may jeer, but I hope that they will consider that it would have been very easy for him 405 to have said, "The increased duty on tobacco would bring in only £39 million this year, which, in a total Budget of more than £6,000 million, is a very small figure. I think that I should do this, but it would not be popular, so I will forget it."
My right hon. Friend did what he thought right, however, and Members opposite might at least have given him credit for that. The right hon. Member for Huyton has graphically described the prospects for 1960 as having a "morning after" appearance. If this were even an approximation of the truth, one thing is clear—that the six years of the Labour Government were one long hangover. In those days the only answer of the right hon. Gentleman and his right hon. and hon. Friends was to imbibe more and more draughts of Socialism with the inevitable consequences, which we all learnt to our cost.
The truth is that the approach of the Opposition is typical, and their basic principle, regardless of the needs of the economy, is to support all that is popular and oppose all that is unpopular. When the right hon. Member for Huyton talked glibly yesterday of increased revenue from proposals concerned with expense accounts and a tax on capital gains, I could not help casting my mind back to 1951, when the right hon. Gentleman the Leader of the Opposition was Chancellor of the Exchequer. In that last Socialist Budget he raised no less than £400 million in taxation. If the revenue from expense accounts and from a capital gains tax is now thought to be so significant, why was nothing done about it in 1951?
Perhaps I might turn for a moment, as there is a representative of the Liberal Party here—the hon. Member for Bolton, West (Mr. Holt)—to the proposals of the hon. Gentleman the Leader of the Liberal Party. They were stated very clearly in the Daily Sketch on 1st April. I do not know whether there was any particular significance in the date. The hon. Gentleman's article was entitled, I thought rather hopefully:If I were Chancellor of the Exchequer.I could not help wondering who was to be Prime Minister.
However, the proposals are quite clear and quite simple: first, put aside £100 million to raise the old-age pensions; 406 secondly, abolish Surtax; thirdly, abolish all tax on the first £500 of new savings; fourthly, abolish Purchase Tax and replace it with a small expenditure tax; fifthly, allow tax remission to companies which set aside shares for their workers; sixthly, abolish Schedule A tax on property; and seventhly, cut all tariffs by one-half. Then the hon. Gentleman added:That is all I can do this year.These proposals, unfortunately, lack a certain amount of precision, and no doubt the reason for the hon. Gentleman's absence today is that he is away working out the details. I would only add that, depending on what the hon. Gentleman has in mind, they might cost about £750 million a year or, indeed, a great deal more.
§ Hon. Members: Chicken feed.
§ Mr. Arthur Holt (Bolton, West)
The hon. Gentleman has not regaled the Committee with the first paragraph.
§ Mr. Barber
I was going on to say that against this increased expenditure the hon. Gentleman has plans for reducing expenditure by only £225 million. That is the content of the first paragraph. Anyway, I hope that the hon. Gentleman may catch your eye, Sir Gordon, so that we can consider these proposals in greater detail.
There is one overriding objective in this Budget, and that is to prevent a return of inflation. For almost two years now we have enjoyed the priceless advantage of a stable cost of living. This is the first time that this has happened in the fifteen years since the end of the war. I think there is nobody in the House of Commons and certainly no one in the country who would deny that the duty of the Government is to do everything in their power to maintain this stability even if, in the course of doing so, it is necessary to take measures which, in themselves, none of us likes. It is, I think, also accepted by almost everyone today that the Budget provides one of the most effective means of balancing the economy; in other words, of ensuring that there is a balance between the pressure of total demand, on the one hand, and available resources on the other.
§ Mr. Barber
My hon. Friend the Member for Kidderminster (Mr. Nabarro) says "Not at all." I must leave it to him and what he called yesterday, rather possessively I thought. "his group" to determine their own views on these matters.
The fact is that this is accepted by most people today, and it really is impossible to maintain that balance by leaning in one direction only year in year out. One might as well suggest that a doctor should offer the same prescription irrespective of whether the patient has a high temperature or a low one.
I believe that when these years come to be seen in their proper perspective it will be agreed that it would have been wrong of my right hon. Friend the Chancellor of the Exchequer to have acted differently either last year or this year. [Interruption.] Perhaps I could put the matter this way. Consistency of policy to keep the economy in balance does not mean consistency of measures. The Chancellor was right to stimulate demand last year, and when the situation changes, as it is changing, he is right to apply some mild restraint this year.
I might add that it seems to me that the cardinal sin would be to be afraid to do the right thing, either from fear of being charged with bribing the electorate or from fear of being called inconsistent. As everybody knows, we have had yet another year of stable prices, and at the same time it has been a year of record production; and the very fact that the restraint which my right hon. Friend has had to recommend this year is so limited is in itself a tribute to the judgment and skill with which he has managed our affairs over the past few years.
So far as this year is concerned, I can assure the Committee that even a slight increase in taxation is unpalatable to me, but I do not think that it will be thought too high a price to pay to prevent the sort of rip-roaring inflation which we experienced under the Labour Government. Once the economy gets out of hand, as it did then, and the reserves go pouring out, the corrective measures—
§ Mr. Barber
Hon. Gentlemen say "What about 1957?" We need only look at the last nine months of 1951 when, if my memory serves me aright—
§ Mr. Barber
All right, 1066. Let us forget it, then. Let us assume that 1951 was a jolly good year for us all.
The fact is that once the economy gets out of hand, as it did then—we must learn some of the lessons of what occurred then—and the reserves go pouring out, the corrective measures which will be necessary will, of necessity, have to be far more drastic.
§ Mr. Rhodes
Wait for it. If the President of the Board of Trade will look in his archives, he will see that one of the contributory factors was the American docking down of commodities to this country. For instance, there was sulphur; 460,000 tons per year of crude sulphur was what we experienced in the way of imports—
§ The Chairman
Order. I am sorry to interrupt the hon. Gentleman, but perhaps he will catch my eye later.
§ Mr. Barber
Right hon. and hon. Gentlemen opposite have on many occasions given explanations for what happened in those years. I was simply talking of the consequences.
There is one point on which I want to be quite specific. One of the prime purposes of the Government remains the reduction of taxation, and if it were not so I should not be speaking from this Dispatch Box. But I must say that I find it very difficult to understand the point of view of anyone who has given serious consideration to these matters who believes that it is possible to reduce taxation year in year out and, at the same time, contain inflation. After all, very large reductions in tax and the rates of taxation have been made under successive Conservative Chancellors since 1951. This is only the third Budget out of 10 in 409 which it has been necessary to make any net increase, and on this occasion I think it is fair to remind the Committee that the net increase, including the increase in Profits Tax which will not be payable until next year, amounts to only 1.2 per cent. of total revenue and only one-third of 1 per cent. of the national income.
§ Mr. Nabarro
May I remind my hon. Friend of a point which I made to the Chancellor of the Exchequer yesterday evening? The Chancellor represented to the Committee that the increase in tax for a full year is £72 million. I put to the Chancellor that there must be added to that the aggregate of the increase in local rates, which is about another £50 million, so that really the increase in taxation is £122 million in a full year. Will the Economic Secretary deal with that point?
§ Mr. Barber
I am sorry; I should not like to anticipate anything. I read very carefully what my hon. Friend said on this point. I can only say that I looked at it most carefully and that I disagree entirely with his conclusion. I think that the figures which were given by my right hon. Friend concerning the increase in tax were correct, and I think that, though the question of rates is certainly a relevant matter, it does not in any way detract from what my right hon. Friend said or from what I am about to say.
§ Mr. Michael Stewart (Fulham)
Before the hon. Gentleman leaves that point, will he remind his hon. Friend the Member for Kidderminster (Mr. Nabarro) that hon. Members on this side of the Committee drew emphatic attention to the increasing burden of local rates in a debate on 25th February and that we missed the hon. Member for Kidderminster on that occasion?
§ The Chairman
I remind the Committee that there are many hon. Members 410 who wish to speak and that fewer will be able to do so if there are too many interruptions.
§ Mr. Barber
I think that the Committee will expect me to say something about the two increases in tax in this Budget. The first is the Tobacco Duty. Of course, once it is decided that in the general interests of the economy a net increase of taxation is necessary, it is not an easy matter to select the particular tax, but the first point to be appreciated in this connection is that the consumption of tobacco has been rising steadily.
During the last ten years, clearances of tobacco leaf from abroad rose by an average of about 2 per cent. In 1949, the public spent £750 million on tobacco, and, in 1959, £1,060 million, an average increase of 3 to 4 per cent. a year. The effect on the cost of living is an increase in the retail price index of only about two-fifths of a point.
For someone who smokes 20 cigarettes a day, the increase in duty will cost about 1s. 2d. a week. I do not pretend that that is insignificant, but it is fair to compare that 1s. 2d. a week with the increase in earnings which took place last year. Between October, 1958, and October, 1959, average weekly earnings increased by 14s. 1d. a week, and that was during a period when prices remained stable.
I must admit that I was somewhat surprised that the Opposition decided to divide the Committee on the Budget Resolution concerned with this increase in duty. After all, the Opposition increased that duty twice when they were in office and on one occasion by no less than 1s. on a packet of 20 cigarettes.
§ Mr. H. Wilson
The hon. Gentleman likes to keep going back to those days. Will he not agree that we left the Tobacco Duty so that the price of 20 cigarettes was 3s. 4d., while he has now raised the price to 4s. 1d.?
§ Mr. Barber
I was simply comparing the increase, which I thought was relevant, in view of the action taken by the right hon. Gentleman and his right hon. and hon. Friends on Monday afternoon.
My right hon. Friend has already explained the reasons which prompted the increase in Profits Tax, and I do not propose to go over them again this afternoon. However, yesterday the right hon Gentleman said that he thought that the 411 increase in Profits Tax was not large enough, and he went on to say that company profits last year rose by 11 per cent. I must say that I thought that it was a little odd that he omitted to say, or forgot to remind the Committee, that in the previous year profits fell by 4½ per cent. In fairness, and to get the matter into perspective, the Committee should have these figures: between 1948 and 1959, company profits rose by 85 per cent.; company dividends rose by 89 per cent.; and average wage earnings rose by 95 per cent.
There is one other matter which I should mention at this stage. In at least one newspaper this morning there was considerable misunderstanding about the effect of my right hon. Friend's proposals for dealing with lump-sum payments and I should like to make one aspect of that clear. It is not proposed to tax lump sums paid under statutory superannuation schemes, or other approved superannuation schemes, to persons who retire on reaching retirement age. In cases where there is no superannuation scheme, if an employer voluntarily pays a sum to an employee who is retiring at the normal retiring age, and the amount is not, broadly speaking, greater than the amount which he would have been permitted to receive under an approved superannuation scheme, that lump sum will not be taxed.
I have already said that the prime objective of the Government is to prevent a return to inflation. But that is not a matter for the Government alone. Between the party opposite and ourselves there is a fundamental difference about the extent to which many of the everyday activities of the individual should be controlled by the State. The fact that that difference of approach arises from convictions which are sincerely held makes it all the more real. Conservative Governments do not pretend, and have never pretended, that the Government alone can control inflation.
I would be the first to admit that the recent success of our economic policies has been due in large measure to the responsibility which has been shown by both sides of industry. I believe that over the past few years the economic effect of what I might call disproportionate wage and salary increases has become far more widely appreciated. People now 412 know perfectly well that when wage increases are too big in relation to productivity, or follow one another too quickly, they are self-defeating, because there is inevitably a decline in the real value of each £ of the wage packet.
Having broken—as we have—the vicious circle of wages and prices, everyone is now aware of the benefits, and not least those living on small fixed incomes. Indeed, whatever the differences between us on questions of policy, it is fairly clear that the events of last October showed that the public was well content with what had been achieved.
The maintenance of general stability in prices is not something which we can get simply by a short, sharp effort. It involves a long and sustained haul. As my right hon. Friend pointed out on Monday, over the last year there has been a very large increase in productivity. The number of people in employment, the hours which they have worked and the wages they have been paid have all increased. Perhaps the most significant fact is that production increased to an even greater extent.
That has been the most important element in maintaining price stability over the past two years. There are some —I think that they are a minority—who think that in the near future there is scope for a further substantial rise in wages or other personal incomes without any danger of renewed inflation. Such an attitude is not held by the majority of people and it stems from a complete misunderstanding of the situation.
In the first place, it is illusory to look simply at the results of one year in isolation. The year 1959 was a year in which production increased faster than wages, but in 1958 it was precisely the other way around. As hon. Members are never tired of reminding us, 1958 was a year in which productivity actually declined, so to start with there was some leeway to be made up at the beginning of last year.
What of the year which we are just entering? Can we expect production to continue to expand at its present rate? I do not believe that we can. To say that is not a sign of pessimism, but is merely facing the facts. After all, a year ago there was spare capacity. Today, what little spare capacity still remains in industry—except in certain less fortunate 413 areas—is rapidly being taken up. Very soon, the only ways in which production will be able to expand will be through large-scale overtime working, with its consequences for the country's wage bill, or the normal processes of technical improvement and capital investment. As the Economic Survey points out, we are expecting an increase in capital investment, which is already at a high level, but even so, there is a limit to what can be expected from that source.
All that boils down to the fact, which we must face, that we cannot expect production to go on increasing at the same rate as last year. That means that in the general interest we must obviously be cautious about the amount that persona] incomes can now increase in the present year without damaging the economy as a whole. By "damaging the economy as a whole" I mean recurrence of inflation, with all the inevitable consequences and hardships which flow from it. It is not an exaggeration to say that whether or not we succeed in maintaining general price stability is largely dependent on what happens to wages and other incomes over the next twelve months or so.
It is essential to see how much improvement in productivity we will achieve this year before we start trying to collect it in advance through higher incomes. It would be the height of folly if those who settle these matters were to blind themselves to what is, in fact, in their own best interest as well as the country's, and I do not believe that they will.
I have spoken about wages at some length, and I have done so because, after all, they account for roughly one half of retail prices. It is, therefore, clear that of the factors which are within our own control, the level of wages can have a dominant effect. However, I do not want it to be thought by the Committee that we regard the level of profits as insignificant. I have already given the accurate figures. Profits, as has been rightly said several times in the last couple of days, are essential as an incentive to investment, and, of course, they are also an important source of savings.
414 If it is right to say to the wage earners that what is good for the country is good for them, then precisely the same applies to employers. In their case, what is good for the country at the moment is undoubtedly that some of the benefits of the increased productivity which they are enjoying should be passed on to the general body of consumers. After all, in the long run, that is the only way of ensuring that those living on fixed incomes obtain a share of the national prosperity.
I do not want to deal this afternoon with the question of price reductions. My right hon. Friend has on several occasions made his position clear on this matter. However, I should remind the Committee that overall price stability does connote some price reductions. The reason is, of course, that some prices inevitably go up. The classic example cited by the professional economist is the price of a haircut, and I must admit that I have always resented the assumption that "barbers" do not increase their productivity. As I have said, some prices inevitably increase and it follows that others must go down if the general price level is to stay where it is.
Throughout the debate so far, almost every hon. Member of the Opposition has referred to the position of old-age pensioners. There is, however, one point which seems to have been overlooked. It is quite wrong to assume, as some hon. Members seem to have done, that Budget time is the normal time for changing the rate of the retirement pension. I must admit that I have found it a little hard to believe that hon. Members opposite are really speaking from the heart when they pretend to plead on behalf of the old-age pensioners. They did it at the last election, but, of course, the old-age pensioners saw through it. What matters to the pensioner is not promises, but performance.
§ Mr. Barber
The right hon. Gentleman, a moment ago, said, "Here we come to 1066 again "and then says, "Let us have some." I will give him only one figure which is the one figure which means more to the old-age pensioner than all the spurious indignation and empty promises of the Labour Party. That is that the real value of the pension today 415 —what it will buy—is 25 per cent. higher than it was when the Labour Government left office.
§ Mr. Wilson
If the hon. Gentleman looks at the figure, he will see that the real value of the pension today is 14 per cent. higher than it was in 1946. Will he tell us how much the national income has gone up since those days, and will he tell us whether he thinks that the old-age pensioners are getting a fair share of the increased national income? The national income rose last year by £2,000 million. Why have not the pensioners had anything of that?
§ Mr. Barber
The fact is that at one moment the right hon. Gentleman criticises me for going back to what happened under the Labour Government and the next moment he refers to 1946. All that I can say to him is that the old-age pensioners know perfectly well what happened, or, rather, what did not happen, year after year under the Labour Government. They know what has happened under a Conservative Government and they gave their verdict very clearly at the last election. We have pledged ourselves to give the pensioner a share in our increasing prosperity and that is a pledge which will certainly be honoured—[HON. MEMBERS: "When?"] We honoured it in the past. Hon. Members opposite may cry out "When?". At election times and all other times we did not go round the country making specific promises, bribes, merely to try to encourage the old-age pensioners to vote for us. There has not been any arguing about what the old-age pensioners think about this. They gave their answer clearly last October.
§ Mr. Norman Dodds (Erith and Crayford)
When the hon. Gentleman says that they do not go round the country making specific promises, is it not a fact that at the election and since the election there have been vague promises by the Prime Minister? Now we are asking when is something to be done. That is what the old-age pensioners are asking.
§ Mr. Barber
The answer to the hon. Gentleman is that we are not prepared, either at election time or other times, merely to say when we shall do some- 416 thing. We have done it in the past and in the future we shall continue to honour our pledges. One thing which is absolutely certain is that if we had to return to the sort of inflation which bedevilled this country in the years after 1946, to which the right hon. Gentleman the Member for Huyton referred, there would be precious little prosperity in which the pensioners could share. [An HON. MEMBER: "We shall be bankrupt."] We were very nearly bankrupt in 1951.
§ Mr. H. Wilson
Talking about 1951, will the hon. Gentleman state what the gold reserves were in October, 1951, and what they are today?
§ Mr. Barber
No. If the right hon. Gentleman has the figures I will allow him to intervene and give them to me, and then I will comment on them.
§ Mr. Wilson
In 1951, speaking from memory, they were 3,300 million dollars and at present, measured in dollars, they are under 3,000 million.
§ Mr. Barber
I hope that the right hon. Gentleman will also remember that if they continued to flow out as they were doing at the time that the Labour Party scuttled from office we would have been bankrupt in eight or ten months.
I want to be fair to the right hon. Gentleman. On this question of old-age pensioners, we all know that the Labour Government would have liked to do more for the old-age pensioners, but the fact was that in the circumstances of that time, which was to a great extent of their own making, they found that they could not afford it. [An HON. MEMBER: "After the war."] It was not immediately after the war, it was six years after the war, and the consequence was that the position of pensioners got steadily worse. In the classic words of the hon. Member for Coventry, East (Mr. Cross-man), under the Labour Government they were cheated of what they had been promised.
Yesterday, the right hon. Gentleman the Member for Huyton said that at the last election—and I quote his words:… the whole election was fought on the principle of free for all, grab all you can, never mind those who have not a dinghy."— [OFFICIAL REPORT, 5th April, 1960; Vol. 621, c. 221.]417 If we had continued to allow the real purchasing power of the retirement pension to fall, as it did under the Socialists, the old-age pensioner would have by now been sunk without trace. The one sure way of helping all those who live on small incomes is to maintain price stability. If the result last October proved one thing, it proved that the old-age pensioner knows which party is likely to treat him best.
Yesterday, the right hon. Gentleman asked whether something could be said about commercial prospects in Europe. The Committee will remember that on 1st July next the first tariff reduction of 20 per cent. is due under the Stockholm Convention. On the same date, the six Common Market countries will make the second reduction of 10 per cent. in their internal tariffs, and, if the Treaty of Rome is accelerated, this reduction will become 20 per cent. and the first step will be taken towards the common external tariff. The situation which will arise on 1st July was the main subject of discussion. It arose at a meeting of the Trade Committee of the 20 Governments which took place in Paris on 29th and 30th March.
At that meeting, representatives of the European Free Trade Association took the initiative in putting forward the proposal, for avoiding discrimination for eighteen months, that emerged from the meeting of Ministers of the Seven at Vienna in the middle of March—that is to say, that the Governments of the Seven would be prepared to discuss extending, on 1st July, to the Six and other countries, in accordance with the principles of G.A.T.T., the tariff cuts that they are due to make by that date, to the extent that the Six are prepared to act on a reciprocal basis.
I cannot tell the right hon. Gentleman very much today, for the simple reason that no decision was taken on this proposal or any other proposals, because the Six were not ready with their own collective views. We must await the reactions of the Six—the Common Market countries—and hope that they will reveal them to us at the next Trade Committee meeting in May.
Apart from the trade problems of Europe I have spoken so far primarily of the economic situation at home, but this is inextricably linked with the strength of 418 sterling abroad. Nobody would deny that injustice would result to many sections of our people if inflation returned, but it is equally important to accept the fact that if there were the merest suspicion that the British Government were not prepared to maintain the strength of sterling by all the means at their disposal our international credit would be gone. For some countries, that would not matter very much, but, as all hon. Members know, because of what we sacrificed between 1939 and 1945, our overseas position will be difficult for many years to come.
The important point to make is that there is nothing precarious about our balance of payments if—but only if—we are prepared to take action in time. One of the factors is the extent of the aid which we provide for overseas development. It is already very large, and it is bound to rise. Our responsibility to meet this need is accepted by everybody in the Committee, but we shall not be able to do so unless our overseas earnings rise sufficiently to pay for it.
I do not want to go into details, because a White Paper was recently published by the Government on this very matter, but I would remind the Committee that in 1959 our net long-term capital investment overseas approached £300 million. This was apart from some special transactions, such as the additional subscription of £232 million to the International Monetary Fund. The greater part of the outflow was private investment but Government transactions accounted for £90 million over half of which represented new lending, mainly to less developed countries of the Commonwealth.
As well as these Government loans, grants are being made at the rate of about £50 million a year. We must ensure that our earnings rise sufficiently to pay for this aid, and one inevitable consequence is some sacrifice in consumption at home. Not only do our exports have to pay for overseas aid, but they also have to pay for the increased imports which are attracted by our expanding economy.
Finally, this is not a standstill Budget. The aim is most emphatically not to halt the expansion of production or investment, nor is it to halt the rising standard of living. The purpose of the Budget is to ensure that our economy continues to 419 expand and at a pace that will not jeopardise price stability. At home, the one thing which the British people want from this Government is the maintenance of the inestimable boon of stable prices. In politics, it is always easy to advocate what is popular, but it is better to do what is right.
§ 4.44 p.m.
§ Mr. G. R. Mitchison (Kettering)
The Economic Secretary to the Treasury made one sensible remark. He recognised that, as a result of the war, the overseas position of sterling will be difficult for many years to come. For most of the rest of his speech he was engaged in defending his deficiencies today by pointing to what he thought were somebody else's deficiencies at any period in the past ranging from eight years ago upwards. It is not the way to commend one's own intelligence and one's own policy to find nothing better to say for it than that someone else did something wrong many years ago. If it cannot stand on its merits it is better not to make quite as much fuss about what one thinks or does not think other people may or may not have done. I hope that the hon. Member will learn that lesson in time.
The hon. Member was good enough to say that when hon. Members on this side of the Committee made remarks about pensioners we did not mean them. We do. I am an oldish person, and I see the plight of the old people whom I meet in my constituency, as do other hon. Members on both sides of the Committee. I would think it quite wrong to say that hon. Members opposite did not feel sincerely about the plight of the pensioners. I feel just the same when the hon. Member takes this opportunity to impugn the sincerity of my hon. Friends on this matter.
We have heard some very grandiloquent defences of what is, after all, a very insignificant Budget. It is notable not for what is in it but for what is not in it. What does it do? That pigeon-that volatile bird which has flown out of HANSARD—must have arrived just when the right hon. Gentleman was thinking, "What on earth can I put into the Budget?" The pigeon laid its egg and said to him, "Come, brother, try hard. You will be laying an egg too if 420 you go on long enough." The right hon. Gentleman duly laid his egg.
Let us look at it and see what it does in the coming year. It raises £39 million by way of extra tax on tobacco. That is the only tax of any importance which will take effect in the coming year. Profits Tax, in its first year, will yield only £1 million. Against that £39 million and £1 million we have concessions amounting to £27 million. The result is that in order to consolidate and fortify our present prosperity—I like the Chancellor's phrase; it really means "to check the boom and to have cheaper port", but he likes to put it in his own way—£13 million is required.
We do not stop people getting lung cancer by putting taxes on tobacco. The effect of that action may be, as it has been in the past, to cut down consumption for a short time, but ultimately it does not reduce the rate of consumption. My objection to the tax is twofold. First, it is a regressive tax. It comes down much more hardly on the poorer people than on the wealthy. Because it is a regressive tax, to the extent that it is intended to be disinflationary I can think of many other taxes which could be better increased for the purpose.
One suitable action would be to deal with Profits Tax as it used to be dealt with; that is to say, to impose a higher rate for profits that were distributed than for profits that were retained. But that wil not happen this year. The increased tax will bring in £40 million next year, and £65 million in the following year. They are not inconsiderable figures, but they will have no effect in dealing with the situation in the coming year, except to the extent that they constitute an intimation to the business world that something or other may be coming next year. The only effective thing for this purpose was the Chancellor's mysterious warning. It is like the Delphic oracle or the Cumaean sibyl.
This is what he said:I must tell the Committee that I think it likely that the time may soon arrive when it would be right that we should take other steps to restrain further expansion of private credit; and we stand ready to do so."—(OFFICIAL REPORT, 4th April, 1960; Vol. 621, c. 46.]I emphasise the words "may soon arrive". I can understand a statement of that sort if one means to carry it into 421 effect fairly soon, but I doubt whether it is the right or effective way to deal with a boom that has got a little bit out of hand to say, "I am going to do something very horrible", and to leave it as it were sitting there as a threat month after month.
I do not know if anyone will tell us what the Chancellor is going to do. No doubt he will have read the Radcliffe Committee Report with the care which that Report deserves. He will have seen that a number of attempts that were made by the Government in the past to deal with booms by monetary measures did not have the effect that those who made them intended they should have. They were, in fact, an indiscriminate form of dealing with difficulties. They were blunt instruments, and the Radcliffe Committee had other suggestions which I will not go into now.
I do not see why the Committee should not be told what the Government propose to do. If, for reasons of distrust of the City or something of that sort, the right hon. Gentleman and his hon. Friends feel that they cannot tell us, let them do whatever they are going to do with reasonable dispatch, and let them choose the right steps this time. I wonder what the Chancellor intends to get at in this way. Will he check lending? Will he deal with the banks by special deposits? Will he have what has sometimes been called a mandatory liquidity ratio, which is another way of dealing with them, or has he some specific steps in mind which would directly affect the consumer? Does he, for instance, intend to do anything about hire purchase? I do not know, nor does anybody else. It seems to me wrong that a threat of that sort should be made, at any rate if it is to subsist for any time without any indication of the sort of thing he intends to do.
Returning for a moment to the Budget, I noticed some omissions. First, the perfectly obvious one of the old-age pensioners. I will not say much more about that because it has been dwelt on by my right hon. and hon. Friends, and will be dwelt on again, but there is no doubt that unless and until something is done about it the Government will have failed to carry out a very 422 definite election pledge. The pledge given was:We pledge ourselves to ensure that pensioners continue to share in the good things which our steadily expanding economy will bring.The pensioners have not had a share of what was an expanding economy for some people last year.
The Economic Secretary spoke today about increases in wages. The Economic Survey shows that increases in wages were of the order of 4 per cent. to 5 per cent. for the year while dividends on ordinary and preference shares of companies, as against 1958, rose by 13 per cent. and share prices rose by between 40 per cent. to 50 per cent. That is where the real increase has taken place. If there is a boom which is getting out of hand at the moment, it has nothing to do with increases in wages, and it will not be restrained, promoted, or affected if profits on that sort of scale lead to wage claims, and the wage claims are met. Those are the outstanding difficulties, and that is where, as I see it, the boom originated, and where the boom continues at the moment.
There is one small sign of it in the figures that we have been given in connection with the Budget. I dare say hon. Members noticed that last year Stamp Duty rose by nearly half as much what it was the year before. I am certain that the majority of that increase was due to speculations on the Stock Exchange, and, so far as it was not due to that, it may have been due to speculations in land. It is, however, the former source that I regard as far more likely, and when one gets an increase from £65 million to £97 million in the Stamp Duty one gets confirmation of what has been happening.
I take that point because that represents one place where the money should have gone. But what money? One of the things that the right hon. Gentleman did was to reduce the duty on wines. I am taking that as an instance because it is the largest of the actual reductions this year and is, at any rate, a fairly substantial one amounting to £3¾ million this year and £4 million in the coming year. Those are the figures which the right hon. Gentleman gave.
I suggest that there were one or two much better ways in which that money 423 could have been spent. Let us consider one of them to begin with. In 1955 and 1956 the general needs housing subsidy was taken away. The result is that council housing has fallen sharply ever since, and when one looks at the figures in the Economic Survey one finds that clearly set out. On page 18 of the survey we read:The increase in both public and private investment expenditure was heavily concentrated on building, particularly house building. From 1958 to 1959 total investment increased by £138 million (at 1954 prices) made up of increases of £68 million in expenditure on housebuilding, £63 million on other new building and only £7 million on plant, machinery and vehicles.That is a small proportion indeed for an industrial country, but let us see what the £68 million expenditure on house building consisted of.
For that purpose one has to look both at council housing and private housing. Since 1955, when the reduction and final elimination of the ordinary general needs housing subsidy began, council house expenditure, still at 1954 prices, has fallen from £338 million to £241 million, and almost the exact opposite has happened to private housing, which has risen from £241 million to £335 million. If one looks at what has been happening more recently, in the last year there has been a continued sharp rise in private housing and hardly any rise in council house building. The position was that during last year, when house building represented the largest form of investment, only about 18,000 houses were built for general need.
Does the Committee think it right to take the duty off port, champagne, and other things, and to restrict council housing in this way because of the elimination of the general needs subsidy? What is happening is that the port and champagne drinker—and I will come to that in a minute—is getting his drink cheaper but throughout the country there are young couples who cannot afford to buy a house of their own and are unable to get council houses because council houses are just not being built for general needs.
What about the amount? If the £3¾ million which has gone into the pockets of the wine trade or the port and champagne drinkers had been applied to 424 council house building, enough houses would then have been subsidised to come up to the 1955 standard of building. At that time, nearly 200,000 council houses were being built. Without going into the figures in detail, that figure could have been attained by proper application of subsidies again last year if the money had been directed to that purpose instead of being used for cheapening port and champagne.
I fail to understand the social conscience of the party opposite if, when they have this amount of money to remit, they use it for that purpose instead of using it to allow more council houses to be built. The people who suffer from this policy are not the occupants of slum houses, who already receive a subsidy, nor the old folk, but the young people up and down the country who are trying to get a house but cannot afford to buy one of their own.
The best evidence about all this is the size of the housing demand. About one in five people are on housing lists at present. It is sufficient to say that a substantial proportion of them are urgent cases. Hon. Members opposite sit there talking about stabilising the economy, the pigeon and the egg, and heaven knows what, but all the time the best they can do for the country is to cheapen port and champagne and to continue to deny council houses to young people who want them. It is a monstrous conclusion.
I turn from that to a rather broader approach to what is really the same question. Local authorities are concerned not only with housing but with education and with a variety of other services. Housing is the most expensive from their point of view. Education is the next most expensive. They are all services of the greatest importance. For many of their services, including housing, local authorities have to borrow. It is easy to see what they have to borrow. In 1956, they borrowed net about £395 million, and in 1958, which is the latest available figure, they borrowed £370 million.
It will not have escaped the attention of the Chancellor of the Exchequer, or of any other hon. Gentleman opposite who takes the trouble to listen, that 1 425 per cent. of that would have almost exactly equalled the port and champagne reduction. If instead of cheapening port and champagne the right hon. Gentleman had applied himself to cheapening the rate at which councils have to borrow for their purposes, they would have got 1 per cent. off in place of the cheaper port and champagne.
One per cent. makes a lot of difference. It is about 7s. a week on a council house. If any hon. Member troubles to work it out in terms of borrowing the usual 60 years loan at the present Public Works Loan Board rate, he will find that it is very nearly £700 on the cost of a house to a council. That particular tax, which is not at all a large one, could have been far better used either for the specific purpose of restoring the general needs subsidy on council houses or for cheapening the rate at which councils have to borrow for the purpose of the public services they render.
I turn now to the remission in question, because it leads me to some other matters. I expected the President of the Board of Trade to tell us yesterday not only why the tax had been remitted to that extent but also a little more about the position between the Common Market Six and the Outer Seven. I did so, because there is remarkably little in the Economic Survey about it. We have heard a few words today, to which I will turn later. When the President of the Board of Trade was asked, "What about port?". which, after all, was the one thing which appeared to be his concern and raised some matters with which he has been prominently identified, he said that his right hon. Friend the Chancellor of the Exchequer had told us about that already.
Let us now look at what the Chancellor said:I have now certain changes to propose in the wine duties. During the negotiations which led up to the signature of the Convention of the European Free Trade Association, the Portuguese representatives emphasised their great concern about the level of duties on heavy wines".The right hon. Gentleman said that he had said that he could not do anything because it was a Budgetary matter. He continued:As it happened, there were other, purely domestic reasons which made it desirable to adjust these duties".426 Let us go on to see what the domestic reasons were. The right hon. Gentleman talked about the structure of wine duties and bringing heavy wines into a better relation with the light wines. He said:The duties on heavy wines are still out of line to some extent and the position is unsatisfactory…. I now propose to complete this reform of the wine duty structure by reducing the rates for imported heavy wines by 12s. a gallon. This is not a reduction that I would have chosen to make on this particular occasion were it not for the trade reasons I have mentioned".—[OFFICIAL REPORT, 4th April, 1960; Vol. 621, c. 53.]Therefore, money which could have been used and would have been sufficient to restore the general needs housing subsidy all over the country, or to lower by 1 per cent. the rate of borrowing by local authorities, has been used for trade reasons. The trade reasons appear to be a somewhat academic perfection of the structure of taxation on the wine industry, bringing the rates for heavy wines into a better relation than those for light wines. If that is the best that the right hon. Gentleman can do by way of an explanation. I do not think much of it.
Portugal hardly comes into this. No doubt some of the reduction will go to cheapen port, but it appears from the import figures that it will go to another purpose, too. The figure for sparkling wine, most of which will be French champagne, is considerably higher than the port figure. Therefore, I do not understand it. I fail to see how anyone with any social conscience could at this moment take this action and fail to do anything whatever for pensioners, for housing, for local authorities, or for a number of other purposes which I should have 'thought would have appealed even to right hon. and hon. Members opposite. This Budget is a remarkably small affair and has these glaring omissions in it.
I turn, lastly, to the Stockholm Convention. We have been told very little about this. Page 6 of the Economic Convention contains a passage about it which was repeated by the Economic Secretary today. It is clear that one of the greatest commercial risks which this country runs at present is the possibility that the Seven and the Six will not agree and that we shall be faced with a limited but still quite definite trade war between one half of Western Europe and the other. That should be considered in a Budget and should provide ground for 427 an explanation by the right hon. Gentleman, who is the Chancellor of the Exchequer at the moment.
Did not the pigeon tell him anything about this? This matter cannot be left quite in that way. The right hon. Gentleman is supposed to be looking into the future. The increased rate of Profits Tax will operate fully only a couple of years ahead, not this year, nor the year after. What will have happened to the Stockholm Convention by then? What will be the state of the trade of Europe? Will there be a trade war? Has the night hon. Gentleman any views about it? Have the Government any views about it?
They remind me of Mark Twain's "Innocents Abroad". He wrote about a traveller who kept a diary. He was asked what he put into it. He said so and-so and so-and-so. They asked him, "What about France?" That is this question. The answer was, "Oh, I left out France". That is what has happened on this occasion. The President of the Board of Trade, who is one of the principal "innocents abroad" in this matter, said not a word about it. Instead of telling us about what was his concern, he did his usual knockabout turn on Budget day. It is great fun. I have heard it year after year, and it thrills me every time, but I would have liked to have heard something about the possibilities of Europe's future trading.
This Budget has not much in it. There is little in it, and so far as it has anything it introduces one regressive tax that is consonant with Tory policy but not with social justice; cheapens port, champagne and the rest, and omits to spend even that small sum of money for perfectly obvious social purposes that I should have thought would have appealed to the party opposite at any time except just after an election.
§ 5.10 p.m.
§ Mr. Peter Thorneycroft (Monmouth)
I should like to comment briefly on the scene that presents itself. I listened, as I always do, with interest to the closely-reasoned arguments of the hon. and learned Member for Kettering (Mr. Mitchison). I rather agreed with him— to start on a very uncontroversial note —one one point, and that is the doubtful value of unspecified threats to credit.
428 I say this not with some rebuke to my right hon. Friend the Chancellor. To tell the truth, all of us have used unspecified threats to credit and made appeals at some time or other in our lives. But my experience is that they are of very little use and that unspecified threats can sometimes do a deal of harm, because they are misunderstood in many quarters. Having said that, I know that the hon. and learned Gentleman will forgive me if I do not follow the rest of his argument.
§ Mr. Thorneycroft
I shall not this afternoon address my remarks, Commander Donaldson, even through you, to the Opposition. I hope that they will not take it amiss, but I can hardly regard the party opposite in financial matters as an opposition to Her Majesty's Government. I want to address my remarks to the Treasury Front Bench and to say a few words affecting them. If I should happen to say anything at all critical of that Front Bench, I hope that hon. and right hon. Members opposite will take it, double it and apply it to themselves because, heaven knows, if my right hon. Friends take any risk with regard to inflation, right hon. Gentlemen opposite would be quite reckless on that subject.
My purpose is not to criticise the detailed proposals of this Budget. I do not share the view that in the situation in which my right hon. Friend finds himself, or has been left by his colleagues— put it how one will—he has room to reduce taxation. I do not hold with that. I do not believe that he is a man who is prepared to ignore the situation in which he finds himself. I think that he has enough courage and common sense—and all those who know him will share that opinion—to take the position as it is and try to do the best with it. I want to talk about the policies that led him into that position; that have, if I may say so, led this country to that position in the past, and that will, I believe undoubtedly lead it to that position in the future unless something is done about it.
First, let me say a word about the background. We have had two years of considerable prosperity, described in glowing terms by the Chancellor of the Exchequer; investments, incomes, consumption, production, wages, profits, savings, revenue, exports—all of them 429 up, and all of them up with stable prices. That is a very satisfactory picture, and I think that everyone can claim a share in it—the technicians, the workers, the managers, the boards, my right hon. Friend himself: even, perhaps a little low on the list, those whose measures two years ago did something to re-establish faith in sterling may claim a modicum of credit.
How come, that after two such years we should reach the point where taxes have to be raised and vague threats of further restrictive measures have to be held out? Nobody who listened to my right hon. Friend could have had any doubts as to the gravity with which he viewed the situation. Indeed, it is all painfully familiar to all of us on both sides of the Committee, with demand tending to outrun resources, with the balance-of-payments situation incapable of sustaining, even at the existing rate— let alone an increased one—our investment overseas.
My right hon. Friend the Chancellor really declared his hand on this situation some weeks ago, with the Bank Rate put up, with the Governor stating publicly that equities were overpriced, with the Government spokesman in another place—who bears the title in private life of Hereditary Standard Bearer of Scotland—saying that gilt-edged were overpriced, and with the Government broker stepping out of the gilt-edged market. With all those things going on, I cannot think that anyone applying his mind to the subject could have expected an easy Budget from my right hon. Friend.
The Chancellor's view, the view of the so-called authorities, was plainly that they were faced with an emergent crisis and they thought that this time it would be better to act soon rather than to act late, and I say that they were right in that judgment. The only thing is that that action, action in this Budget to the extent of imposing additional taxation this year of some £40 million, might have been matched by some reduction in the increased expenditure of £350 million on a Budget of £6,000 million. It must have been a grave disappointment to my right hon. Friend that he was unable to persuade his colleagues on something that he must have pressed with the greatest urgency upon them.
430 The question that we should discuss, therefore, is how we get to this position, and how we should avoid it in the future. Have we really got it so good that we can never hope for effective and consistent lowering of taxes without running into another crisis? The history of the last ten years under any Government, and I make no difference between any of them, certainly prompts that question and entitles all of us on both sides of the House to demand an answer.
It seems to me that there are two views that the Government can put. They can say that they are the creatures of circumstances; that this situation swept suddenly and unexpectedly on them; that they discovered half way through the year that imports were coming in a bit too fast. Some official comes in and says that the figures—like the shipping figures—are a little unfortunate. That is a possible approach—strong men battling against undeserved adversity.
On the other hand, they can say that they are the architects of the situation; that they are rather proud of it; that they like it; that this rather drab Budget and these threats of restriction are the price we pay for continuing expansion. The Chancellor leant rather to the first approach, the President of the Board of Trade rather to the second; but I should like to put my own view. Here, may I say that I recognise the truth of what the Economic Secretary said in a very able speech today, which is that what happens in this economy is decided by thousands of individual decisions, about when to invest, when to stop, when to save and when to spend. But what all these people do, and above all when they do it, depends to a very large extent upon what the Government do themselves—how much they borrow, how much they tax, how much they spend.
Last year we budgeted for a deficit of over £700 million. We planned to spend a great deal more money. We plan to spend a great deal more money this year. We are embarking upon a round of wage increases backed by demands for a shorter working week and, at the same time under the pressure of demand, competition for labour in the factories is driving up current earnings. And we are doing all this at a time, as the Economic Secretary has said, when it is unlikely that production will go on increasing at the same pace as it did last year.
431 Against that background, one does not have to look very far to see the origins of the present situation or the necessity of the present Budget. I recognise—I think that I recognise as well as most —the pressures on the Government to spend for defence, a noble cause, though one sometimes wonders whether we are all that safer for spending an extra £100 million, to spend for roads, always popular, and if for roads then for railways—true they may run parallel with the roads—and another £1,000 million is planned for investment in them.
Then there is the Health Service, though the less said about the finance spent on the Health Service the better. [HON. MEMBERS: "Why?"] For the sake of brevity at least. Then there is education. I think that the cry is now "Education at any cost". Then there is the Welfare State, peculiarly designed for the early years of the present century; indeed, directly attuned to the situation of widespread unemployment and poverty which was endured during those years—but any reflection upon that is regarded in certain circles as a dirty word.
In any event, for some years these emergent and growing claims have been irresistible to the Government. During the last five years of Conservative Government spending has gone up by something like £1,000 million. Naturally, during part of that time and largely under the pressure of this spending the value of the £ has been going down, and this year against a background of stable prices a planned increase of £350 million is contemplated.
All these objectives of expenditure are no doubt, in a sense, as the President of the Board of Trade said the other day, justifiable, all of them are desirable, but the truth is that we must either pay for them or give some of them up. It is the attempt to get them for nothing or to try to get them at something below their real cost that has driven this country inexorably over the years from one crisis to another.
Nothing is more boring in a speech than personal reminiscence, but may I just remind the House that two years ago I did leave the Government? At that time the public relations of the Government found it convenient to spread the story that I 432 had left for what they called "a mere £50 million." I observe that today, in conditions of incipient inflation, the sum has risen to £500 million. But the truth is that I did not part with my hon. and right hon. Friends on figures; I parted with them on principle.
I held the view then—I still hold it. and may I say to the House quite frankly that I admit it to be a minority view, though I still feel that I am entitled to put it—that the interests of the economy as a whole should be put above the interests of the individual spending Departments. I hold the view that the avoidance of the risks of inflation, or the defence of the £ as it is sometimes called, should not only be stated to be a priority but that we should act as if it were a priority.
I hold the view that the Government have spent, are spending and are certainly planning to spend a great deal too much money. As I understand the Government, they appear to hold a slightly different view from this. They will, I think, tell the House if they are pressed that what they spend is, after all, the consequence of policies approved by the House of Commons, pressed on them by the Opposition, pressed on them sometimes by the Conservatives, that the increases are inevitable, that costs have gone up, or that wages have gone up, or that the value of money has gone down, but that any way they are keeping employment high and that if they eased spending it might risk employment falling in some areas.
These are different approaches. They are honourable views on both sides of the House, but I think that they are views which in all honour ought to be expressed freely and openly in the House of Commons and in this Committee, because much of our future may turn on the choice between them.
What advice, then, would I offer to my hon. and right hon. Friends? What I have to say I do not pretend is popular, but I would like to say it. First, in their central financial policy, I would ask them to keep their eyes fixed not on the development areas but on the country as a whole where the unemployment figure is dipping below 2 per cent. Spend by all means—this is not always agreed—in the development areas, with special aids to Scotland or elsewhere, 433 but do not try to run the whole country as though it were a declining coal mine somewhere in South Wales, because if we do that it will soon become like a declining coal mine in South Wales.
Secondly, give an assurance now that in about the most highly taxed country in the world tax reduction forms an important part of Government policy, and not only that it forms a part but that it is the determination of the Government to include the taxpayers in a high place as claimants in the future. Thirdly, let us have a little more frank speaking about what the Government intend to spend. If the existing policies mean increased spending this year, next year and in the years to come, then much better say so.
At this very moment orders are going out from the Ministry of Defence for new weapons and matters of that kind. It is impossible for back benchers to have detailed information on these matters, but I think that it would be right for the prospects of future expenditure to be outlined very freely and frankly to us by the Government. They must have some idea of what these expenditures would look like on the basis of existing policies, leave aside flying saucers in the Ministry of Transport or the awful thought that space travel might enter into the head of the Minister of Science. On the basis of existing policies, what would this expenditure look like?
That would represent one line, a steeply rising one, upon a graph. They could make some assessment on what real production is likely to be in the future. Have they thought whether these policies and prospects clash or not? Do the lines on the graph cross? Is there, in fact, a gap between them which would permit of tax relief in the future; which would leave enough room for us to carry out our responsibilities as a principal investor in the British Commonwealth? I believe that the Government must accept responsibility for these matters and that unless and until both the Prime Minister and the Chancellor are prepared to plan the country's spending and to set some limits to it these things will continue to cripple us, with all the side effects on the rest of the economy which we know so well.
It so happens that we cannot run an economy of this kind unless at regular 434 intervals we are able to borrow very large sums of money from the British public. We cannot borrow that money unless the public has confidence in the British Government. If once the suspicion gains a hold that inflation is regarded as something which is tolerable or, at any rate, the avoidance of it is put not as a first priority in high quarters in the British Government, they could lose that confidence, and perhaps lose it for a very long time. I say this with all urgency to my right hon. Friend; he is much nearer to that point than he should be for comfort at the present time.
These are, at any rate, my opinions. I ask my right hon. Friend to realise that though they are minority opinions they are held by other people in this country. There are those who would prefer to out our coat according to our cloth; to ask for rather less or pay something a little nearer to the cost of it; to live honestly up to our overseas obligations; to avoid the intermittent crises from one year to another; to see the Government themselves take the advice which they offer to others in exercising some modicum of restraint. But the leadership, the suggestions for saving, the limits on spending, cannot come from back-bench Members in the House of Commons; they can come only from the right hon. Gentleman himself.
§ 5.33 p.m.
§ Mr. Anthony Crosland (Grimsby)
We can congratulate the right hon. Gentleman the Member for Monmouth (Mr. Thorneycroft) at least on one thing, on having made a speech which was very much more relevant to the problems confronting us than either of the two speeches from the Front Bench to which we listened today or yesterday. There was one point about which I would disagree with the right hon. Gentleman, when he said that his views represented the views of a minority of hon. Members on the benches opposite. Judging by the applause, they represent a clear majority and the Chancellor and his colleagues are faced with an extremely powerful revolt against them.
I think, however, that there appears to be a division in the revolt. Whereas yesterday the hon. Member for Kidderminster (Mr. Nabarro) wanted a reduction in no fewer than five major taxes, the right hon. Member for Monmouth 435 today said that he wanted no tax reductions of any kind. Clearly, there is not merely a gap between the Front Bench and the back benches opposite, but a gap within the rebel ranks also.
Today we heard a speech from the right hon. Member for Monmouth very much on the lines of speeches which he has made here and elsewhere in the past. I agree profoundly with him on one point but I disagree profoundly with his remedy. I think he is absolutely right to point out the painful dilemma in which we find ourselves in this country that, whenever we have one single year of expansion, the price we pay for having a good year is that we have to have cuts next year. This has gone on for ten years. In order not to make a party point, if he wishes, I will say that it has gone on under Governments of either party.
Coming to the question of what we are to do about this, I believe that the solution offered by the right hon. Gentleman is profoundly wrong, profoundly pessimistic, and consists of giving up the whole problem in advance. There are two ways in which we can deal with it. One is the way which the right hon. Gentleman wants, the pessimistic, gloomy way of saying, in effect, that the problem is beyond us and that all we can do is to cut, cut, cut away at expenditure. The other way to approach the problem, which I believe is the right way to deal with it, is not to restrict but, on the contrary, to increase productive capacity to cope with all the demands which are made.
It is worth thinking of the implications of the kind of policy which the right hon. Member for Monmouth is urging upon us. He talks about public expenditure. Most hon. Members on the other side of the Committee treat public expenditure as such an emotional concept, as such a dirty word, that they cease to discuss it in a rational manner, and the discussion has an emotional, religious tone about it. But let us consider what in fact would be the consequences to the country if we adopted what is in effect the desire of the right hon. Gentleman and his hon. Friend the Member for Kidderminster and many other hon. Members opposite, which is to nag and nag away at public expenditure 436 the whole time and try to reduce it at any rate as a proportion of our total income.
There is one point I wish to make in advance. It is not generally realised in the complaints which are made about public expenditure that in fact the spending by the Government and local authorities combined has been falling as a proportion of the national income for most of the way through the 1950s. Of course, it was implicit in the speech made by the right hon. Gentleman, it was implicit in the leading articles in The Times, and in the Economist during the last few weeks, that this is a wholly desirable thing to occur, that public expenditure should decline as a proportion of the national income.
But what sort of country shall we be living if this occurs? I feel that I am living in a completely different world from that of the right hon. Gentleman when he talks in this emotional manner about public expenditure. I do not know what sort of constituency he represents. I think that in some ways I represent a typical constituency. If he came to my constituency he would find that we have not had a new hospital built for forty years. For fifty years we have been waiting for six miles of direct road to connect us with an industrial area a few miles away. A few weeks ago we sent a deputation to the Ministry of Transport but we were told that we could not have the money because of the restriction on public expenditure.
We need a great deal more money spent on schools. Some hon. Members represent constituencies where conditions are much worse than in Grimsby, but there we still have slum areas where people live in degrading conditions without proper toilet facilities, and the waiting list for houses is as long as it was a few years ago because of the restriction on public expenditure. This is the consequence of always trying to drag public expenditure down as a proportion of the national income.
What does that mean for the country as a whole? It means that all the people depending on the social services, whether old-age pensioners, widows or whoever they are, find their incomes are declining compared with the incomes of the rest of the community. It means that people employed in the public sector—railway-men, the police, teachers, doctors, dentists—find that their incomes are 437 declining compared with those of the rest of the community. It means that public investment in basic industries is lagging behind investment in the private sector. It means that the road system is growing less and less adequate to meet the mounting volume of traffic put upon it. It means that standards of health and education are consistently falling behind rising incomes as a whole.
Is this really the sort of Britain which the right hon. Gentleman wants to see? Is it the sort of Britain which hon. Gentlemen opposite want to see? Is this really their order of priorities? It means a growing unbalance between the social capital in this country and our private capital. It means a growing unbalance between the incomes of those who depend on the public sector and the incomes of those who depend on the private sector.
Of course, nobody on either side of the Committee wants an indefinite, reckless, uncontrolled increase in public expenditure, but I very much hope that the Chancellor and his colleagues will resist with the utmost firmness accepting the ideal of a large number of the Tory back benchers that it is always an ultimate object of public policy to drive down public expenditure as a proportion of the national income. We would live in a really restricted, hideous, monstrous Britain if that policy were carried out.
I turn to the question of the general state of the economy, and here I should like to come back to one or two of the things the right hon. Member said. First, I wish to congratulate the Chancellor on a small point. I was out of the House for five years, but I read the Budget statements. I congratulate him on making the most lucid, intelligible Budget speech we have had for many years and on producing much the most informative Economic Survey we have had for many years past. We had a great deal less mumbo-jumbo in the Budget statement this time than in those of many Chancellors including, I regret to say, the right hon. Member for Monmouth.
This lack of mumbo-jumbo, this appeal to economic reason in the Chancellor's speech was, no doubt, one of the reasons why it was so ill-received on the benches opposite. As to the general bias of his Budget, I have a great deal of sympathy with what the right hon. 438 Member for Monmouth said. I hope and pray that the Chancellor is right in saying that at the moment we need neither an increase nor a decrease in taxation. I agree entirely with the right hon. Member for Monmouth that it would have been utterly reckless to have had a "give-away" Budget, as the phrase is.
I tend to feel that the Chancellor has taken a slight risk in having only a standstill Budget. He may be right, but I see a certain risk on the basis of his own figures of the likely increase in demand and the likely increase in production this year. He may have certain reasons for optimism which an outsider, certainly an Opposition back bencher, cannot know. But I fear he is taking a risk and making an error which many Conservative Chancellors have made before in the last few years in relying excessively on monetary policy to cure a situation which a fiscal policy is not used to cure.
He should have been warned by the example of the unhappy fate of the Home Secretary when he was Chancellor in 1955. He had a flabby fiscal policy and thought it would do no harm if he offset it with a tough and stern monetary policy, but he found to his cost, and to the cost of the country, that that was not the case. I very much hope that the Government are not relying too much on monetary policy in order to correct any possible errors in their fiscal policy. At any rate, I hope that the Chancellor is right in his calculation, but I also hope that if he turns out to have been over-optimistic and we run into inflationary conditions towards the end of the year and find an additional strain on the position of sterling, he will not hesitate —even if it means eating his words—to swallow his pride and his vanity and come to the House for additional powers to cure any incipient inflationary situation.
I want to speak more generally for a few minutes. This is relevant to what the right hon. Member for Monmouth said about the long-term state of the British economy. I have taken the view for many years, and have been criticised on the Left for this view, that the kind of economy we are running now is a perfectly viable one. I think that even under a Conservative Government we shall 439 normally maintain something approaching full employment and I think we shall see quite a significant increase in the standard of living.
The question is, are we really satisfied with this on either side of the Committee? If we simply look inwards and are content to jog along in Britain without any relation to what is going on in the outside world, well and good, we can be satisfied that we are jogging along all right and that the system is not faced with imminent collapse overnight. If, on the other hand, we set ourselves a more ambitious target and turn our eyes outwards to what is happening in the rest of the world, we cannot be satisfied with the kind of progress we have been making in the last few years.
Almost all of us, I imagine, want Britain to remain a great Power and to maintain a strong influence in international affairs. In the last analysis, being a great Power depends on economic performance. Our economic performance is not such at the moment that we shall remain a great Power indefinitely if we go on like this. On the contrary, our economic strength is slowly—only very slowly, almost surreptitiously—running away We had a good year in 1959, but no better than other countries. But as the Economic Secretary knows, over the long run our performance has been a really pitiful one by international standards.
I do not take perhaps the most alarming comparison of all, which was given by my right hon. Friend the Member for Huyton (Mr. H. Wilson). He mentioned what is happening in Soviet Russia, but I assume that there are certain differences between these two countries that affect such a comparison. I would rather take a comparison between ourselves and continental Europe. Countries there are in a roughly similar state of economic development and there is no reason on earth why they should go forward so much faster than we, and yet they do.
It does not matter what base year we take for comparison. If we take 1953 up to the last quarter of 1959, we find that production in the United Kingdom increased by 27 per cent., whereas in the Common Market countries it in- 440 creased by 63 per cent.—more than double. From 1955, an alternative base year, in Great Britain the increase was 12 per cent. and in the Common Market countries 34 per cent., almost three times as much. This seems to be a terribly depressing picture.
§ Viscount Hinchingbrooke (Dorset, South)
Is this in the same range of commodities? Could the hon. Member give more details?
§ Mr. Crosland
This is a comparison of industrial production in two countries, seasonally adjusted. If the noble Lord would like figures of the gross national product, which embraces all types of production, I can give similar figures. Since 1953 in the Common Market countries, the percentage increase was 29 per cent. and in the United Kingdom it was 11 per cent. Since 1955, in the Common Market countries it was 13 per cent. and in Britain, 4 per cent. Taking the whole national product evens out commodity distribution.
As a patriot I find these figures emotionally humiliating. Intellectually, I find them extremely disturbing as one who wants Britain's influence in the world to increase and not to decline. In the light of those comparisons with the Common Market, the failure of the President of the Board of Trade, in what was an utterly frivolous speech yesterday, to say anything about the problems of our relations in Europe was, to put it mildly, extraordinary.
Why is our performance so much poorer year in and year out than that of almost every other industrial country? There are many reasons for this. I should have thought, and probably most hon. Members will agree, that the basic one is that our investment is too low. If we compare investment in this country with that of the Common Market countries, we find that gross fixed capital formation, excluding housing, was 14 per cent. of the gross national product in this country, as against 17 per cent. in the Common Market countries, and in Germany it was just on 20 per cent.
Here I must say something to the right hon. Member for Monmouth, who is always taking, as it were, a Jeremiah view of the state of the economy. I am not saying this in an unfair spirit, but he takes some credit to himself for 441 having made a great gesture on principle when he resigned. I must point out that he was also partly responsible for weakening our long-term position when he was Chancellor of the Exchequer, since it was then that the most recent cuts in investment were made. He has some responsibility for the fact that our underlying economic strength is lower today than it should be.
If we take the picture over the last few years of Conservative Government, we find it to be about as depressing as it could be. The most depressing figures in the Economic Survey are in Table 6, showing that manufacturing industry was lower in 1959 than in any year since 1955. It was lower than in 1956, 1957 and 1958. It is true that private investment is clue to rise this year but, as Sir Roy Harrod pointed out this morning in the Financial Times, even that rise will bring us only near to the 1957 figure. In other words, in 1960 we shall just about get back to the 1957 level.
These figures of investment and production, showing how we are falling behind the European countries, the Soviet Union and Japan, have frequently been quoted in the House and elsewhere, and of course the Chancellor and the Economic Secretary—who is to speak tomorrow—pay lip-service to the idea of higher production and higher investment, but the fact remains that—
§ Sir Alexander Spearman (Scarborough and Whitby)
Would the hon. Member make a comparison with the United States? Does he not agree that it is fairer to make the comparison with a country such as the United States than with the European countries, which started after the war from a very much lower level of industrial production?
§ Mr. Crosland
I do not agree that a comparison with the United States would be in the slightest degree relevant. When we are three times as wealthy as we are now—which America now is— I shall not be worrying nearly as much about industrial investment. If we had achieved the degree of material prosperity which the United States has achieved, I should not worry nearly as much. I believe that the fair comparison is with other European countries which are roughly at the same stage of economic, political and social development as we are in this country.
§ Mr. Julian Ridsdale (Harwich)
What is the proportion of civil and Government expenditure in Germany and in other Common Market countries? In particular, what is the defence expenditure in Germany?
§ Mr. Crosland
I am afraid that I could not give the figure off hand, but I take the implication of the hon. Member's remark. As far as I know, it has never been suggested that the higher rate of investment in Germany has anything to do with the level of Government expenditure in Britain by comparison with the level of Government expenditure in Germany.
§ Mr. Sydney Silverman (Nelson and Colne)
Has my hon. Friend taken into consideration in making these comparisons what proportion of their investment the other European countries spend in defence expenditure as compared with the proportion which we ourselves devote to it? Or does not that matter?
§ Mr. Crosland
It varies between the six Common Market countries. For example, France, which has a considerably higher investment expenditure than we have, is certainly spending a much higher proportion of her national income on defence on account of the war in Algeria. However much a reduction in defence expenditure may or may not be desirable on other grounds, it is certainly not a necessary condition for putting up our rate of investment.
The Conservatives have been in power for nearly ten years. This gap between our investment and production performance and that of the European countries has continued for ten years. I want to ask the Chancellor or the Economic Secretary this question: what do they propose to do about it? Do they take a view of the matter? Have they a clear view or a clear plan of what they propose for the years ahead—not just between now and the next Budget, but looking ahead over the next five years? In other words, are they satisfied to continue with a rate of growth of about 2 per cent. a year in this country when it is almost double in the countries which are our main competitors? Are they satisfied with the ratio of investment to national income, which is very much lower in this country than it is in most of our competitor countries?
443 It is important that once in a while, when we are discussing the Budget, we should not simply discuss a single year but should take a general long-term view of the economy and decide whether we are broadly satisfied with our economic performance and with our investment or whether we should set ourselves a substantially higher target than we have so far achieved. The Chancellor is always regarded as a nautical figure. He spends a lot of time sailing. Probably the admiral he is emulating is the most cautious and unambitious of all admirals —Jellicoe—who fought exactly the way that the Chancellor has done; there was a psychological similarity between them. He thought that he alone could lose the war in a single day. I wish that the Chancellor would emulate some of the more audacious naval figures of the past, such as Howe, Collingwood, Nelson and Jervis, and would begin to take some risks with the future of the economy. I do not mean that he should take risks with inflation but I mean that he should take some risks in order to jerk the economy up to a higher and competitive level of performance.
What I should like to suggest to the Chancellor and the Government is that they should have one very simple aim. They should set themselves the target of increasing investment as a proportion of the national income by 1 per cent. in each of the next four years, which would mean by the time this Parliament is over we should have raised it to a figure approaching the German figure. I concede at once that if they do that they will make life extremely hard for the Labour Party at the next election, but they will have earned and deserved the gratitude of the country.
§ 5.55 p.m.
§ Mr. Stratton Mills (Belfast, North)
I would ask on this occasion for the traditional tolerance of the House towards a maiden speech. I apologise to the hon. Member for Grimsby (Mr. Crosland) if I do not follow his arguments on this occasion, and I would say generally to hon. Members that if in the course of my brief remarks this afternoon I stray from the path that is normally followed by maiden speakers, that error is entirely one of ignorance rather than of intention.
444 I have the honour to represent in the House the electors of Belfast, North, which is the largest urban constituency in Britain, with an electorate of 75,000. Belfast is a highly industrial city and can be described essentially as a child of the Industrial Revolution. It has vast shipyards, virile aircraft works and a high variety of factories, both in the city and scattered around the suburbs.
Many hon. Members representing constituencies in England may have tended to forget—it is only too easy—the days in the 1930s when in their constituencies there were many people who had no work. In Northern Ireland 7.5 per cent. of the insured population is unemployed, which remains a disfiguring scar upon our economy. I will return to that point in a moment.
I should like to tell my right hon. Friend the Chancellor that I welcome the Budget. It is a cautious Budget, but, having looked through the figures over the last few months as we have approached the Budget, with the balance of payments danger looming large on the economic horizon, I feel that very few of us could have had any doubt that this was the Budget to expect. The job with which the Chancellor was faced was that of consolidating expansion and ensuring stable prices.
It may come as a shock to other hon. Members when I say that from the days when my generation, who were born in the 1930s, started at the age of 14 or 15 reading the newspapers after the war and following current affairs, I cannot recall a single period in which prices were not rising every few months. I do not today blame any party for this. I cannot recall a single period when we were not in the midst of, approaching or just leaving some economic crisis. I do not today blame any party for that. It is, nevertheless, the essential fact which we have to face, and if the Budget contributes to the stability of prices, it must be welcomed.
I would, however, say to the Chancellor that I hope that the economic sugar plum will not evade us for very long and that we can look forward next year to some form of substantial relief. I would further say that before we meet to deliberate on next year's Budget, I hope that perhaps my right hon. Friend will have been able to give some relief to the old-age pensioners.
445 I noted with particular care the remarks of my right hon. Friend in his Budget statement when he said:First, steps in changing the climate for private lending have already been taken by the increase in Bank Rate in January and in open market transactions. I must tell the Committee that I think it likely that the time may soon arrive when it would be right that we should take other steps to restrain further expansion of private credit, and we stand ready to do so."—[OFFICIAL REPORT, 4th April, 1960; Vol. 621, c. 46.]What do those remarks mean? Do they mean a higher Bank Rate? Do they mean special deposits? What I fear my right hon. Friend means is that we shall have a new credit squeeze in the very near future and that there is a new economic albatross on the political horizon.
Without going into the economic merits of the credit squeeze, I feel that there can be little doubt that, in the short term, the recent credit squeeze did a good job and was effective with no tremendous hardship in areas of high employment. But, in areas where there is high unemployment, the effect of the credit squeeze is positively murderous. What happens in an area of high unemployment when there is a credit squeeze? Immediately, there is a fall in public works, a fall in local authority building, a fall in private building, a fall in school building and a fall in factory building. There is a resulting fall in employment in the area. Again, private industry tends to withhold expansion in such an area and there is a loss of potential employment.
If one accepts the value of the credit squeeze to the British economy, the problem is how to insulate areas of high unemployment from its worst effects. To put it in another way, can an economic fuse box be built using two different types of economic fuse wire?
There are four main aspects of the credit squeeze. First, there are the restrictions on capital issues. In the recent credit squeeze, the limit beyond which one had to obtain the consent of the Capital Issues Committee was £50,000. In Northern Ireland, we were able to apply a separate limit of £10,000. This in itself proves that, at least in one aspect, the credit squeeze is divisible.
446 Secondly, there is the credit policy of the banks. Professor Isles, in his Economic Survey of Northern Ireland, gives at page 328 a very interesting graph showing that the relationship between bank advances and bank deposits in the period 1935–52 remained more or less the same in Northern Ireland and in Great Britain, although I understand that in the recent credit squeeze—I do not have the figures— Northern Ireland banks were slightly more liberal in their credit policy than their cross-Channel counterparts. With an approaching credit squeeze, I suggest that there is an opportunity here for a more liberal policy to be investigated.
The third factor in the credit squeeze is the increase in Bank Rate. Is it really beyond the ingenuity of Treasury officials to find a method whereby, in certain areas of high unemployment, there can be a lower Bank Rate for industry?
§ Mr. Stratton Mills
The fourth factor is the new weapon of special deposits. These have been talked about a great deal in the last few weeks and if this device strikes terror in Throgmorton Street it certainly strikes terror in areas of high unemployment. That, I suggest, is the geographical extent of the problem one has to face. I suggest that we should do well to look at this matter in advance. While I appreciate the technical difficulties, I cannot help wondering whether there is here an opportunity for some kind of departmental study by Treasury experts to see whether there is some way of isolating areas of high unemployment from the more severe social and economic effects of the credit squeeze.
I welcome the Chancellor's reference to national savings. The record has gone up yet again from £325 million to £389 million in the last year. There can be little doubt that the National Savings movement has on many occasions acted as an economic lifeline to my right hon. Friend in his Budget. There is little doubt also that the trend in savings in Britain is now gaining momentum. However, I cannot help thinking that it is now clear that Savings Certificates are more attractive to the large taxpayer than to the small saver.
447 The high taxpayer saves a considerable amount of tax through having his investment in Savings Certificates. The small investor pays little tax anyhow. I believe that we are at the moment witnessing a substantial change in social habits in regard to savings in Britain. No longer does the small saver go only to the Post Office Savings Bank to buy savings certificates. I suggest that we are witnessing today a gradual change inasmuch as the small saver is tending to invest his savings in unit trusts, investment trusts and in buying shares on the Stock Exchange even in a small way. There is, I feel, tremendous scope for an increase in savings among people in this section of the community. Perhaps my right hon. Friend might in future years be able to give further incentive to this class of small saver.
I thank right hon. and hon. Members for their very kind reception of my speech on this occasion and for their most courteous attention.
§ 6.7 p.m.
§ Mrs. Eirene White (Flint, East)
It gives me the greatest possible pleasure to offer congratulations from all quarters of the Committee to the hon. Member for Belfast, North (Mr. Stratton Mills). I must make a personal apology to him for forgetting at one moment, so fluently was he speaking, that his was a maiden speech, and that I should not have interrupted him. He seemed to me to be talking such sound sense that I felt that he should be on this side of the Committee rather than on the benches opposite.
The hon. Gentleman drew such a picture of conditions in Northern Ireland and Belfast, which happens to be my own natal city, that he was forced by the logic of the circumstances which he was describing to draw the conclusion that what, after all, is really needed in Northern Ireland is a little Socialist planning. It was at that point, I regret to say, that I interrupted him. I say very sincerely that his speech was so cogently argued and well thought out that it will be a very great pleasure for all of us to hear him on future occasions.
We have had several notable speeches this afternoon. We had one from the right hon. Member for Monmouth (Mr. Thorneycroft) which was fluent, as 448 always, but, I thought, depressing in the extreme. If I may be allowed to say so, we had a very notable contribution from my hon. Friend the Member for Grimsby (Mr. Crosland), who put the true Socialist case on the state of our economy and its future prospects in a way which few of us could rival.
The frightening feature of the present situation, as my hon. Friend so admirably explained, is that we have a Government who, apparently, are incapable of dealing with more than one year of expansion at a time. I will not make too much play of the fact that a year of expansion coincides with the year of a General Election, but if the pattern is to be that only once in four years can we have, for electoral purposes, an expanding economy and then must take the next three years to recover from it, the outlook for Britain is bleak.
It is clear from the speech of the right hon. Member for Monmouth that he, for one, does not believe that his colleagues on the Front Bench are capable of dealing with the genie of expansion once it has got out of the bottle. The right hon. Member's speech expressed the true outlook of the great majority of the Conservative Party. I do not say necessarily of the majority of hon. Members at present sitting on the benches opposite. I mean the phrase metaphorically. There are few hon. Members physically sitting on the benches opposite at the moment, but it would be true to say that the authentic voice of Conservatism is that of the right hon. Member for Monmouth, and that we have sitting on the Front Bench opposite the best Socialist Chancellor that we could have at the moment.
The argument of the right hon. Member for Monmouth amounts to this, that we cannot afford the dangers of expansion and that the moment we have an expanding economy, in our present state of affairs, our imports go up, our balance of payments position is under pressure, and hardly have we started to expand than we must at once damp down effort and enthusiasm. The right hon. Gentleman really has no remedy for this situation. He repeats, regrettably, the Conservative fallacy that virtually all public expenditure is inflationary but that private expenditure is not. We on this side cannot possibly accept that. We do not believe that one form of 449 expenditure is, in itself, more inflationary than another. On the contrary, we believe that if we are to get our social priorities right expenditure in the public sector is at least as important as expenditure in the private sector.
We cannot allow the selfish wishes of many of us as individuals—we are all involved here—to take priority. There are times when the public interest must come first, and when judgment of the public good must take first place over the naturally selfish wish for comfort of which we are all guilty from time to time. If we allow our individual selfishness to come first, we shall constantly have the situation in which Governments turn to us and say, "We cannot afford this, that or the other type of social expenditure". If we allow ourselves to be governed by individual selfish interests, we shall continue to have the position, which we all know so well in our constituenies, of an increase in certain forms of expenditure on consumer durables, as they are called in the economists' jargon, but, none the less, continue to have completely inadequate improvements in our schools, hospitals, housing, and so on.
Recently, I looked at expenditure on education. I was drawn into doing so by a remark made the other day by the Parliamentary Secretary to the Ministry of Education who was congratulating himself and the Government on a decision to increase sharply expenditure on school building. When I looked at the figures, however, I found that the proposed increase of expenditure on school building will not, by any means, bring us back to the level of expenditure on school building in 1955. It is simply an increase over the figures after the economy cuts of the right hon. Member for Monmouth.
It is, therefore, not a real increase at all. In fact, we have not even caught up to the position which we were in five years ago. Yet the condition of mind of the occupants of the Front Bench opposite is such that they congratulate themselves in public on an increase which does not even bring us up to the position in which we were five years ago. In one department of our social expenditure after another the same story can be found. There was the Home Secretary's famous election boom. After that there was a very sharp decline, and we are still rather laboriously climbing up the hill.
450 In general, I share fully the apprehensions of my hon. Friend the Member for Grimsby. He is very much more competent in these matters than I am, but I feel that the country is being deceived by Conservative propaganda of the kind that we had during the election. This, among other things, accused us of placing, on the country an intolerable burden by our social policies, suggesting that they could be carried out only at the cost of vastly increased taxation. But the right hon. Member for Monmouth himself gave the figure of an increase of £1,000 million in Government expenditure over five years. Some of the computers at the Conservative Central Office used that very figure during the election. It was not our calculation—it was theirs—of the cost of the programme of the Labour Party at the election. Granting that it was accurate, it would have been no more than the amount by which the Government have increased expenditure over a comparable period. I think, therefore, that we are entitled to say that this kind of propaganda, which was carried out extensively at the election in all the constituencies, was entirely without foundation.
Having said something about my general feelings on the Budget, I should now like to mention one or two details. As someone who for many years past has taken part in discussions here on the Entertainments Duty, it would be ungracious of me if I were not to acknowledge that the Chancellor has abolished this Duty, which had become exclusively a tax on the cinema industry. This is a little late in the day, but we welcome it. I wish that he had done it earlier. Had he done so, there would have been a better chance of the industry reorganising and rationalising itself. I think that that time has probably passed and, therefore, it is a great pity that this was not done two or three years ago. However, it has now been abolished, and the effect may be to save a few cinemas which would otherwise have had to close.
Many of us on both sides of the Committee have pursued this matter over the past few years. We have in the Palace of Westminster a cinema with some rather out-of-date projecting equipment. It would perhaps be a nice gesture to the House of Commons if the cinema industry thought of giving us a new and more up-to-date projector.
451 There is another matter to which I wish to refer. It is something which is, in its detail, a matter for the Finance Bill rather than for a Budget debate, but we have still a little while before the Finance Bill is published and we should put in a plea at this stage for anything which we wish to have included in it. I do not often speak in the House as a feminist. I would not seek to rival my right hon. Friend the Member for Warrington (Dr. Summerskill), but there are occasions when it is only right that those among the small number of lady Members here should say something on behalf of the women of this country. I want to make a plea on behalf of a small number of women who at the moment are very much discouraged by our fiscal provisions.
A few days ago the Financial Secretary received at the Treasury a deputation representing the professional and university women, who put it to him that with the present arrangements for taxation a married woman who is a professional person and, therefore, able to earn a reasonably large salary is so affected by our present system of taxation, and of aggregating the incomes of husband and wife for taxation purposes, that there is too little advantage to her financially to take a job. She is not even able to obtain an adequate domestic substitute for herself if she is doing full-time professional work. It is not worth the while of women with scientific and professional qualifications to work even though it might well be for the good of the country.
I have with me a report made by the British Federation of University Women which draws attention to the loss to the community of the valuable services of the small number of highly-qualified women. The British Federation, some little while ago, realising the need for scientists and for teachers in technical colleges and schools of mathematics and scientific subjects, decided to run refresher courses for married woman with good qualifications to encourage them to return to employment. It was found that the response was not as good as had been hoped. The Federation therefore took pains to make an inquiry among its membership.
The result of the inquiry was that roughly half of those to whom the 452 Federation applied said that it was financially so disadvantageous to them to take employment that they had decided that it was not worth while. Therefore, the country is deprived through its taxation policy of the services of women in spheres in which they could be of particular value. As every Member of the Committee knows, we are extremely short of teachers in mathematical and scientific subjects. We are also short of specialist workers in industry. We are extremely short, as we know from Questions week after week in the House, of school dental officers. In some areas we are short also of doctors and other similarly qualified persons. Surely it is foolish so to arrange our taxation that this group of women is discouraged from returning to employment. From the viewpoint of national finances, the return from taxation is negligible—the numbers involved are small—but from the point of view of using people of quality and attainment in certain fields, the public advantage is clear.
I will not bore the Committee by going into detail with figures which, in any event, are available at the Treasury, but I plead with the Treasury to take this matter seriously. It is very discouraging to a woman who has had an extremely expensive education, who has then married and probably brought up a family, who knows that she has the equipment with which to do a worthwhile job, to find that the community is so little interested in her that it will not make any change in our taxation system.
There are many of us who are of professional standing, if we may call membership of the House of Commons a profession, who find, for instance, that on the work we do here, after allowing for our own direct expenses as Members of the House, when our tax position is taken into account it is quite impossible to earn enough to find an adequate domestic substitute for oneself. Therefore, one spends a great deal of time doing laborious work. I do not object to doing it in one sense. On the other hand, if one considers the possibility of using one's capacity, it seems a pity that people in our position should, for financial reasons, have to spend so much time on work which other people could do equally well.
453 Whilst one does not wish in any way to compare oneself in capacity with some of the great figures of the Victorian era, when one reads, for example, that Florence Nightingale had five people who did nothing else but look after her comfort one wishes that it were possible to afford just one.
I shall never forget the heartfelt cry at a moment of pressure of my hon. Friend the Member for Blackburn (Mrs. Castle), who said, "If only I had a wife." We all knew exactly what she meant. There are many hon. Members who have the support and care of their wives in their moments of political crisis and stress of work which those of the opposite sex hardly can have. Even though their husbands bestow upon them the greatest kindness and consideration, it is not quite the same thing.
I make this small feminine plea to the Treasury to look seriously at the position of the professional wome and to see whether it is not possible in the Finance Bill to make such arrangements about the aggregation of tax as would make it possible for these people to give their best to the community.
§ 6.27 p.m.
§ Mr. Joseph Hiley (Pudsey)
Pudsey, or, as it is familiarly known in Yorkshire, Pudsa', the constituency which I represent, has always enjoyed a wider and greater fame than its Member of Parliament. Nothing happened last October to invalidate the truth of that assertion. Its renown, however, has been gained, not. as it might have been, by the excellence and variety of its products, but rather because it has produced more first-class cricketers than any other place in the world. Herbert Sutcliffe and Sir Leonard Hutton are household names, but the Borough of Pudsey also gave Yorkshire, and, indeed, England, Halliday, Booth and. for those who can remember. Tunnicliffe.
It may not be as generally known that within the constituency of Pudsey is a place called Rawdon, from whence comes Brian Close and from whence came the late Hedley Verity, who performed as valiantly on the field of battle as he did on the cricket field.
The Pudsey constituency, too, has produced Illingworth, who has recently been with the England team in the West Indies. To assure the Committee that 454 we shall not rest on our laurels, I want hon. Members to know that in our present No. 1 in Yorkshire, Brian Stott, we have a man who is ready now to take his place as No. 1 for England. Surely, no place in all the land, including Scotland and Wales as well, has ever produced so many great players of England's grandest game.
I thank hon. Members for the indulgence they have shown so far, because they must be wondering what all this has to do with the Budget. The only connection I can think of is that I realise I am indeed batting on a sticky wicket. I hope that the indulgence of the Committee will be extended a little longer. To pursue the simile, I hope that nobody will walk in front of the sight board for another moment or two.
I have mentioned that the fame of Pudsey might have been gained by the excellence and variety of its products— wool textiles, engineering, dyeing, the making of perambulators and the distribution of food—which come from large numbers of small firms which have been built up during the last 50 or 100 years and which, in the main, are still controlled by the descendants of the founders. By comparison with the large concerns in the country today, they are indeed small, but they make a vital contribution to the economy of the country. In fact, I do not think it would be an exaggeration to say that they make at least an equal contribution to that which is provided by the industrial giants.
Happily for the wool textile trade, the habits of the people are such that they do not encourage it ever to develop in large units, and unless we all dress in uniform, that is not likely to happen. In order to stress that point, I particularly refrained today from wearing my House of Commons uniform. In matters of taxation, private companies are treated the most harshly. I realise that I must not be controversial today, but when I refer to the ploughing back of profits, I believe I shall secure the support of hon. Members on both sides of the Committee.
I wonder if those hon. Members who advocate the ploughing back of profits realise that the Inland Revenue can, and indeed sometimes does, come along to private companies and make a tax 455 assessment on the distribution which the tax authorities themselves think ought to have been made. It is quite true that they do not say that the distribution has to be increased, but, by virtue of their authority and their ability to make assessments, it means that a greater distribution will be made, because I have never yet found the human being who, having been taxed, does not make sure that he gets the money on which the tax has to be paid.
The late Sir Stafford Cripps sought to alleviate this evil by restraining the tax authorities from wielding this weapon too vigorously, and I suggest to my right hon. Friend that he, too, might now unfold his umbrella and so consolidate and fortify the resources of private firms. So far as I know—and I am not an economist, but merely one of the little men trying to keep the wheels going round—that is where investment in industry could come from, and that is where those who have been engaged in industry all their lives look for the money with which to fortify their businesses. If the Chancellor takes it all, I cannot see where the investment in industry is to come from.
The ploughing back of profits creates another hazard for the private firm, especially the one which is director controlled. Section 55 of the 1940 Finance Act was particularly severe on private companies. I am not quite sure, from the Chancellor's Budget statement on Tuesday, reported at the top of column 61 of the OFFICIAL REPORT, whether the proposed changes in Estate Duty refer particularly to Section 55, but I hope that it is intended by my right hon. Friend to ensure that wives and families will be preserved from the penal and evil effects of Section 55, as it appears in the 1940 Act.
Many small firms continue to be swallowed up into larger organisations, and this is not good for the country. It is brought about almost entirely by this penal system of high taxation. Sometimes, amalgamations take place, but they are not always possible, and when they do not take place, something even worse could often happen, as indeed it does on occasions. Firms controlled by private companies have closed down as a result of Estate Duty and other forms of high taxation.
456 I welcome the Estate Duty concessions which have been made by the Chancellor, but the levels are still too high and ought to be lowered. I think that the value to the Exchequer of what the Chancellor secures from Estate Duty is quite insignificant compared with the disruption which it causes to family businesses. So long as Estate Duty remains, I would respectfully suggest to the Chancellor that he should help those in private industry to find ways by which they can make payments easier in order to provide for possible assessment of Estate Duty.
Why should not the Chancellor allow individuals to create during their lifetime funds which would not be subject to aggregation in their estates after death, something on the lines of tax reserves? Insurance could probably assist one in this dilemma of providing funds to meet Estate Duty, but it is expensive. Then, of course, there are some lives which could not possibly be acceptable to the insurance companies. I think it is far better for a man to be able to face this problem during his lifetime with some certainty, rather than leave it behind for his wife and family, who in most cases are far less able to cope with that situation than he is himself.
High taxation has a devastating affect on the private company, and, incidentally, on those employed therein, and if it is not remedied, we shall find owner-management and indeed competition gradually being eliminated. These are absolutely vital characteristics of private enterprise, and, therefore, I hope that the Chancellor will take heed.
§ 6.38 p.m.
§ Mr. Arthur Holt (Bolton, West)
I have very great pleasure in following the hon. Member for Pudsey (Mr. Hiley) and congratulating him on his maiden speech. This is not exactly a battle of the roses, but an exchange of courtesies, and I express my congratulations very genuinely.
The hon. Member has succeeded a former hon. Member of this House who perhaps experienced a situation in which I think all of us would hope never to be placed ourselves—that of rinding himself in distracting and deep emotional disagreement with his own party over a policy which he thought to be completely wrong. I had many conversations with him over the great interest 457 which he took in the Middle East, and I must say that, although possibly the hon. Member—I do not know—may not agree with the views of the former Member for Pudsey, I am quite sure that he will hold him in great honour for the personal stand which he took. I do not think I could offer the hon. Gentleman any higher hope than that he will represent his constituency in the same very honourable way in which the former Member did.
I would agree with many of the comments which the hon. Member made about private firms. Indeed, I wish to see them remain in existence, and I hope that we can stop these very unnecessary amalgamations and the movement towards monopoly which is still going on in this country. If the hon. Gentleman does not mind, I will not follow him into that subject this evening.
As the only member of my party who will probably have the opportunity to speak in this debate, I have the duty of having to mention rather a lot of subjects, while trying to avoid an omnibus speech. Therefore, for the sake of brevity, I should like to draw the Committee's attention to the Motion which we put down yesterday outlining some of the points on which we are critical of the Government. It says:That this House has distrust in the financial ability of a Government which, after attacking its opponents at a General Election for proposing increases in Government expenditure, itself budgets for an increase of £400 million, has no proposals for a reform of the tax structure to take some of the weight of taxation off earnings"—which was one of the points which my hon. Friend the Member for Orkney and Shetland (Mr. Grimond) made in that excellent article to which the Economic Secretary so courteously drew attention earlier in the debate—and has done nothing to encourage the spread of ownership, either by reducing the stamp duty on transfers, giving any tax incentive to co-ownership or by abolishing Schedule AThere are also other points in the Budget of which we are somewhat critical, such as the Tobacco Duty and the increase in Profits Tax. Retrospective legislation, although on something in which we had no particular interest, does seem a most undesirable step to take. There is also the very questionable pro- 458 vision relating to the superannuation tax allowance of £15.
Before the right hon. Member for Monmouth (Mr. Thorneycroft) leaves, I should like to have his attention for one moment. I really am sorry he cannot go out for a moment, for he must be dying for a cup of tea. I turn now to the main burden of what I want to say, and to utter a word about what the right hon. Member for Monmouth said, and also about what was said by the hon. Member who followed him, the hon. Member for Grimsby (Mr. Crosland).
I would not presume for one moment to pretend that I have the qualifications, the knowledge or the experience of either of them in economics, but I did listen to them very carefully, as, indeed, all the people in the Committee did when they spoke, and I would say to both of them that they are very good at posing the problem; but I think—and he himself, I think, would not deny it—that today the right hon. Gentleman did not himself offer the solution. He discussed the problem of deciding how much should be spent. We can all discuss this, but the real problem is, on what in particular is it we are going to cut expenditure?
I hope I am not being patronising in saying this, but I would remind the right hon. Gentleman that there was a famous associate of his, famous in another sphere. Sir Anthony Eden, who also resigned from Government. That was before the war, and it was in different circumstances which may or may not have justified his action. He decided not to campaign for his views. Whether, if he had done so, the turn of events would have been otherwise, I do not know.
I would say to the right hon. Gentleman that there are quite a lot of people who share some at any rate of his views. He has given the Government a period of two years in which they may think about their policies. If he is really serious about this matter, then, in the interests of the country as a whole, I suggest he should campaign strongly about it. That need not be particularly embarrassing to his own party at the moment; it is a long time before the next General Election. It really is up to people who take his kind of view to campaign strongly for it.
I think he will find a surprising amount of support for some of his views, and find it in rather strange places in 459 this Committee, not only on his side and not only on this bench.
I feel that we must be frank and that, if we are talking about cutting Government expenditure, we have to recognise that there is probably no support—or very little, anyhow—in this Committee for cutting Government expenditure on things like education. Indeed, I should think that there is a large majority in the Committee for a steady increase, at least for some time, in expenditure on education, and on roads, and, probably, on parts of the national welfare services, pensions and sickness and unemployment benefits. As the country's wealth increases there will certainly be a majority in this Committee for seeing that those benfits also increase.
However. I think there is a majority here for, first of all, seeing that on some other items no more money goes, and then for finding ways and means by which the expenditure in some cases can be cut—I refer to expenditure on nuclear arms and agricultural subsidies— and by which in some other cases the burden of expenditure is transferred from the Budget on to other sources. I am referring now first of all to the railways subsidy, as it now is, which, by reform of the railways, could certainly be greatly reduced, even though we may agree to continuing to run some services which are marginally uneconomic; and also to what is widely accepted among people interested in the matter as being the desirable achievement of getting the financing of the nationalised industries done on the open market and not by compulsory savings off the Budget.
Although many people have talked about this, no apparently satisfactory or practical methods have been found. We, for our part, have suggested that we start with the gas industry, which is already broken up into twelve boards, and because the borrowings they may have to make are likely to be of a small order.
I suggest that there is quite a large measure of agreement basically in the Committee on these four objects which I have mentioned, and, surprisingly enough, for instance, about the agricultural subsidies. It was even suggested in the maiden speech of the hon. Member for Clitheroe (Mr. F. Pearson) yesterday.
460 He made the simple point that the Minister of Agriculture was intimating that he did not want a total increase in agricultural production but that, on the other hand, he had told the farmers that they must increase productivity; and he made the simple point that if there is a farm with two men working on it and their productivity is increased, they are bound to increase production. He asked where was this to go. His answer was simple. We must have export markets for some of our agricultural products and let them go abroad. He said that this cannot be allowed because of these subsidies, and that they would have to be given up. The particular ones he mentioned were milk and beef, for a start.
I suggest that these are the kinds of things people in this Committee, if they are serious about cutting Government expenditure, should get together upon, for by agreement we could bring some influence to bear and make some progress. Unless we are prepared to deal with these subjects particularly, and to argue about them, it seems to me absolutely useless talking in a general sense about the need for cutting Government expenditure.
I agree in general with the kind of objects which the Chancellor of the Exchequer is obviously intending and wishing to pursue in his Budget, but I suggest that he has left one instrument out which is readily to hand and in which, strangely enough, people are really more interested today than they have been for some time. I have often felt mine was a lone voice here about it. The Chancellor has said that investment is going up, that production is going up, and that the great, important thing is to keep costs and prices down.
What is the one thing which, without disturbing anything else that he is doing, he could have done and has not done which would make a real contribution? The right hon. Member for Monmouth knows the answer and I see that he is now leaving the Chamber and is not waiting to hear it. It is simply to return to what was long ago, before the Tory Party turned it upside down, the traditional policy of this country, and that is to make a slashing cut in import duties. Before some hon. Member condemns this as "old Gladstonianism", let us 461 examine what would be the result at the moment.
The cutting of tariffs would be entirely in the mood of some of the developments in the international sphere. The cutting of tariffs would lower prices in the home market substantially and the effect of that would be to push more of our production abroad, which is another thing that the Chancellor wants to do. It would also tend to reduce stocks, because there would be a slight tendency for prices to go down rather than to go up. When there are tendencies for prices to go up people say, "We had better have higher stocks". The reduction of stocks is one of the things which the Chancellor, in his Budget speech, said he wished to secure.
The cutting of tariffs also increases incentives to save, because if one thinks that prices will be a little lower next year or later one tends to save rather than spend, and the whole go-ahead international trading climate which would result would certainly encourage investment. This, of course, is all very well and if we were to consider it in isolation I would say that it should be an absolute must, but there are other things going on in Europe at present and we must look at them.
It is extraordinary, and I entirely agree with the hon. and learned Member for Kettering (Mr. Mitchison) when he expressed his surprise, that the Chancellor of the Exchequer said absolutely nothing about the Common Market in his speech. This really is extraordinary. Those who are students of history may have noticed that this year is the centenary of the famous commercial treaty with France of 1860. Perhaps surprisingly, I am familiar with some of the speeches made at that time. I have looked them up and read them on various occasions, and I have noticed that Gladstone in his famous Budget speech of 1860 is reported over sixty columns whilst the Chancellor's Budget speech this year takes up only thirty columns of HANSARD. I cannot help feeling that half of the Chancellor's speech was missing—a half which he should have delivered about a French treaty.
Today, instead of having a French treaty we have very pleasant courtesies exchanged in London with the French President, but what more there is to it we do not know. Possibly the real sig- 462 nificance now is that, instead of having a Liberal Government on the Front Bench opposite, we have a Tory Government. I suggest to the Committee that in the economic conditions of today and in view of international movements there are only two choices for us. What is going on in Europe is very serious and I do not think that a solution can be found, as is suggested in some quarters, in the establishment of a wider Atlantic economic community.
I believe that the choice is between this country deciding to go unilaterally for free trade again, and ensuring that in this country we have the cheapest market in which to manufacture our goods and so be able to get them over any barriers put in our way in Europe, or alternatively recognising that the only solution in Europe is for us to go into the Common Market of the Six.
As for the first solution, we would miss the political advantages. There would only be economic advantages. The political importance of not dividing Europe and of our playing a full part in it are rather more important than the economic advantages of having fewer barriers to trade. It is simply this that the Government have to recognise, and they have a first-class opportunity now that the Germans, as announced in the Press today, are concerned about the Hallstein proposals and obviously they are to be buried for some time. The Government have a first-class opportunity now of starting again with their proposals. If they think that, because the Germans and the Belgians are upset about the possibility of increased tariffs keeping out imports from Britain, they are going to hold up the Common Market, they are utterly and emphatically wrong. They must recognise this.
I was most disappointed to notice that when the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) raised this matter on 1st April the Prime Minister obviously still hoped that there could be some way of bridging the gap between the Six and the Seven. I would have thought that it was almost, though not quite, too late for the Government to recognise that there is no arrangement that the Seven can make with the Six and that the only kind of arrangement by which the Six can be made bigger is for people like ourselves—and certainly 463 the Danes and possibly the Austrians and the Swiss would then follow—to go into the Common Market. If the Common Market were enlarged it might be possible for other small countries of Europe to make an association, but it would not be possible for us to be outside.
This is the Government's responsibility. It is no good blaming the French. These are the realities of the European situation. Neither is it any good blaming it on the Americans, which is the biggest mistake of all. If one talks to any American one finds that he looks at Europe with the eyes of an American, the citizen of a country which has no barrier between its states. The American says, "That is precisely what should happen in Europe." This idea of the British not associating with a group in a Europe which should be like the United States the American thinks is just unrealistic, and he thinks that failure to do this is just the British being terribly slow about it. The Americans think solely of a United States of Europe, and they have done so all along. This ought to be absolutely plain to the Government by now. Until the Government face up to this we shall not find a solution. I hope that they do it before it is too late.
§ 6.59 p.m.
§ Mr. Cyril Osborne (Louth)
The hon. Member for Bolton, West (Mr. Holt) said that he was putting before the Committee what might be called the old Gladstonian free trade concept, and I should like to ask him two questions about his concept. I represent an agricultural constituency and I should like to know whether the hon. Member would destroy all food subsidies and would end all the guaranteed prices. Would he tell me that?
§ Mr. Holt
I am sure that the hon. Member does not want me to make another speech. I thought that I was absolutely fair and clear about this. I want a start, and I support the approach to the subject of the hon. Member for Clitheroe (Mr. F. Pearson). I do not want to destroy the whole thing at once.
§ Mr. Osborne
The hon. Member said that he would drastically cut all tariffs. I wrote down his words. I should have thought that that would involve ultimately, if not quickly, the ending of 464 farm subsidies and of supports. All I have to say is this. I am not a farmer but I represent farmers, and they believe that it would bring absolute ruin back to the English countryside. If this is what the hon. Gentleman is advocating I am completely opposed to him.
He made a second point with which I rather agree. He said that if we are serious about cutting Government expenditure we have to face the fact that it involves a complete and major change of policy. We cannot effect really big economies by trying to get what I call administrative higgledy-piggledy pennyworths of savings here and there. If we are really to affect the financial situation in any major way we have to do it by a major change of policy.
So many Members on both sides of the Committee, including my hon. Friend the Member for Kidderminster (Mr. Nabarro), are demanding enormous' Government savings without saying where they ought to be. That seems so unfair and unreasonable. The only good suggestion in this debate about where we might save money is in defence.
I wonder whether, since we were told by my right hon. Friend the Minister of Aviation when he was Minister of Defence that there is no real defence against the modern atomic bomb in this country, since Mr. Khrushchev seems so determined, if he can, to get peace, and since the only real threat to this country could come from Russia, we might not look at some of our defence expenditure in the near future. We are spending £1,500 million a year on defence. Since the end of the war we have spent about £16,000 million on defence. I begin to wonder whether that is not one of the major policy changes that might be looked into.
I agree with a point made by the hon. Member for Grimsby (Mr. Crosland) in a very attractive speech. As his constituency and mine adjoin, I listened with doubled interest. He made the point that, compared with other countries in Europe, we were not investing nearly as high a proportion of our national product, and that we ought to be investing in re-equipment a substantially greater proportion.
We have to face the fact that if we are to invest a greater proportion of the 465 national product in re-equipment, then we have to cut down immediate consumption to the same extent. It is no good members opposite saying that this would be easy. If we went to our supporters and told them that we were proposing to build new factories and fill them with up-to-date machinery, and that as a result they would have fewer schools and hospitals and a lower standard of living in order to enable us to do it, we should not be popular on either side.
The dilemma of the modern democratic way of life is that whilst we can control the economic machine, we lack the courage to tell our people truths about that machine and the way in which it can be worked. The trouble with the persuasive argument of the hon. Member for Grimsby is that if he were to tell his constituents that he was going to cut down their standard of living in order to spend more of the national income on re-equipment, I do not think that he would be returned to the House at the next election—and no Member on either side likes to face that prospect.
I say this about the Budget. I congratulate my right hon. Friend the Chancellor on what I consider to be politically a dull, dismal, uninspiring and unpopular Budget, but which, economically, is necessary and very courageous. Because of that, I congratulate him. I wish he were here. I would not like him to feel, because of what he read in the newspaper headlines today, that he has not the support of the overwhelming number of his own back benchers, because he has.
He has certainly a number of critics, and I honour them for their point of view and the sincerity and the ferocity with which they put it, but I assure my right hon. Friend that they are a tiny band, a very small number, and many of us have an immense respect for his character and the work that he has been doing.
Some say that the Budget is tough. I wonder if it is tough enough. I would like it to be much tougher. Some have said that it is the sort of Budget that Sir Stafford Cripps would have brought in. I was in the House at the time and listened to Sir Stafford Cripps. I had a great respect for his character and for 466 what he tried to do. I did not agree with the way he did it, but for his courage in telling the people the bitter truth I had the utmost respect. I think that what is needed at the moment is more of the Crippsian spirit on both sides of the Committee, even though that may mean risking temporary unpopularity.
I now turn to the speech of my hon. Friend the Member for Kidderminster. I told him that I would say things against him, but he is on television tonight and therefore cannot be here. He begged by pardon for not being present. But I am entitled to say even in his absence—and I know my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) will reply to me later today or tomorrow— that his attack was unjustified. It was bitter, unreasonably bitter, and is resented by many of his colleagues on this side of the Committee.
It reminded me of two previous occasions in the House. One was when the right hon. Member for Ebbw Vale (Mr. Bevan) made his resignation speech in 1951 from the fourth bench below the Gangway on this side. It was at that time resented by his colleagues as being unreasonable and unjustifiably bitter, and I feel the same about the speech of my hon. Friend the Member for Kidderminster.
The hon. Member for Coventry, East (Mr. Grossman) will remember Mr. Ernest Bevin turning round to him in t947 and saying that he was tired of being stabbed in the back because he was accused of not bringing in a Socialist foreign policy but instead was continuing a British foreign policy.
What happened last night reminded me of those two examples, and I want to reassure my right hon. Friend the Chancellor of the Exchequer that most of us on this side of the Committee will support him to the utmost. I say this to my noble Friend the Member for Dorset, South, who will no doubt take the opposite view. Since 1954 the social services have cost the country £1,000 million more a year. The time to protest about Government expenditure is when such policies are passed in the House, and I do not remember the Kidderminster crowd ever protesting against 467 increases in health, pensions or education. It is upon those three items that this £1,000 million extra is largely being spent.
The time for them to protest and to abuse the Chancellor is when the policy is being agreed upon. Why did they not do so? I say also that during the election most Conservative candidates—and I was one—were proud of the fact that we spent all this money on social services, and we got votes on it. To abuse the Chancellor now because we have spent that money is, I think—I dare not tell the Committee what I really do think —is grossly unfair, and I resent it.
It seems that we have hon. Members on all sides of the House of Commons who have a queer kind of dual personality. Nine-tenths of the time we come to the House and demand that more money shall be spent on pet subjects which suit us or our constituencies, and then once a year we have to pay for it and we squeal like pigs. [HON. MEMBERS: "Oh."] It is perfectly true. Those who live on farms know how pigs can squeal.
§ Viscount Hinchingbrooke
I am sure that my hon. Friend the Member for Louth (Mr. C. Osborne) will remember a certain stricture that he delivered only about thirty seconds ago against intemperate language.
§ Mr. Osborne
But the description was collective and included myself. I said that we all have this queer dual personality. We like to spend money, and yet we hate having to find that money.
So far as I can see, the real kernel of our problem has not been touched upon. It is that the last ten years of Conservative prosperity and of a high standard of living in this country have largely been enjoyed at the expense of the coloured men of the world. The terms of trade have been in our favour, and we have got our tin, rubber, lead and zinc at prices which ought to make us ashamed. Nine-tenths of the world are living at one-tenth of our standard of living. We say that we want the coloured people to have a higher standard of living, but they can have that only if we pay a fairer price for what they produce. If that is to happen, the terms of trade will move against us. 468 As the Economic Secretary knows, a movement of about two points in the terms of trade would land us in a deficit which would give us the shivers. There is not enough reserve in our economy to take care of that. We shall not always be so lucky.
I have just returned from South Africa. There I saw people working for wages that made me shudder. The problem in Africa will be solved not by politics but by putting up wages and by giving the people a decent standard of living. [HON. MEMBERS: "Hear, hear."] We shall have to pay for that. It is no good hon. Members cheering unless they are prepared to say to their constituents, "This means, brothers, that those people are to have some of the good things which you are enjoying." They must also say whether they are prepared to do that or not.
I wonder whether enough weight is being given in our calculations to the danger that the terms of trade may turn against us. Let it not be forgotten that the 50 million of us in this country can exist only if we sell abroad 30 per cent. of all that we manufacture. If we pay more and more, as we must and as we ought, for the raw materials that we use, it will be more and more difficult for us to sell our goods in foreign markets, and more and more difficult for us to maintain the Tory prosperity of which we have all been so justly proud. Very few persons are prepared to tell the people these unpleasant truths, and that is why I wish that we had half a dozen men like Sir Stafford Cripps on both sides of the House.
I should like the Chancellor to consider whether there is enough reserve in our economy to take care of the dangers which I conceive may arise if we have to pay more for our raw materials and foodstuffs. Will the Chancellor do what I asked a previous Chancellor to do but which he refused to do—go out day by day in the country and explain the difficulties of our situation and appeal not only for restraint in wage claims by the workpeople but on this side of the House for restraint in dividends and profits, for better, greater and cheaper production, because that is the only way that we shall avoid another serious crisis which might well be ahead of us?
§ 7.15 p.m.
§ Mr. A. Woodburn (Clackmannan and East Stirlingshire)
I apologise to the Committee for not having been present throughout the debate because of other engagements in the Palace of Westminster, but I should like to intervene for a short time following a very good example. I am sure that we have all welcomed the freshness of the contributions made in our Budget debates by the hon Member for Louth (Mr. C. Osborne). He can never be described as orthodox, and his speeches always break fresh ground. We must agree that many of the things he says are full of wisdom.
The hon. Member may be unduly pessimistic in thinking that what he has described will suddenly come about, but what he has said about the peoples of Africa undoubtedly contains a great deal of truth, and unless we foresee what is likely to develop it may bring disaster upon us and our economy. The hon. Member may be interested to know that when my right hon. Friend the Member for Ebbw Vale (Mr. Bevan) addressed a Scottish Labour Party conference some years ago he devoted his address to pointing out what the hon. Gentleman has just said, that it will be part of the duty of the people of this country to give up some of their standard of living so that the peoples of Africa and a thousand million people in the East can enjoy an improved standard of living.
My right hon. Friend also said another thing which is very true, that the most effective way to do that is to have capital investment of a kind that will increase the productivity of our industry and that of the industries of these other countries so that we shall be able not only to expand our production to help those people but to help them help themselves.
There was a curious aspect about the elimination of malaria. Many people thought that it would so increase the population in the East that it would further depress the standard of living there. However, in most cases it is found that the fact that people are no longer disabled but are able to work has resulted in much greater production, and in some places the standard of living, instead of falling, has actually risen. I am sure that if America, Britain, Germany. Russia, France and other countries which 470 have scientific resources could extend a helping hand to the peoples of Africa it would do more to eliminate the political problems which are arising than all the political discussions and the treaties which might be made with their chiefs. There is not the slightest doubt that the struggle of the African is a struggle not for mastery of the world but to get some of the benefits of the civilisation which we have selfishly kept to ourselves all these generations.
I was a little alarmed by the Chancellor's speech on Monday, though not by what he has done in his Budget. I feel that most people—certainly hon. Members on this side of the Committee —welcome a great many of the steps which the Chancellor is taking to remove unfairness in taxation. There is a certain amount of hard luck on the part of 70–80 per cent. of the people who make their contributions in the normal way—they are taken from them by P.A.Y.E.—and have no gambling possibilities in their duties.
Yet there is a fringe of the population who can make money by speculation and gambling because they have an economic freedom which is not possessed by the ordinary employee and can use all sorts of methods to avoid paying their due share of tax. There is nothing meaner than that a person who makes a huge fortune in this country going off to some place in the Bahamas or elsewhere to avoid paying his decent share of the taxes of this country, and then lecturing the people at home on what they should do while he is enjoying the sunshine and dodging his duty to his own country. That is a disgrace. Therefore, we welcome anything done by the Chancellor to make things fairer.
However, the Chancellor indicated that there was to be a further tightening-up of the economy and that some other steps would have to be taken to slow down the machine which was beginning to run too fast. I am all in favour of avoiding inflation. Inflation is a stupid way of conducting our affairs, because it is just chasing our own tails, making a lot of movement and getting nowhere, exhausting our economy in the spiral. I am utterly against having inflation. We can always have it simply by printing "£2" on £1 notes, which is not creation of wealth.
471 However, inflation is always discussed as though it were general. Inflation generally arises when there is more demand for goods than it is possible to satisfy with the existing labour, raw material and plant. That is a generalisation, but it does not always apply generally. In the South of England there is an inflationary tendency, but in the rest of the country there is the very opposite.
Therefore, to start to introduce a general tightening-up in order to cure inflation in the South of England is to make matters worse for the North and to bring disaster to great sections of the population. I am, therefore, a bit disappointed that the Government have not yet got down to appreciating that while they may have to put on the brakes because in some areas the car is going too fast, in other districts they ought to put their foot on the accelerator because the car is going too slow. That sort of discrimination is essential if the economies of the North-East Coast and Scotland are not to be shattered by the further application of the brake on the economy.
I have been very interested by what has happened in Malta, where the Government seem to have found a wonderful way of inducing industry to leave inflationary areas and move to deflationary areas. There is a report of this action in The Times of 15th March. The Times reported that the Colonial Secretary had started a campaign to induce firms to set up in Malta. The Times report said:He also announced the appointment of Sir George Dowty … as chairman of the Malta Industrial Development Board, in succession to Lord Hives … £32,250,000 will be spent on the island. Industry is being encouraged to expand, by such incentives as a 10-year tax free holiday, loans or grants of up to 33⅓ per cent.—and in special cases up to 50 per cent.—for capital costs of plant, provision of new factories at low rentals, Customs duty reliefs, and preferential tariffs. These, Mr. Macleod said yesterday, produce about as good a bargain for the businessman as he could find anywhere in the world.The Government insist on clinging to their fetish about private enterprise, although private enterprise in this country has practically disappeared and there is now a co-operative enterprise between the Government and industry.
§ Mr. Woodburn
Yes. I have not the slightest objection to that. In fact, I 472 am all for it. But let us admit it and not go on with some sort of pretence that the Government do not interfere with industry and industry does what it likes.
If we accept that, we have to plan how the economy can work most effectively. Private enterprise depends on making ends meet to start with and on making a profit. I thought that the Chancellor was going to quote from Dickens about 6d. above and 6d. below income—Mr. Micawber. We recognise that if someone has a business and runs it in an area where it loses money, the business comes to an end. It can run only if it makes a profit, which is a condition of private enterprise.
If for geographical or economic reasons industry in the North and in Scotland cannot make a profit, it is ridiculous to expect private enterprise to set up there and make a loss. That is commonsense from any businessman's point of view. We therefore have to face the fact that if it is left to the free working of the profit-making system, industry will drift more and more towards London, Birmingham and Manchester, because there the markets are economic and there the profits can be made. Hon. Members will realise that it is not only Englishmen who drift South. Scots capitalists drift South as well, because they have an eye to profit, the same as anybody else.
Therefore, as a country we have to decide whether we want the whole country populated, or whether we want shooting resorts and wildernesses in the Highlands with the population all congregated round London. Any sensible Government will say that we want the population properly distributed.
One has only to think of the difficulty of travelling in London. A friend of mine, who was one of the managers in the works where I was employed for 25 years, was a manager in an engineering works in London. He found that by the time he got home at night he had time only to have a meal and then go to bed. He came to Edinburgh, where he found that he could leave work at five o'clock, go home, have a cup of tea, and be on the golf course by half-past five.
The attractions of living in the country where one can do that sort of thing are obvious, and they are not open to 473 people who live in conglomerations like London. After all, people flock from London to Scotland to fish in the lochs. Why should we not have industries in areas where people can have all those delightful recreations instead of having to spend hours in the tubes and trains, as they do in London? I say that it is desirable that we should spread industry throughout the country. The question is how it is to be done.
The Government have discovered a method for doing it in Malta, and I should like that method to be tried in Scotland. When I was Secretary of State for Scotland, we had a development area around Inverness. Cheap rentals and other inducements were offered to persuade firms to come to the area, but those inducements were not sufficient to overcome the handicaps. Will Darling, who used to be an hon. Member, used to advocate this idea of a tax-free holiday. Will the Economic Secretary ask the Chancellor to consider this idea? If it can be used to induce industry to go to Malta, would it not be equally valuable for inducing industry to go to those areas of this country which are threatened by depopulation and economic crisis?
Industries might be induced to start up in Scotland if they had such economic assistance. I appreciate that the Government have already given about £9 million to motor car firms as an inducement to go to Scotland. The trouble is that there are too few of such firms and that their arrival will not be a major contribution to the solution of the problem, because there are 92,000 unemployed, with about 24,000 people leaving the country each year, and only 10,000 new jobs are to be provided.
The Chancellor's problem in the South of England is that there are too many jobs for too few people, so that he is having the pressure of inflation in the South. If he could get some of those jobs transferred to the North, he would find that they, like honey, attracted the bees.
§ Mr. C. Osborne
Many thousands of Scotsmen have come penniless from Scotland to London and have made vast fortunes. As a Scotsman, cannot the right hon. Gentleman persuade his fellow 474 Scots who have made such large fortunes to take some of their fortunes back to their native land to find employment for their less fortunate countrymen?
§ Mr. Woodburn
Let me be quite fair. There are some Scottish capitalists and some English capitalists who have done very we'll in this direction. Sir Stafford Cripps was able to persuade Mr. Smith of Smith's Clocks to bring his factory up there. Tom Johnston was able to persuade Mr. Morrison, chairman of British Aluminium, to bring one of his factories up there, and a good deal has been done by good will.
However, I am afraid that some Scots, like some English, have been brought up on capitalist ideology and try to get as much profit as possible, which takes them South. We have to face that fact. I suggest that the Chancellor might use his economic power, by some of the novel methods which the Government have discovered, to induce industry to go up to Scotland.
I see that the Chancellor has come into the Chamber. I was saying that the Colonial Secretary has just proposed that industry should be induced to go to Malta by a ten years' tax-free holiday and many other inducements. Since the Government have discovered this excellent way of taking industry from the inflationary areas into the deflationary areas, the Chancellor might adopt these methods in Scotland and the northern counties where industry has suffered and where instead of an inflationary crisis we have 92,000 unemployed.
§ Miss Margaret Herbison (Lanarkshire)
I am quite certain that my right hon. Friend would not want to do any harm to Scotland and to Scottish business. Although I agree with a great deal of what he has said, is it not the case that American firms, Westclox and others, are making a profit and are finding it very profitable indeed to be in Scotland?
§ Mr. Woodburn
The explanation is that American firms, like Ferranti's, which have come to Scotland, have their sales organisation all over Europe already in being. It is a different proposition for a new firm starting up without a sales organisation in being. A firm like the British Motor Corporation has a sales organisation and no doubt in 475 time will attract minor firms to Scotland, but it is necessary to try to induce key industries and growing industries employing people to go there and act as an attraction to other industries.
The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory)
I am very interested in what the right hon. Gentleman has been saying, and I should like to confirm, from my information, that firms which have started in Scotland in the last few years have bean extremely satisfied with the conditions which they have found.
§ Mr. Woodburn
The Chancellor is absolutely right. Every American firm has said that it is delighted with the labour, which it has found adaptable, and with the efficiency of production which it has been getting. I hope that what has been said will be noted by other firms which have perhaps been discouraged by certain rumours. I should like the Chancellor to look into this wonderful scheme of the Colonial Secretary for Malta and to be as generous to Scotland as his right hon. Friend has been to Malta. In this case we shall be quite pleased to have a little attention from the Colonial Secretary since he has a name which should at least encourage him to think about Scotland. I hope that he will encourage his colleagues to extend this scheme to Scotland. I know that many other hon. Members want to speak, so I will cut short anything further that I have to say.
§ 7.34 p.m.
§ Mr. Julian Ridsdale (Harwich)
I hope that the right hon. Gentleman the Member for East Stirlingshire (Mr. Woodburn) will forgive me if I do not deal with the problems of Scotland. I think that in the beginning of his speech he dealt with a very important item in the general economic picture, and that is investment in Asia, Africa and the overseas territories. I am sure that the ultimate solution of all our long-term problems can come only if the creditor countries of the world play their part in a proper investment policy so that world trade can expand and so that we are not faced with having to contract trade in Western Europe and in the Western free world as a whole.
When I listened to the right hon. Gentleman the Member for Huyton (Mr. 476 H. Wilson) speaking yesterday, I thought that the theme of his speech was a return to Socialism. Like the Bourbons, during the last ten years he seems to have learnt nothing and forgotten nothing from the lessons of the last three General Elections.
If there is one thing which the country does not want, I think that the lesson of the last election is that it does not want a return to Socialism, as expounded by the right hon. Gentleman the Member for Huyton yesterday. That is in the main why I have been disappointed with the prelude to this Budget which faces us with such a large increase in Government expenditure. In those circumstances, as the Guardian said yesterday, the balance that the Chancellor chose, I believe, will turn out to be about right.
Yet how regrettable it is that the Chancellor had so little ground for manoeuvre, which prevented him from carrying out further reforms of our taxation structure which for the future impetus of our economy I am sure are necessary. In spite of all that has been said about the Budget in the last few days, let us be clear that the background to this debate is one of confidence and that it is vital in the situation of today to keep this confidence and not to bring uncertainty into trade or industry. Indeed, production is booming today. Industrial production is up by 10 per cent. and our exports have risen by up to 18 per cent. compared with a year ago. Steel production is up. Our task, I am sure, is to keep this mood of confidence in the economy but, above all, to keep stability in prices which we have enjoyed now for two years.
How different the situation is from that of a year ago. Then we faced a very different situation. We faced a marked degree of unemployment, outlook for trade was uncertain, but the advantage that we had then was a balance of payments of £350 million. I am glad that at that moment, given the situation that was before the country, the Chancellor was prepared to take the risk he did and run into a deficit of £720 million and to take the decision to take the strain on the balance of payments.
As it has turned out, the strain on the balance of payments has been brought down to £145 million and the deficit that we face today is about £300 million. 477 When the strain did develop in the economy, which showed a certain degree of similarity with the position in 1954–55, I congratulate the Chancellor on acting soon rather than allowing inflationary threats to emerge.
The warnings given by the Governor of the Bank of England, the raising of the Bank Rate, the withdrawal of support for gilt-edged to restrain bank advances —all these steps, I am certain, were in the right direction to prevent the overloading of our economy. Looking at the deficit of £312 million and bearing in mind the economic situation today, I am not so sure that the deficit may not be too large if we are to get stability in prices. What I am concerned about is, where do we go from here?
Now that we are in this favourable position, are we taking full advantage of it, especially with the still good terms of trade and favourable commodity prices? Will our balance of payments at the end of the year be enough to maintain the strength of sterling, to add to our resources and provide enough for our investment requirements overseas? Everybody must realise that in order to achieve this we must have a balance of payments of at least £400 million. As was said by the hon. Member for Grimsby (Mr. Crosland), in an excellent speech referring to the investment policies of the Commonwealth countries, we must not be complacent, because Germany is investing 23 per cent. of her national product in her industry, compared with our 16 per cent. The reserves in Western Germany are very favourable compared with ours.
What steps must we take to provide still further incentives to meet this problem? It was with this thought in mind, and with trade booming, that I was prepared to accept a little slimming from the Chancellor, provided that the pill was not going to damage the health of the patient. I am disappointed that my right hon. Friend has chosen the pill of increased taxation rather than faced the problem of postponing certain items of Government expenditure. Bearing in mind the still heavy level of taxation, further increases disturb the rhythm of our expansion in production and savings and undermine our feeling of confidence, besides creating some uncertainty in industry, which is bad for trade and for our economic situation.
478 I want to see further reductions in taxation as soon as possible, especially those which will help the elderly, those living on small fixed incomes, and those paying Schedule A tax. I also want to see better allowances given for scrapping old machinery more quickly. More responsibility should be given to individuals, families and industry, so that they can get on with the job. That is the basis of my political philosophy—can I say "our" political philosophy?—as opposed to Socialism.
Accepting the fact that the Chancellor was not prepared to resist Government spending, I recognise that taxation increases are inevitable if we are to maintain the strength of sterling and price stability. That is why I turn my wrath not so much on the Chancellor as on the spending authorities, and on the present philosophy of relying too much upon the State and not enough upon individuals, families and industry to save and spend their own money.
But what about Government spending? We are driven to realise the truth of the sayingFor the Government to spend is to tax.I am most disturbed by the growth of spending by the Government, especially in civil expenditure, which is now over one-third of Budget expenditure. It is £340 million extra this year, excluding railways and the dentists' bill. That figure includes £100 million on defence; another £60 million on local authority spending; £21 million on health; £17 million on National Assistance, and only £13 million on roads. The rest of the expenditure is spread in small sums round the Departments. If we are to spend only £13 million extra on roads when local authorities are to spend another £60 million, our priorities are wrong.
Since I came into the House in 1954, civil expenditure has increased by over £1,000 million—an increase of 40 per cent. In 1954 it was about 13 per cent. of the national product; today it is about 14.5 per cent.—a difference of about £250 million. The annual increase has been about 7 per cent. Since 1954 defence spending has oscillated a good deal, but it is fair to say that whereas in 1954 it was 9 per cent. of the national product it is now only 7 per cent. I cannot agree with my hon. Friend the Member for Louth (Mr. C. Osborne), 479 who said that we must necessarily look to defence for economies. But let us be clear about this; it is the large increase in civil spending, much of which is necessary, and which, in the election, many of us pledged the Government to carry out—especially in regard to pensions and National Assistance—that is preventing any decrease in taxation.
Yet this increase of £1,000 million in spending since 1954 is obviously putting a strain on our balance of payments, and threatening the stability of prices. In those circumstances, are we prepared to postpone some civil expenditure? Are we prepared to bring it down to the 1954 figure of 13 per cent. of the national product? We cannot do this in pensions and National Assistance, but I am not so sure about local authority spending, especially in the spending done by some county councils. I asked my right hon. Friend about short-term borrowing by local county councils, and I understand that an estimate is now being made. I have not yet been able to obtain the relevant figures, but I am sure that there is one item of expenditure at which we should look more closely. I can speak only of my experience in my part of the world, but there is certain local authority spending in respect of which I am not sure that we are getting value for money.
We cannot make savings on particular items; we can make them only as a general act of policy. We can resist demands only as part of an overall act of Government policy. Otherwise it becomes a "free for all", with each Member competing and trying to obtain the best for himself and his constituency, and scrambling and shouting to get a piece of the national cake.
Those are my thoughts about the Budget. I trust that it will lead to stability in prices, but if, as I think possible, further restraining action is necessary, I press my right hon. Friend to examine Government expenditure rather than to think of further increases in taxation. The worst of being in politics is that we always have to compromise between what is ideally right and what is practically possible, but it is for the Government to give the lead; they should not expect us, as back benchers, to ask them to deal with one item of expenditure or another.
480 Above all, I hope that my right hon. Friend can get over to the country the idea that our vital purpose is the achievement of a decent and adequate balance of payments, so that we can carry out our world commitments, maintain the strength of sterling and the stability of prices, and accumulate reserves that a trading nation like ours should have— reserves adequate to carry out a proper Commonwealth and financial policy.
§ 7.48 p.m.
§ Mr. John McKay (Wallsend)
This debate has been very interesting. We have heard a lot about what we should do, and the way we should do it. There has been a strain of morality running through the speeches; but, however good that may be, I must point out that one must have sufficient intelligence to use one's strength in the right direction. I wondered how the Chancellor was moving in this respect. He made, a great appeal, publicised throughout the country, to industrial magnates to try to bring about a reduction in prices. He did not succeed. The spirit of good will did not exist. One wonders whether the new taxation on the engineers of industry is due to the feeling that these people could do better, and that now is the time to force them to meet the Chancellor's proposals.
One thing puzzles me. I presume that if the Chancellor had been successful in his appeal it would have meant an increase in purchasing power for the working man and the rest of the community. We now find, after only a few weeks, that there is a cry for economy and talk of an international crisis in the balance of payments. We all realise that it is necessary to keep the balance of trade in its right perspective. We have been looking at the economy from the point of view of trade, and one begins to realise the needs of our people. When the Chancellor appeals to people to get prices down, he knows whether they can do it within reason. Nevertheless his appeal cut no ice.
For many years I have felt that the industrialists of this country are not influenced by moral considerations. This has been emphasised today. Industrialists go into business for profit, and one can understand that, but if they are patriotic and are doing well in industry surely one would expect a limit to be 481 imposed on the amount of profit that they make.
Is there no moral quality which influences these people when they are considering profits? Is there no quality within them which prompts them to put a brake on prices? Do they ever think, "I am getting plenty of profit and I am doing well. There is no urgency for me or my firm to make more money by way of profits. I am producing goods that are required. I am getting far more profit than I require to lead a good life"? The answer is that they do not.
For many years profits have continued to rise. There seems to be no limit. The question of cutting prices does not seem to enter into their considerations. That is why the Chancellor, aware of the tremendous profits that are being made, made his appeal for lower prices, but, as I said, he was unsuccessful.
The Chancellor has now come down on the other side and increased the Profits Tax from 10 per cent. to 12½ per cent. That is a substantial increase and there must have been a good reason for it. However, we will leave it to the Tory back benchers to fight out that problem. I suppose that that is the nub of their agitation. We will let them carry on to see what they can do about it, but let them at the same time consider the welfare of the country. If hon. Gentlemen opposite think that they are more patriotic than hon. Members on this side of the Committee, this will be a test of their patriotism. Are they prepared to co-operate with the Chancellor and give him some encouragement? Are they prepared to tell him that he is doing something for the good of the country? The Chancellor believes that he is, otherwise he would not have done it.
The Chancellor may have made a mistake. He has made mistakes in the past, but to me this is a matter of principle. Today we have men in many occupations who work hard—married men who earn about £8 10s. a week, or about £440 a year. While I have no objection to people living on invested income and getting the same amount of money as a man who works hard every day of the week, there is a principle involved here. When one is considering giving relief to people, particularly to people who receive an income of about £440 a year from money that has been invested, it is 482 out of tone and bad judgment to so make the tax exemptions that the married wage earner is treated in a worse way than the man of 65 years who gets his money from interest on invested capital. A man who earns about £8 9s. a week does not get the same treatment as the man or woman who has money invested.
When the individual who has invested money becomes 65 he gets his money net, but when the wage-earner receives £440 a year, a low-paid married man, despite his low wage he has special liabilities and penalties attaching to that £440. There is about £26 in insurance, £13 in taxation, at least, and £13 on expenses attached to his job. The very low wage-earner takes home about £52 less than a person living on invested capital. When a change is made which is favourable to people who perhaps have £12,000 invested, they should not be given an advantage over a man who earns the same amount in wages as they receive by way of investment income. By some method we ought so to arrange the taxation system that that man takes home at least as much as those who are living on investments.
I put down a Question on this matter asking how much it would cost to help such a man so that he could take home more than he does at the moment. In the reply, I was told that it would take at least £100 more personal allowance. The weakness seems to be that if the Chancellor gave £100 extra allowance to that man all the other people would have to get an extra £100. No one can make me believe that the Chancellor does not know of ways and means to get over that. Qualifications could be introduced in the taxation system to get over difficulties of that kind. Two or three years ago, by a special piece of legislation which had never been introduced before, these people were exempted. The Chancellor could have arranged for wages earners similarly to be exempt so that until they went beyond a particular limit they would get an annual allowance of £100.
Taxation is a knotty question but our minds should be more concentrated on the social necessities of the people. We should be thinking about what has to be paid in National Assistance and such matters. Is it a system we should uphold that when such allowances are given in 483 National Insurance more than I million people who have paid into insurance have to go to National Assistance to enable them to live?
So far as I can judge the psychology of the Conservative Party and of the Government, they seem to delight in the principles they are now adopting, or applying. They stand hard and fast on the question of pensions. They say that we can get over the difficulty of poor unfortunate men and women who cannot live on their pensions alone by making them go to National Assistance in order to get something worthwhile. When we are discussing these things, I do not think it right to concentrate on the question of pensioners. Many men are worn down in health and are off work for six or twelve months. Surely they need as much help as pensioners.
There is a lot said nowadays about savings. Savings are a great instrument to help the Government to get money in order to meet the needs of the country, but the more we examine savings the more intricate the matter becomes. The financial system of the country has so worked in past generations that all sorts of recompenses are given to various individuals for the amount of saving they can make. The Government ask for loans and give 4 per cent. or 5 per cent. tax-free to encourage saving. If a poor man goes to a bank he gets as much interest for his money as does a rich man in the same department. He will not pay so much in, but on whatever he pays in in the same department he gets the same interest as the rich man.
There are other ways of saving. There is the life endowment system, which generally pays 3s. 6d. in the £, 17 per cent. A tremendous amount of money goes into life endowment. Then there is the great national social machine—not a life endowment or an individual transaction with a company —which we have set up since 1946. No doubt that is a great saving instrument. It is acknowledged as such. Do we find that the poor man, the low wage-earner, when he puts his money into National Insurance gets the same tax relief on his payments towards pension as better-paid people? Not at all. We have a most peculiar system which has worked 484 itself into the economy of the country. It has been carried for generations. Since 1946 it has still carried on, and most people think it is justified within the National Insurance system.
What will happen under the new graded pensions scheme which is to be introduced in 1961–62 under the National Insurance Act, 1958? I am not sure about the figures, but I think that about 8 million people will be affected. All those earning from £16 a week upwards will be receiving a tax relief, every week, in respect of their contributions. These 8 million people within the National Insurance Scheme will be receiving tax relief at the rate of 2s. 6d. a week. Under the ordinary scheme we are paying about 5s. a week towards retirement pension, but when the new Act comes into force, these men will have to pay more. They will be paying perhaps 8s. a week as a contribution to pensions. Thus, instead of Income Tax relief on 5s., they will get relief on about 8s. a week; they will get 2s. 6d, a week in tax relief on their pensions contributions.
If the hon. Member is referring to the comment I made yesterday on the proposed method of dealing with tax allowances, I do not think he has fully understood this proposed method.
§ Mr. McKay
I am referring to the graded pensions scheme and its effect on savings. It will mean that the Chancellor will get more savings. But he will also have to pay more in tax reliefs. I was given a Parliamentary Answer on this point a week ago showing that employers receive in tax relief 51 per cent. of the amount of the contributions which they pay into the National Insurance Scheme. This gives them a return of £143 million in tax relief on their contributions. There is also tax relief on the amounts paid by the ordinary contributors. Some get nothing, but collectively they receive £40 million in tax relief in respect of their contributions.
485 I have put a lot of study into this question and I know what I am talking about. It is an intricate matter. An hon. Member cannot look at a subject like this for just an hour and then think that he knows all about it. It takes weeks of study to understand the problem and to see how the situation could be revised by various methods which would involve only a little extra money from the Exchequer. These taxation reliefs could be reduced.
When employers are compelled to enter the new graduated pensions scheme—the new social scheme—they will say that the scheme is costing them the amount of money which they are paying into it. In fact, as the Economic Secretary to the Treasury said a week ago, they are getting a return of 51 per cent. of their contributions in tax relief. Yet under this system millions of people in the poorer sections of the community, who are paying no Income Tax, will get no relief in respect of their contributions. That is not moral at all. The Chancellor may claim that contributors are saving this money, that they are getting no benefit from it until they are 65 and that, on that ground, we provide for tax relief, but this question needs careful examination. I am not speaking from a party point of view. I am thinking of the retired, the sick, the unemployed and others who are handicapped by illness.
It is one of the country's greatest problems that more than a million of our people, who for years have paid into the National Insurance Scheme, now have to go for National Assistance. Many of them do not like that. It is a problem which needs serious attention by both parties.
Let us break away from the traditional methods of saving. At present we have the many occupational pensioners who are receiving a big taxation return. The big executives in industry are getting a return which is bigger still. In other words, they are getting their pensions on the cheap—and they are big pensions, ten times as big as those which the ordinary workers get. As a country we must give our people some security. In any case let us make provision for every man and woman who is insured under future schemes. Let us so revise those schemes that there is at least a basic provision, far more than National Assistance level, 486 for even the lowest paid of our people. Let us take all these people off National Assistance. At present it costs us £47.5 million to pay National Assistance to all these people who are sick, unemployed or otherwise in need. By revising the scheme, bringing it up to date and into line with the social desires of the people, we could straightaway make a saving of about £47 million on National Assistance.
I have been working on this subject for months and in many ways. The traditions of the trade union movement are a brake upon any attempts to make changes in this respect. Both parties must examine this matter afresh. Let us take up all new ideas which may lead to advance. It is a great national necessity to bring into operation a scheme such as I have outlined. All the talk there has been about pensions would make a long story, but something could be done soon, in a year or two, when the new Act is implemented. Let us make the system rest on a great scheme which would cost the State scarcely any more than what has hitherto been proposed, in the new Act, and, within it, provide for a graded pension scheme in the same way for those earning above £10 a week.
I do not wish to discuss the new Act now, but I must say that it is a useless instrument for introducing the ideal social security scheme which would free all people from the need to ask for National Assistance because the basic level would be high enough. A graded scheme operated more or less on the lines of the new Act could be introduced with much greater benefits. I am quite satisfied about ways and means of doing it. I have put months of study into the matter, and I have determined to make it my personal endeavour to persuade our own people to agree, if they possibly can, to move in this direction. There are obstacles in the trade union movement. There are old traditions, but they must be broken through.
There is £1,500 million credited to the nation's insurance system. How many more thousands of pounds of capital do we want to lie there, helping the Government, no doubt, but not being properly used in a good national scheme? How much more capital do we want to accumulate for the purpose— £50,000 million? That is the direction in which we are going.
487 The Labour Party scheme was not a good scheme, in my view, in the sense of encouraging people to take part. There were many things in it which people did not understand. We must examine the whole thing again. All I have attempted to do is to encourage a little thought. I have tried to show how a reasonable scheme could operate successfully. I shall have to put it to my own people, and I know that I shall have as much difficulty with them as I have with anybody else. But I hope for the best, and I conclude with the hope that what I have said will lead to further interest in the subject and encourage a move towards the betterment of our social security system as a whole.
§ 8.25 p.m.
§ Mr. Leonard Cleaver (Birmingham, Yardley)
I hope that the hon. Member for Wallsend (Mr. McKay) will not consider me, a very young Member of the House, impertinent if I say that we always very much appreciate listening to him and appreciate the sincerity with which he presents his case, but I shall not follow him in the whole of his argument. There are, however, three points I wish to take up.
The hon. Gentleman said that he felt it right that people in industry should do something for the good of their country. Industry consists of shareholders, management and workpeople, and out of every £ of profit earned by work people and management, over 10s. goes into the National Exchequer. It would be a very sorry day for this country if industry were bankrupt and the Exchequer received no revenue.
§ Mr. Cleaver
I was pointing out that the Chancellor takes a very good rake-off out of all profits earned by industry and that, without it, we should be in great difficulty.
The hon. Gentleman referred also to the Profits Tax. Industry at the moment is booming, thank goodness. There is nothing to be ashamed of in that. By his proposals, my right hon. Friend intends to tax industry because it is 488 doing so well. That is another contribution which industry makes even though—if I may use the expression— it may "bellyache" a bit about it. Of course, no manufacturer likes paying taxes any more than I do, but it is a contribution made for the good of the country.
The hon. Gentleman may know more than I do about those who earn over £20,000 a year. I am quite certain that there are none in my constituency and one could count the Surtax payers there on the fingers of one hand. The hon. Gentleman should not overstress the position of those who earn such incomes as that because they are not the most important people. Those who interest me most are the middle-class and working people who keep our country going.
§ Mr. Cleaver
The hon. Gentleman should remember the allowances which the Chancellor gave in his last Budget to the old and to those with moderate incomes who had just retired. Let us also not forget that there are allowances which apply to everyone, and particularly to the poorer members of the community, with extremely good effect.
I shall not follow the hon. Gentleman in his long discussion on pensions, but I must ask him to remember that the House of Commons has agreed that National Assistance should be paid. "National Assistance" has become a dirty term, but it is part of our social services and it is up to everyone on both sides of this Committee to see that every old-age pensioner who needs it applies for and receives it because he is entitled to it.
I welcome the Budget because, in my view, it will help the industrial community of Britain. Before I develop this argument, I wish to emphasise something which may be known to the Committee, namely, that Kidderminster is not the capital of the Midlands. My constituency is in the City of Birmingham. I am very proud of that fact. 489 In Birmingham there are 1,500 trades. There Is immense knowledge of commercial and industrial undertakings and, except in very minor instances, there are good relations between workpeople and management. Although I agree that Government expenditure should be curtailed on every possible occasion, the recommendations of my hon. Friend the Member for Kidderminster (Mr. Nabarro) have been put forward at the wrong time. I support a number of them, but if they were all applied to this Budget we should once again have rip-roaring inflation.
The Committee knows that there is only 1 per cent. unemployment in my district. We are proud of that and we hope that that situation will continue. We do not object in the slightest if industries, such as the motor industry, are transferred to the constituency of the right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn) and to Scotland. We are only too pleased that that should happen. That is part of Government policy. I hope that it will be borne in mind that when large industries, like the motor industry, or portions of them, are transferred to other areas, great benefits reflect in the subsidiary industries. That has happened in Birmingham and it is largely due to that that we have the present employment situation. I hope that that will come about in other parts of the country.
I am pleased that my hon. Friend the Economic Secretary chose as the subject for his speech the vital point in the Budget concerning the damping down of inflation. We in Birmingham know that we shall not continue as we are unless the £ is stable and unless there is no more inflation. That is absolutely vital, and it should not be forgotten by any Chancellor. We realise that our local trade is very dependent on stability. If our home trade gets out of gear, it will be difficult for our exporters and, in due course, for our manufacturers to maintain the present standard of living and full employment.
The history of the reasons for the Budget is well known to the Committee. We all know that the returns from shipping adversely affected our balance of payments. We know that revenues from oil were disappointing. It is a rather 490 Gilbertian situation that the heavy demand for increased stocks which is being brought about by the Government's sensible industrial policy has affected adversely our balance of payments position, owing to its timing. In addition, consumer demand has been growing too rapidly.
There has been a great deal of talk during this debate about election promises. I will not go into the election promises which were made about pensions and which are well known to both sides of the Committee, but no one has mentioned the promise which my party made and which is the reason why the Chancellor is now sitting on the Front Bench. He said that he would try to damp down inflation, whatever happened. That is the situation in which, unfortunately, he finds himself today. My right hon. Friend has had to act, but, fortunately for all of us, he has acted soon enough. He has not let the matter drag on. He has not considered the newspaper headlines. He has done the right thing by the country.
§ Mr. Richard Marsh (Greenwich)
Our objection was not concerned with the election. Our objection to the conduct of hon. Members opposite during the election was that they based their entire campaign on the cry that this country was very prosperous and that everything in the economic garden was lovely. It is now quite clear that, even at the time of the General Election, this country was already beginning to find itself in difficulties.
§ Mr. Cleaver
I can only say what I campaigned for myself. The point I made was that we would maintain stability because every housewife and workman in my constituency wanted it maintained. We did not want rip-roaring inflation. That is the point that I made.
I quite agree that it might be that in Birmingham there will be more cheers when Aston Villa gets into the First Division than if my right hon. Friend adds £50 million to the balance of payments. I agree that if Birmingham City is relegated, it may be thatAll the birds of the airwill falla-sighing and a-sobbingin my district. However, I hope that my right hon. Friend will not allow that 491 to deter him in any way from the sensible measures which he has brought forward. We are here talking about people's bread and butter, and if my right hon. Friend had not stopped the tendency towards inflation we should have unemployment in Birmingham. Industrialists and exporters would find it more difficult to sell their goods abroad.
The one thing that we do not want in any section of the community is a devaluation of the £. If we were to have another devaluation the people who would be hardest hit are those on fixed incomes and pensions. We have heard so many times of the old problem of too much money chasing too few goods. We have heard of the spiral of wages and prices. In my city we now have the problem of jobs chasing too few men. There are simply not enough men.
A married man with two children who earns £1,000 a year draws about £939 net. If my right hon. Friend the Chancellor of the Exchequer allows the cost of living to rise by one point, the increased cost to that man would be about £9 a year. If my right hon. Friend wanted to adjust this, he would have to grant some kind of Income Tax allowance of, probably, over £25. That is the measure of it.
If the 80s. a week old-age pensioner were to face a 1 per cent. increase in the cost of living, he would suffer to the tune of 8d. per week. If the cost of living started to go up and increased by as much as 5 per cent., that same pensioner would be 3s. 4d. a week worse off. In view of these figures and of the fear of people on modest incomes and pensions, it is absolutely right for my right hon. Friend to give first priority in his Budget to dealing with inflation.
We Conservative back benchers from the City of Birmingham have been careful to check the opinion of local industrialists. Let us be frank about it. One never finds an industrialist who likes to pay out his "brass". If he were to be taxed more, he would grouse. Industrialists, however, have much more common sense than they are sometimes given credit for, and the observations which I have had from them are to the effect that the Budget is not too disappointing, although they are not too pleased.
492 One industrialist, in referring to Purchase Tax, says that "a touch of the brake "is" putting it mildly". Another says that on the whole it is a very fair Budget. It is, in fact, a fair Budget. The wealthy companies are doing well— thank heaven they are—and they are being taxed; but the public, faced with an increase in the tax on tobacco, can avoid it if they wish. Another industrialist says that the Budget is an extremely fair one. That is the attitude we should adopt towards it. I have been in touch with the members of the chamber of commerce and with the National Union of Manufacturers to ensure that I do not mislead the Committee.
I should like to make a few references to my right hon. Friend's proposals to raise revenue. Undoubtedly, the removal of the tax on cinemas is welcomed, certainly by us in the city and also, I think, by back benchers on all sides. There is a welcome also for my right hon. Friend's easement concerning post-war credits and his encouragement to savings.
I have to disclose my interest as an accountant and I should like to refer to my right hon. Friend's revenue proposals. Those relating to housekeepers and widowers are welcomed by all of us, but it has always struck me as being most peculiar that when any tax allowance is introduced, whoever recommends these things to the Chancellor always thinks in terms of such small amounts and never makes them into multiples of £52.
I have had experience of looking after a large wages office and I know how much the people depend on their weekly pay packets. If the allowances could be given in weekly terms not only would this help the workman himself but it would be of great help to those who run automatic machines and the like. There is no objection, as far as I have heard, to the Chancellor's proposals to stop any form of tax evasion. I think that, by and large, British industry is, so to speak, clean, but let us see that we eradicate any tendency that we find in the direction of tax evasion.
With regard to the proposals about losses in one trade being set off against profits in another, particularly in the case of farming, I would remind the Committee that that is not the only case in which that provision might apply. There 493 are others which I have known in my own experience where other activities are carried on and where there is not the slightest chance of making a profit, and which, in equity, should be stopped. Some people run theatres in that way, some people run railways, and while I have no objection to both, I do not think that the public should be invited indirectly to subsidise them.
Another thing to which I hope the Chancellor will refer is the repeal of Section 142 of the Finance Act, 1952. I think this is the old Section 34, and during my examination in order to become a chartered accountant, I had a question on the operation of Section 34, and I have forgotten what answer I gave. I presume that the Chancellor is aiming at the case in which a rump company can be bought up, or the registration of a company with a large loss can be bought, and when the wealthy company has purchased it, it can start setting off the losses against the profits. At the same time, if I may utter a word of caution, there are some quite genuine cases in which I cannot see why such a set-off should not be allowed.
Taking an exceptional case, or, possibly, an ordinary case in my city, we might have a man, for example, who has a grocery business and who is also running a fish and chips shop, one making a loss and the other making a profit. From his point of view, I cannot see why he should not be able to set off the one against the other.
In reply to my hon. Friend, I think he will find that I am not intending to stop a set-off of that sort. It is limited by Section 142, but that Section, I think, is no longer required in order to provide for a reasonable set-off. I think he will find that the situation is quite satisfactory.
§ Mr. Cleaver
I am very grateful for my right hon. Friend's statement, which will very much help many manufacturers concerned on that point.
I should like to say that, of course, there are objections to the increased Profits Tax, but we have to remember that the balance of the Budget must be maintained, and all parties on this occasion must make a contribution to the difficulties which we are in or the difficulties which we may be in. There- 494 fore, although there may be objections from the manufacturers, I do not think that the increase is unreasonable. On Estate Duty, we are very grateful to the Chancellor for the easements he has made, though I have always regarded Estate Duty as an unsatisfactory tax. It is like dealing in death, as far as I am concerned, and I would only express the wish that the Chancellor had been able to graduate the inter vivos scale by steps of 20 per cent., because in that way the people who have to pay out would feel that they were getting a fair deal.
May I say, on the question of taxation, which I think is the most important part of the Budget, that I have in my position met a great many people in all walks of life who have asked me to help them with regard to tax matters. Unlike what has been suggested from so many benches tonight, nearly every time I find that they say, "I do not want to pay any more than I have got to pay, but I do not want to pay any less." That is the basis on which the operation of taxation rests, and I hope that my right hon. Friend will bear that in mind when the Finance Bill comes along.
Finally, we welcome the Budget. We hope that it will do what it is intended to do and will prevent an inflationary situation arising, and I therefore support it.
§ 8.45 p.m.
§ Mr. R. E. Prentice (East Ham, North)
The hon. Member for Birmingham, Yardley (Mr. Cleaver) said he was supporting the Budget. Although he got one or two cheers towards the end of his speech from what, I gather, are rebellious quarters on the other side of the Committee, I think one can count him on balance as being one of the hon. Members opposite who support the Chancellor. I have sat here throughout the debate totting up the score, and the hon. Member seemed to redress the balance which, up to the time of his speech, had been rather heavily against the Chancellor. On this side of the Committee we cannot help taking a certain malicious delight in splits on these matters among hon. Members opposite.
Without wishing to stoke up the fires too much, I must say that I was very intrigued when I listened to the speech earlier today by the right hon. Member 495 for Monmouth (Mr. Thorneycroft). It was one of the rare occasions on which he addresses us, and he spoke with eloquence, solemnity and dignity, but it seemed to me that he did not really say anything at all.
§ Mr. Prentice
I would suggest to the right hon. Member, and to the hon. Member for Harwich (Mr. Ridsdale), who made a similar speech though in a minor key, and to other hon. Gentlemen opposite, that if they are to make these attacks on the level of Government expenditure they have a duty to this Committee and the country to say what they want to cut down. The right hon. Gentleman gave a list of Departments which are spending more. So did the hon. Member for Harwich, but neither of them gave any specific proposal to this Committee as to what items ought to be cut, although that is a duty which rests upon those who make these criticisms.
The trouble on the benches opposite seems to be that this is a Budget which suffers from lack of design. It is not a Conservative Budget in the orthodox sense. It is certainly not a Socialist Budget, although it has been called that by some hon. rebels on the other side. It is a Budget which, from whatever point of view we look at it, is one which does a bit of good here and little bit of good there but which does not inspire anyone. I agree with the hon. Member for Louth (Mr. C. Osborne), who called it dull, dismal and uninspiring.
While listening to the Chancellor's speech on Monday, I was reminded of the Gracious Speech last November, because there again the Government's policy had no design and contained no major legislative proposals of any kind. It seems to me that both in their approach to legislation and in their approach to the economy the Government are suffering from the same dilemma. They have won power by securing a signal election victory but they have not yet decided what to do with it. They dare not be orthodox Conservatives, because to be that would be to invite defeat at the next election. On the other hand, they are afraid not to use their power in a Conservative 496 direction because if they do not do that they will incur the anger of some rebels on the other side of the Committee and up and down the country in Conservative organisations. That is the dilemma they face.
One thing which is healthy about what is happening in this Budget debate and which, presumably, will go on happening in debates on the Finance Bill is that this dilemma in the Conservative ranks is coming more into the open. I hope that it will destroy the image of the Conservative Party as a united party and of the Labour Party as a party of splits. [Interruption.] Well, yes, because the disagreements in the Conservative Party are just as fundamental, and probably at this moment more fundamental, than any disagreements in the Labour Party.
§ Mr. Prentice
In both parties there are differences of opinion. It is much healthier if those differences of opinion, which are public differences, are argued in public. In so far as this debate has shown that happening on the other side of the Committee, that is a healthy development, something which we on our side welcome for party reasons, but something which we welcome also as good democrats. There is no reason why any large party representative of the public should not have differences of opinion. Members of Parliament are not and should not be a flock of sheep. Let us see these differences come into the open. We can afford this warfare on the other side.
I should like to refer to two items in the Chancellor's speech which I do not think have been mentioned so far. The right hon. Gentleman referred to the state of the economy last year and spoke of the decrease in unemployment. He referred to the existing figure of 413,000 unemployed and used what to me was an extraordinary phrase when he said:These are good figures." — [OFFICIAL REPORT, 4th April, 1960; Vol. 621, c. 36.]I want to remind him and the Committee that, until it started growing in 1958, only in two years since the end of the war has the figure of unemployment stood at a higher rate than it stands today.
Those two years were 1947, when there was an exceptional fuel crisis, and 1952 497 which was the first year of a Conservative Government. The general unemployment figure has been below 400,000 and in many years under both Governments it has been below 300,000. I suggest to hon. Members opposite that it is no good going on being smug about an unemployment figure of 413,000.
Hon. Members opposite always speak as though all that remained of unemployment were one or two localities in which there was a special local problem. Adding these localities together, they cover a considerable area of the United Kingdom and represent a national problem. I speak as the representative of a constituency which has full employment, but, looking at it nationally, 100,000 unnecessarily unemployed people are 100,000 cases of hardship and frustration. This is a tremendous waste of the country's economy which needs tackling with far greater urgency than has been displayed so far.
The other matter which has not been mentioned so far in the debate is what was said by the Chancellor when he was discussing the prospects of expenditure and income below-the-line for the coming year and referred to the sale of publicly-owned steel assets. He said that it was expected that in the coming year this would be accelerated and that there would be an income as a result. This is something which we ought to debate this week. It would not be a Finance Bill point but it is a point concerned with the economy and with the general structure of the Budget.
On this side of the Committee we are entitled to challenge the Government by asking what possible justification there is in the public interest for the selling off of these public assets. We realise that this is part of the Conservative myth and that there are doctrinaire reasons in the party opposite for doing this, but can hon. and right hon. Gentlemen opposite give us one reason for it in the public interest? What good will it do the steel industry and the nation if Richard Thomas and Baldwins has a number of shareholders imposed on top of it?
In the two years or so leading up to the General Election we saw a great deal of expensive publicity from the steel industry, paid for, of course, by the customers, telling us how well the industry 498 was doing. These were achievements which we were glad to read about, but they were the achievements of the workers at all levels, including the management. They were achievements to which the shareholders contributed nothing. The present shareholders do not control the steel industry. They run none of the risks with their capital.
There are none of the classical excuses for shareholders in the steel industry today. Shareholders are redundant, but they continue to make profits from other people's work and capital gains, helped along by subventions from the Treasury. I hope that some spokesman for the Government will tell the Committee and the country, leaving aside the doctrinaire views of the Conservative Party, what there is which in the public interest justifies this move in the steel industry.
There are other matters on which I should have liked to say something but in the time left to me I will refer to pensions and the omission from the Chancellor's statement of any proposals in that direction. When the Economic Secretary opened the debate, he said that the Budget speech was not necessarily the occasion for making proposals about pensions, but we are entitled to ask the Government, when is the right occasion? When will there be some statement about pensions?
I do not want to repeat all the arguments, which are well-known, for improving the lot of pensioners—the retired, the chronic sick, the unemployed, the widows and all the other groups. But I appeal to the other side of the Committee for some sense of honour in this matter, because what was said in the Conservative election manifesto and by Conservative candidates gave the impression that something would be done to help the pensioners early in the new Parliament if a Conservative majority was elected.
Those who phrased the manifesto were careful to avoid a specific pledge, but nevertheless the implication was there. The differences which exist between the two parties on the question of pensions were blurred in the public mind by the phrase in the manifesto which said:We pledge ourselves to ensure that pensioners continue to share in the good things which a steadily expanding economy will bring.499 It is now more than two years since pension rates were adjusted. In those two years the national income has risen. What is to be done, and when, about this problem? I have come to the depressing conclusion—and I hope I am wrong—that the clue to the Government's intentions on pensions is to be found in the National Insurance Act passed in the last Session of the last Parliament.
That Act lays down a new system of financing pensions and a new system of grading them. It contains complicated figures and calculations, all based on the 50s. pension. It is to come into force in April, 1961, and my inference from that is that the Government have no intention of improving pensions before April, 1961, or for some considerable time after that.
That should be either confirmed or rejected by the Government. They should be fair with the nation and state what they intend. If they intend not to do anything for the pensioners then there really ought to be a revolt on the benches behind them. Many of the hon. Members opposite who won marginal seats did so because the impression was given that something would be done to honour the pledge in the manifesto. Many Members owe their election to that fact, and they know that people of all classes want the Government to do something about this.
On Monday evening B.B.C. television interviewed people outside Victoria Station and asked them their reaction to the Budget. All but one of those who appeared in the programme said that the one thing they regretted was that it contained no proposals to improve pensions. This is something on which there really ought to be a revolt of conscience among the people who support the Government.
I was very glad to listen to the speech of my hon. Friend the Member for Grimsby (Mr. Crosland), and he made many of the points I wanted to make about the comparison between the economic performance of this country in the last few years and that of other countries. What amazes me is the complacency of the Government about this matter, and the fact that they convinced the majority of the British people, as evidenced at the election, that we need 500 not be ambitious in this matter and that we could set our sights low.
What is meant by the slogan, "Life is better under the Conservatives"? Better than when? It is eight and a half years since they came into power, and any industrial country in that time makes progress, but why has British progress been so poor compared with the progress of other industrial nations? A question I want to emphasise is why is the progress of the Western world generally so poor compared with that of the Soviet Union?
What we ought to be getting from the Government at this moment is a recognition of this problem and a clarion call to action, asking the nation to do better, making plans and giving a lead towards improving our production so that we can really compare with what other countries are managing to do. In Soviet Russia the national income is now rising by about 10 per cent. per year. It is based on a massive degree of investment in capital goods and a massive investment in education, and that is based in turn on austerity in the consumption of consumer goods which in turn is based upon a political dictatorship which people in Western countries would never accept.
It is just not good enough for us to sit back and say that our people will not accept these things and that, therefore, we shall be by-passed by the Soviet Union. It has become almost a cliche to say that in the years ahead the cold war will be fought more in terms of economic rivalry and political propaganda than in military terms. Is the Western world to allow the Soviet bloc to by-pass it, to invest more and more of its money in under-developed countries without our being able to afford to match that investment? If that is so, the democratic ideals in which we believe will perish in time, because people who are hungry will not worry about the niceties of political freedom, and Soviet influence is bound to follow from that process.
Therefore, the most important charge of all against the Chancellor and the Government this week is that they are complacent about these matters, that they give no lead to the country and that they are not taking charge of our economy and controlling its assets so that 501 we may make the best use of our assets for the good of our country by providing fair shares for our people and so that we may play our part in the world.
§ 9.2 p.m.
§ Mr. George Darling (Sheffield, Hillsborough)
I notice that the hon. Member for Manchester, Moss Side (Mr. Watts) rose to speak when I did. I would begin by apologising to him for cutting him out in this way. I would merely say that it has happened to me on two occasions as a back bencher and that I know precisely what he is thinking and thoroughly agree with him.
Earlier today I had a great deal of sympathy with the hon. Member for Belfast, North (Mr. Stratton Mills) and the hon. Member for Pudsey (Mr. Hiley). but now that they have made their maiden speeches—excellent 'speeches they were, too—I can only envy them.
I have had to examine the Budget on this occasion in greater detail than has been previously my custom. As a back bencher, like most back benchers who take part in our debates, I used to try to take part, not always very successfully, just to make one or two small points. However, the more I have examined this Budget the more interesting it has become to me. As my hon. Friend the Member for East Ham, North (Mr. Prentice) has just said, it has revealed the deep differences which exist in the Conservative Party on many of these fiscal and financial issues.
It will also, I think, be an historic Budget, because the historian will mark it as the first more or less public demonstration by the Conservative Party of its acceptance of the fact that to maintain full employment and the Welfare State in an expanding economy without inflation one has to inject doses of Socialism into the economy. The Conservatives have been doing this, of course, in a half-hearted way for some time; they have not been able to escape doing it. But their views on the matter never have been revealed so clearly as in the Budget and in the debate on the Budget.
As my hon. Friend has just more or less said, the Budget is like the curate's egg—good in parts. The good parts from our point of view are those which are the result of proposals made from 502 this side of the House of Commons from time to time. However, hon. Members opposite who support the Government in these matters and the Government themselves have, with obvious reluctance, come to the conclusion that they must have some Socialism in the Budget. The Government's Socialist injections are rather weak. They are fumbling about and they are making some awful mistakes, with some of which I shall try to deal shortly.
There is a feeling among hon. Members opposite—and it has already been expressed—that if we must have Socialism, even weak doses of it, in this way, it is much better to leave the introduction of Socialist measures to the Socialists, which is something we would very much like to undertake. The astonished looks which came over hon. Members opposite when the Chancellor went on to reveal what to them were his somewhat strange proposals made me think that he had missed an opportunity of adding to the Revenue. I felt that a tax on tranquillisers would bring him in a substantial revenue.
I was very interested in the opening remarks of the President of the Board of Trade yesterday when he said that hon. Members on this side of the Committee were rather naive not to go into a full scale attack on the Budget. He did not explain what he meant by that, which was rather curious, as it was the first time that I have heard the right hon. Gentleman make a statement which he did not proceed thereupon to explain.
If he meant that our approach to the Budget and our acceptance of so much of it would fail to allow us to make any political capital out of it, he was greatly mistaken. We have been already presented with all the political gifts we need in the reports of meetings of hon. Members opposite upstairs immediately after the Budget. Incidentally, it is pleasant to us to see that the bloodhounds of the Press, having smelled the gore that was being spilled, are now turning their attentions to the private meetings of the party opposite.
We have had some political capital also from the speeches of the right hon. Member for Monmouth (Mr. Thorney-croft) and the hon. Member for Kidderminster (Mr. Nabarro). I am sure that we all enjoyed the speech of the right hon. Gentleman. Under my breath I was 503 cheering him at many points, especially when he referred to defence expenditure. It has always seemed peculiar to me that many items in a Budget are cut down almost to pounds, shillings and pence, but that when we are dealing with defence expenditure £1 million here or £1 million there seems to make no difference to the big totals with which we have to deal. I agree with the right hon. Gentleman that there are economies to be made in defence expenditure which would not weaken our position. We are all agreed about the need for expenditure on defence, but I am sure that these large figures should be studied with far more care than they have been getting up to now.
I also agree with the right hon. Gentleman that any Government must view the economy as a whole instead of just adding together the claims of each individual spending Department. I profoundly agree with him that the Prime Minister, the Chancellor of the Exchequer and other Ministers ought to get down to the job of planning the country's spending. That is the kind of planning which we have been advocating from this side of the Committee for a long time while hon. Members opposite have been saying that they do not want that sort of planned economy.
Like my hon. Friend the Member for Grimsby (Mr. Crosland), I parted company with the right hon. Gentleman when, as my hon. Friend put it, he produced his emotional objections to public expenditure. My hon. Friend explained our views far more clearly and eloquently than I could. His was an excellent speech, and there is no need therefore for me again to cover the ground.
The right hon. Gentleman is now in a rather difficult and false position when he justifies, as he must on occasions like this, the restrictive measures which he introduced to check inflation when he was Chancellor. Some of those measures, at least in our view, were anti-social, that is, when dealing with what he said was the need to restrain wages, the right hon. Gentleman had to pick out an industry which was under his influence to use it as an example for wage restraint. Unfortunately, that was an industry in which the men had low wages.
I am sure that it was never the right hon. Gentleman's intention, either then 504 or now, to say that the railways of this country should be run on cheap labour. But he was in a difficult position. This is again a point where we part company because we hold strongly to the view that we cannot put this country straight and we certainly cannot maintain its greatness by promoting that kind of social injustice. It was social injustice, in our view, to keep a low-wage industry stuck to that low-wage level.
I agree, although the hon. Member is not present, with some of the less declamatory observations of the hon. Member for Kidderminster. I agree with him, as I am sure every hon. Member of the Committee will, that we are an overtaxed nation. There is no question about that. He implied in his criticism of the Government that they had so misjudged our affairs, not just this year but over a succession of years, as to make it impossible for substantial tax reductions to be made. The hon. Member asked for tax reductions, but that was part of the propaganda operation. I would prefer to agree with the right hon. Gentleman that, in the circumstances of today, the tax reductions for which the hon. Member asked are impossible. When the hon. Member for Kidderminster went on to criticise the nationalised industries and to say that the Government's troubles were largely the result of over-investment in public enterprises, I felt that he did not expect us to take him seriously. That was just propaganda.
I remember when I first got up as a back bencher some eight years ago and said that the only way to avoid a coal and fuel crisis, which I felt would come from a too great dependence on imported oil, was to make full use of our indigenous fuel resources and to put a great deal of money quickly into the building of carbonisation plants so that we could get full value from the coal and a great increase in gas production. I suggested then that we should put the country on a gas grid so that as many industries as possible could take gas for their power fuel, which is a possible technical development.
I was going to ask the hon. Member for Kidderminster Whether I was correct in my recollection that when I was putting forward those views he supported me with his usual vociferous "Hear, hears". 505 I was pleading then for an expansion in public expenditure for what I thought was a perfectly good technical purpose which, if carried out then, would have stood us in good stead now that we are faced with a fuel crisis.
We have had debates over the last few years on electricity supply and on gas supply, and in all those debates the hon. Member for Kidderminster has taken part. But never once have I heard him suggest that we should hold up the development of our electricity supply service. What we have to understand in these discussions on public expenditure for these public services is that our great industrial expansion has been made possible by the supply of cheap electric power on an expanding scale. We must continue that expansion of cheap electric power for the development of our industries. If we are to get rid of this tight situation in which we have no slack in the economy and no free or unused industrial capacity we must have far more cheap electric power than we have today. We can get it only by building more power stations; it does not come out of the air.
Therefore, to suggest that we should cut down expenditure on the nationalised industries is completely out of accord with the picture with which we are presented today—the picture of a country whose industrial resources are stretched to the limit. We must have far more investment in these industries in order that our industrial expansion can continue.
The same argument is true of transport and the railways. We must have a modern railway system in order that it can sustain our expanding economy. We can get it only by expenditure, and that expenditure is very heavy. Those hon. Members who travel to Manchester on the line from Euston day by day see the job of electrification that is being done there. This will eventually mean raising every bridge from Manchester to Euston, with new girders and all the expenditure involved in putting in the overhead cables. We cannot put all that stuff in at a cost of 1d. a foot. It is enormously expensive, but if the country wants a modern transport system it must pay for it. We need it, and the sooner we get it the better.
506 The hon. Member for Kidderminster has threatened us with an attack on the nationalised industries in the debates on the Finance Bill. Hon. Members on this side of the Committee are not altogether happy about the present methods of financing our public service industries; we have raised these matters before, but I will tell the hon. Member for Kidderminster and his friends—the "unofficial Opposition," as he describes it—that before we consider any of his proposals we want an honest disclosure of the motives behind these attacks on the nationalised industries. The hon. Member is not present, but if any of his hon. Friends who support him in this matter are present I must tell them that this constant sniping at our public industries has now gone so far as to become almost a succession of charges of negligence, incapacity and inefficiency directed against the public servants that we have put in charge of those industries. These baseless criticisms of public servants who are not in a position personally to reply reflect no credit upon the hon. Member and his friends.
However, I look forward to the debates which he has promised to initiate, because I am convinced—and I say this with all the emphasis that I can—that we shall have no difficulty in showing that our public service industries are well managed, efficient and, in the circumstances in which they have to operate, highly successful.
In his Budget speech the Chancellor referred to the financing of our railway system during the modernisation period. There is nothing new, revolutionary or reprehensible in the idea of cancelling a trading deficit of a public service rather than put a load of accumulated debts upon the enterprise. It has been done before. It is done by the German Federal Government for the German State Railways, which are very efficient and progressive, and give an excellent service. It is done by State railways in other countries. These deficits on railway operations seem to be endemic. After a Parliamentary debate and a thorough examination of the railway accounts the German Government take over the annual deficit and pay it off out of State revenues. It is not carried forward as a debt burden on the railways.
507 There is nothing new about that. It has been clear to everyone who has carefully examined our own railway operations, and the prospects for our railways over the last few years, that the method adopted by the Government for financing this vast essential reorganisation was completely unworkable. We said so in 1957 when the Transport Act was before us. We could see then that the Government were crippling the railways with an immense load of debts, and we felt that these debts would prevent the railways from ever being able to offer the public a competitive transport system.
If the annual deficits as a result of the reorganisation scheme had been allowed to go on piling up, the advantages of reorganisation would not accrue to the public in cheaper and better services, because they would be taken to pay off the debt charges for many long years to come.
The Chancellor is at last proposing to pay the railways a subsidy. As far as this Budget goes, it is a temporary subsidy. We shall have to decide future financial arrangements when we see the Government's proposals, but if those proposals are tied up with the commission of inquiry which we heard about today we shall get into a not very happy situation.
We think that the Minister of Transport is setting about this business in not quite the right way, but even the temporary subsidy is to us an important innovation. It has caused some alarm among the Chancellor's hon. Friends who paraded themselves as the last supporters of laissez-faire liberalism.
I cannot understand why this has not been done before. This is a step in the right direction. The Chancellor never has been opposed in principle to giving Government aid to industries in temporary or permanent difficulties. He has been responsible for paying enormous sums out of public funds to agriculture. He is to pay quite a lot of money to agriculture this year. We support these farming subsidies for a very good reason. We do not want prosperous urban communities to be surrounded by a derelict and poverty-stricken countryside.
That is why subsidies are paid. We thoroughly agree, but when the Chan- 508 cellor goes on to express the view, as he did in his Budget speech, that our industrial prosperity must be fairly shared, he cannot give us a general expression of opinion of that kind and stop at the agricultural community. Just as we cannot have a poverty-stricken agricultural community in a land of prosperity, so we cannot have a poverty-stricken community of railwaymen and a debt-ridden railway system. We therefore welcome the Chancellor's step and also the Government's belated rejection of the idea that we ought to check inflation by trying to run the railway system on the cheap. If prosperity is to be fairly shared, then railwaymen and other people in difficulties must get their fair share.
There is the final aspect of nationalisation mentioned in the Budget, the sellout of Richard Thomas and Baldwins. We take the view that if we are to maintain full employment and the Welfare State—and the party opposite is pledged, as the hon. Member for Louth (Mr. C. Osborne) made clear, to maintain full employment and the Welfare State— there must be greater public control over the economy. We cannot do it without public control and a measure of public ownership. We are agreed about that because these public services about which we have been talking have not been sold out. It is only the steel industry which has been largely sold. For that reason we think that the Government are making a great mistake in surrendering their last holdings in the iron and steel industry. I think that the hon. Member for Shipley (Mr. Hirst) will agree that when debating questions of this kind it is very difficult to put political prejudices on one side, but there is a good unprejudiced case for the Government having at least one big steel plant in their possession. We on this side of the Committee would go further, of course, in our claims for public ownership. That, perhaps, is where the political prejudice comes in. My hon. Friend the Member for East Ham, North expressed it eloquently a few minutes ago, but let us put that aside and look at this problem.
Richard Thomas and Baldwins is efficient, well managed and prosperous under public ownership. There is no question about that. We have only to read the annual reports of the chairman 509 of the concern and the references to his annual speech which have appeared in all the papers, including the Conservative financial papers. To sell out its equity holdings to private shareholders would not improve its efficiency, its opportunities for development, or its worker-management relations. As my hon. Friend said, the management of the steel industry is now in such a position that management has ceased to be responsive to shareholders. The shareholding is too diffuse. If we look at the shareholdings of United Steel companies we find that it would be quite impossible to get them all into one hall in the country. They have more shareholders than workers. Shareholders are scattered, individual holdings on the average are too small, and in practice the shareholders cannot exercise any control over the management.
§ Mr. Darling
I have never examined the location of the shareholders. Frankly, I do not know whether there is any American investment in the concern or not. There is considerable institutional investment, which rather strengthens my argument. Whether they come into that I do not know. With the scattering of the shareholding and the fact that management cannot be responsive, but for the somewhat negative control exercised by the Iron and Steel Board as regards policy the management would be responsible only to itself. That would be true if the shareholding of Richard Thomas and Baldwins were arranged in the same way at the time of the sell-out.
This, we think, is a very serious situation. It is true that the steel companies which have been sold out have not abused their freedom. With some rather worrying exceptions, they have worked with the Iron and Steel Board and have leaned over backwards to show that they are public spirited, but I hope hon. Members opposite will not mistake or underrate the influence on the steel companies of the prospect of nationalisation. I speak as a representative of a steel city. I should say that they have done what they have done to try to prove that public ownership would not improve the industry, but they have not done enough. They are still somewhat afraid to risk having too much productive activity.
510 I have not time to go into the whole story of holding up of expansion schemes, but hon. Members can read the reports of the Iron and Steel Board. They can find further evidence in the trade returns, which show a great increase in steel import, particularly of sheet steel last year. Until the new sheet mills— which we are paying for—come into operation, the expansion of the motor car industry, which the Chancellor desperately wants for his export trade, will to a large extent have to rely on imported steel. This is not a happy situation. The truth is that the steel companies are doing very well, and if our general industrial expansion, which depends on steel, is to continue, some companies will have to be pushed into taking risks in building new plants and expanding plants to meet potential future demands for steel. If they hesitate we may find the general expansion we want will be handicapped through a shortage of steel. We may have to depend increasingly on imports, which will not do our balance of payments any good.
For these reasons, and without any political prejudice in the story at all, I think that the Government are making a profound mistake in having no stake at all in this industry, and in giving up the means of making good in the expansion of their own plant the deficiencies of the private companies. We object in the strongest possible terms to the cynical disregard of the public interest which the Chancellor and his friends display when they invite the City's operators to dip their fingers into the coffers of this highly profitable public enterprise.
The right hon. Gentleman said that the sale of Richard Thomas and Baldwins will help him below the line. I hope that he—or the Economic Secretary when he concludes the debate tomorrow—will tell us what he intends to do with the money. We should very much like to know.
In the few minutes which I have left I should like to turn briefly to another industrial aspect of the Budget. I do not think that it is unfair to say that the Chancellor was unable to produce a popular Budget, with substantial tax reliefs, because he dare not take any risks with the trading position. Our economy is too delicately balanced. Our 511 financial reserves are not strong enough to allow him to take risks, and our productive capacity, as has repeatedly been said in the debate, is stretched almost to the limit. As he himself said, we no longer have the reserves of labour and capacity on which we could count a year ago.
Yet, even in these very tight circumstances, we must get a bigger output of goods, particularly for export. We can do this only by getting more production out of our existing factories, out of the additional factories which ought to be built quickly in areas of unemployment and out of our present labour force.
In these circumstances, we cannot afford any industrial unrest. We cannot afford any check to production, any failure to make full use of our limited resources. But we are not making full use of our resources. There is far too much easy-going, inefficient management in many sections of our industries. I am sure that the hon. Member for Louth (Mr. C. Osborne) will agree with me, because I put this question to him in a previous debate and he nodded his head vigorously in my favour when I said that if the managements of all concerns were as good as that of the best concerns, we should be a lot better off than we are now.
§ Mr. Darling
The hon. Member anticipates me. What I mean by inefficient management is that there is not quick enough scrapping of out-of-date machines and not rapid enough introduction of modern machines and modern methods. I am sure that the hon. Member agrees with that. But probably the greatest weakness of our industrial set-up is bad industrial relations. I could say a great deal about this, but I want to finish in a couple of minutes.
§ Mr. Lawson
Does not my hon. Friend agree that management gets the industrial relations it deserves?
§ Mr. Darling
I have only two minutes left and I want to put this in my own way.
512 The view which I want to express is that in our present economic circumstances, when every little bit of production is needed, particularly for export— even little bits of production are needed —and is vital to our well-being, we must look at labour relations. We cannot accept the view that labour-management relations are the private concern of individual firms and that the Government have no right to interfere. If relations are good—and thank heavens they are good in most industries in this country—there is no need to interfere. But where relations are bad, where there are constant strikes and stoppages, the Minister of Labour has a duty in the national interest to step in, to get his officials to go in to examine relations, to find out what is wrong and to offer new and better means of attaining a healthy working partnership.
Finally, may I very quickly point out that there are far too many workers today receiving low wages, particularly in certain of the public services such as hospitals and local government. Indeed, we are presented with a somewhat misleading figure of average earnings by the Ministry of Labour. There is far too much relative poverty in this country among pensioners and the lower-paid workers. If we are to have a Budget fair for everyone, the Chancellor must stop imposing extra burdens upon the poorer sections of the community. He must do much more to help. In this Budget he has failed to help them in any way, and on that count alone we must judge his financial manipulations to be wholly inadequate.
§ 9.36 p.m.
§ Mr. Geoffrey Stevens (Portsmouth, Langstone)
I add my congratulations to those of the hon. Member for Sheffield, Hillsborough (Mr. Darling), and of the two hon. Members who immediately followed them, to my hon. Friends the Members for Belfast, North (Mr. Stratton Mills) and Pudsey (Mr. Hiley) on their maiden speeches. Most of us find this to be not an easy place in which to speak, not least because of the sympathetic atmosphere which is particularly noticeable on the occasion of maiden speeches. Most of us probably find it a little easier to speak if there is the odd spot of heckling around us. Today, my two hon. Friends were free from that inspiration. This is the first and 513 last occasion on which that will be so. I am sure that they will hereafter receive all the inspiration they need.
The hon. Member for Hillsborough started by saying, "Alas, how are the mighty fallen". The great Tory Party, he said, has in its 1960 Budget to introduce injections of Socialism. He complained that the injections were too weak, but they were injections of Socialism none the less. To which of my right hon. Friend's suggestions was he referring? Was he referring to the added incentives to small savers? Was he referring to the reductions in Estate Duty by the sliding scale? Was he referring to the increases in personal allowances in respect of Income Tax? Was he referring to the increases in Profits Tax? To which of my right hon. Friend's proposals did he refer when he spoke about injections of Socialism? The hon. Gentleman must have been trying to take some lessons in propaganda from my hon. Friend the Member for Kidderminster (Mr. Nabarro) who, I am bound to say, does it a lot better.
We had today a very important contribution to our whole way of thinking on Government expenditure from my right hon. Friend the Member for Monmouth (Mr. Thorneycroft). I took his speech as one directed not at my right hon. Friend the Chancellor of the Exchequer but at all of us Members of the Committee of Ways and Means of the House of Commons. How many of us can put our hands on hearts and say that never at any time in our political career, even as recently as last October, have we said to any person or group of persons, "I am the chap who will get you more roads, more schools, more hospitals", without going on to say, "Of course, you are the chap who will pay"? How many of us can stand in a white sheet and say that?
My right hon. Friend's speech drove home to us the dereliction of duty of which this Committee of Ways and Means has been guilty for many years. What he said ties in very closely with the actions of my noble Friend and Member for Dorset, South (Viscount Hinchingbrooke), my hon. Friend the Member for Yeovil (Mr. Peyton) and others of my hon. Friends who, a week or two ago, drew attention to this very matter. Time after time on Supply 514 Days—the choice of subject on Supply Days is a matter for the Opposition— we let votes of fantastic sums of Government expenditure go through on the nod and make no effort to search our minds and consciences about what the economic consequences of voting these astronomical sums are likely to be.
I welcomed the statement of my right hon. Friend the Leader of the House, who appeared to be fully seized of this difficult and, I think, highly dangerous situation, when he said that he would consult with everyone concerned, including the Opposition, to see whether, before the Estimates are in final form— in other words, in the autumn—this Committee of Ways and Means could not get back to what used to be its primary duty and act as guardian of the public purse. The speech of my right hon. Friend has emphasised that very much.
I support this Budget for three reasons and with a number of reservations. The three reasons which lead me to support the Budget are these. First, the keynote of it is stability. Secondly, it gives added encouragement to small savers. Thirdly, it does not provide for the introduction of a capital gains tax.
On the first point, that of stability, although there may be discussion about the reasons, there is no argument about the facts. Whatever the critics may say, my right hon. Friend's term of office as Chancellor of the Exchequer has throughout been accompanied by a remarkably steady retail price index and a remarkably steady £. That is a fact which no one can gainsay. Equally, there cannot be the slightest doubt that that is of the utmost benefit to industry and is of the greatest possible benefit to all those who work in industry and to old-age pensioners, for whom right hon. and hon. Members opposite say the Conservative Party has done so little.
I should have thought that one of the greatest boons to old-age pensioners in the last eight and a half years has been that they have not seen the purchasing power of their pension being eaten away, not year by year, but, as happened at one time, month by month. That is not the case today. It has not been the case for two years, and I am sure that that is what not only the old-age pensioners but all those who live on fixed incomes, particularly those on small fixed incomes, appreciate more than anything else. I 515 shall say a little more about savings in another context later.
I now want to say a word or two on the possibility of a capital gains tax about which my hon. Friend the Member for Torquay (Mr. F. M. Bennett) said something yesterday. I am glad that my right hon. Friend did not fall for the wheedlings and blandishments of the right hon. Member for Huyton (Mr. H. Wilson) and Mr. Nicholas Kaldor, for two reasons. First, it seems to me that a capital gains tax would run completely counter to Conservative political philosophy. Secondly, on a purely practical note—[Interruption.] The hon. Member may not be able to understand political philosophy. He may understand practical points. Save in the case of inflationary periods, a capital gains tax would yield relatively little. We are not likely to have an inflationary situation again, save in the unfortunate event of the return of a Socialist Government.
The Chancellor considers that the rate of expansion of production during the last six months is dangerously fast. It is certainly true that in the last six months it has been increasing at a rate exceeding even the immediate post-war period when, in certain respects, it was very much easier, during the change-over from war-time to peace-time production, to achieve these remarkable figures. In the last six months, however, the rate of expansion has been even faster. My right hon. Friend feels—I am entirely in agreement with him—that the pace has accelerated too much. As he said, there must be a slowing down of the rate of expansion, but it must not be brought to a full stop.
It is a matter for argument that some of the more pessimistic pundits are right and that the evaluation of the brake to be applied can be measured in terms of £200 million to £300 million of additional taxation a year. I have a shrewd suspicion that had my right hon. Friend applied the brake to that extent, he would have had a man-sized revolt upon his hands.
I am very glad that my right hon. Friend has felt it wise to retain the investment allowances. There is not the slightest doubt, as hon. Members opposite have said, echoing what has been said previously from these benches, that out hope for the future depends upon 516 increased productivity. It does not seem to me that there will be any real difference of opinion that there are four reasons, and four only, for wanting increased productivity.
The first of the four reasons is to keep down our costs. I have in mind not only the home trade but the export trade, too. By so doing—this is the second reason —we can improve our own standard of living and double it in twenty-five years. By increasing our productivity we can get more leisure. The fourth reason is that by increasing our productivity, we can bring more help to the underdeveloped countries. I would not have thought that there was any difference of opinion that those were the four reasons. As there has been no interjection from the benches opposite, it would appear that those reasons are generally accepted.
§ Mr. William Baxter (West Stirlingshire)
Does the hon. Member accept that productivity should increase in agriculture as well as in industry? Why is it the Government's policy to try to stultify agriculture?
§ Mr. Stevens
I do not regard that as germane to the point I was making that there are only four reasons for wanting increased productivity. The hon. Member's interjection was not entirely relevant.
That being so, I cannot help wondering from time to time, as trade unions ask for reduced hours of work, whether they are in tune with the policy of the Labour Party of wanting more help for under-developed countries. If we reduce the effective hours of work proportionately with, or more than proportionately with, the increase in productivity, less goods and services will be available for the under-developed territories.
§ Mr. Walter Monslow (Barrow-in-Furness)
The hon. Member always refers to trade unions and what they might do, the reason being that they should apply wage restraint and that there should be no reduction in hours, so that more can be done for the underdeveloped countries. I should have thought that this could be done by spending less on non-productive and destructive services and by spending more on productive and social services.
§ Mr. Stevens
I entirely agree. I thought that the hon. Member would 517 answer the point I had just made. The fact that he did not indicates that there is substance, as obviously there is, in what I have said.
If by giving ourselves more leisure we reduce the amount of goods and services available for export, how can we in the same breath call for more assistance for the under-developed countries? I am not making any party political point out of this. [HON. MEMBERS: "Oh."] I merely ask Members of the Committee, on both sides, whether the two things should not be considered together, that is, the natural desire to have more leisure and the natural desire to bring more assistance to under-developed countries, but to find a happy balance between the two.
In that connection, in view of the various increases in the national wealth which have taken place in the last year, I felt that my right hon. Friend the Chancellor was less than fair—and in this he was followed by many other Members of the Committee—when he dealt with only one year, the rise from 1958 to 1959.
My hon. Friend the Economic Secretary this afternoon went back further—to 1948. I think it is fair to go to the Economic Survey and take a reasonable period of time. I have taken five years, which I think is fair enough. We find that between 1958 and 1959—and I give these figures very briefly for the sake of clarity—the income from employment rose by £474 million, which is 35 per cent., and gross trading profits of companies rose proportionately much more, by £308 million, which is 10 per cent. If we go back a little further and take a longer period, that from 1955 to 1959, which I would have -thought was a reasonable period, we find that income from employment, that is to say, salaries and wages, rose by £2,659 million, which is 23½8 per cent., while gross trading profits during exactly the same period rose by £463 million, which is only 159 per cent., or about 7½ per cent. less. I think it is quite unrealistic to suggest that in a fairly reasonable period, company profits have risen so much and income from wages and salaries so little.
§ Mr. Mitchison
Is not the relevant table the one at the bottom of page 30, which shows that from 1958 to 1959 the 518 percentage of the national income represented by wages and salaries fell by I, while gross trading profits and the income from self-employment went up?
§ Mr. Stevens
No, the relevant table is not that one. The hon. and learned Gentleman is on the wrong page. The relevant table is on page 40 of the Economic Survey, and is Table I of the Statistical Appendix, which deals under different headings with the income from employment and gross trading profits of companies respectively. Perhaps the hon. and learned Gentleman, at the conclusion of our deliberations, will look at the right figures, instead of the wrong ones.
Now I come to my reservations. Three months ago, I thought it was possible that my right hon. Friend would have sufficient confidence in the future to be able to make another considerable reduction in the standard rate of Income Tax. I appreciate that, in present circumstances, that is not possible, but I am not sure that he could not have taken 3d. off. I do not think that Chancellors of the Exchequer are fair to the British people. They always seem to think that if a reduction is made in the standard rate of Income Tax, and ordinary men and women have left in their pockets each week or month a little more of what they have earned, they immediately dash out on a spending spree. That is not true. The tendency is all the time to save.
In 1952, the then Chancellor, the present Home Secretary, took 1s. off and estimated the cost at £229 million. In the following year, National Savings increased by £434 million, and it is the case that if the National Savings increase by more than the cost of the reduction in the standard rate of Income Tax, there is no real inflationary effect. That is the point. In 1953, the Chancellor of the Exchequer took 6d. off, at an estimated cost of £141 million, and National Savings increased in the following year by not quite so much. In 1955, the Chancellor took 6d. off, at a cost of £155 million, and National Savings increased by £266 million.
§ Mr. Stevens
No, these are the right figures. The party opposite can get by with its propaganda only by quoting the wrong figures, as we learned last October.
519 In 1959, the Chancellor took 9d. off, at an estimated cost of £229 million, and National Savings increased, as was announced this week, by £219 million. Therefore, it is not true, and although I have that one reservation, I am sorry he could not do that. I am also sorry that he could not do anything with regard to Schedule A. Although I am not one of those who think that Schedule A Income Tax, even for the owner-occupier, should be abolished, I think there should be some increase in the statutory repairs allowance, particularly in respect of smaller properties. I also think that some attempt might have been made to move the £2,000 limit, not necessarily to £3,000, but to £2,250, as the starting point of Surtax.
I think it is regrettable that my right hon. Friend has not been able to do what the hon. Member for Sowerby (Mr. Houghton) had a good deal to say about yesterday—I entirely agree with him— reduce the difference between expenses chargeable for Schedule E purposes and Schedule D purposes. I am sorry that my right hon. Friend has not been able to extend the provision originally brought in by my right hon. Friend the Member for Monmouth, the O.T.C. status for companies registered in this country but having overseas branches. I am sorry that he has not been able to extend that to overseas subsidiaries as well. I am sorry that, though I welcome the gifts inter vivos provisions, my right hon. Friend has not been able to reduce the actual rates of Estate Duty themselves. I do not think that that would have had an inflationary effect.
Again, I do not think that if a man or woman inherits a little more money than he or she otherwise would have had he or she dashes round the corner on a mad spending spree. They do not spend it; they save it. However, I do not look the gifts inter vivos provisions horse in the mouth and I welcome it.
520 Now for a very odd thing indeed. It seems that right hon. and hon. Members opposite like this Budget That, of course, at once makes me feel that there must be something wrong with it. [HON. MEMBERS: "Cheer up."] To my hon. Friends on this side of the Committee who do not like this or that specific proposal in the Budget I have two things to say. First of all, is it conceivable that my hon. Friends, this little group, could possibly have liked a Budget introduced by the party opposite? I do not think that is possible. Is it not possibly true in this case as in others that the red devil from Tiverton we know is better than the arch-fiend from Huyton whose Budget, thank goodness, we do not know?
The other and by far and away the most important thing I have to say, which is the thing which has weighed with me above all things in considering what view I should take of this Budget, is this. It is the fact that my right hon. Friend the Chancellor throughout his tenure of office has put the stability of the £ as the first priority. He has had two years of success. It certainly cannot be said of this Budget that it has serious inflationary potentialities. It may well have deflationary tendencies. It may have, I think, steadying tendencies. In other words, I think that this Budget will tend to prolong that quite remarkable run of success of my right hon. Friend in that very important context, and for that reason I will support it, and I commend it to my hon. Friends.
§ Whereupon Motion made, and Question, That the Chairman do report Progress and ask leave to sit again.— [Mr. Brooman-White]—put and agreed to.
§ Committee report Progress: to sit again Tomorrow.