BUDGET RESOLUTIONS AND ECONOMIC SITUATION

HC Deb 20 April 1961 vol 638 cc1395-523

3.49 p.m.

Mr. Douglas Houghton (Sowerby)

We now come to the fourth and last day of the debate on the Budget Resolutions. The Budget is now looking somewhat battered and the Government Front Bench a little bewildered about the unfavourable reception which the Chancellor's proposals have had. They should not be surprised, because more taxes were put on than were taken off, and those that were taken off benefited only 300,000 people—and for them the delights of tax relief are deferred.

The clarity of the Chancellor's Budget statement, the attractiveness of its delivery and the sincerity and seriousness of his purpose were vitiated by the proposal that he made, last of all, to give enormous cuts in Surtax, ranging up to £34 a week. Up to that point his Budget proposals sounded plausible, if not convincing. But few people believe that this latest example of how much the Conservatives care has anything to do with exports and few believe that it has anything to do with incentives, either, although one of my right hon. Friends said, yesterday, that he wondered whether the poor speech delivered by the Economic Secretary was due to the high level of taxation, and what a pity it was that we should have to wait until 1963 for a better one.

One of the poorer parts of the Economic Secretary's speech was that which related to Income Tax reductions during the last ten years, when he was comparing money with money instead of making allowance for the change in the value of money over the last decade. A truer comparison is to be found in the Written Answer given to my right hon. Friend the Member for Huyton (Mr. H. Wilson) on 20th March, 1951. I will not dwell on that, but any hon. Members who may have heard the Economic Secretary, or read what he said, should not take his comparisons as valid ones without looking at the table in that Written Answer.

There are also serious misgivings on both sides of industry about the two economic regulators proposed by the Chancellor, and especially the payroll tax, Which many workers rightly regard as having sinister possibilities. There is one interesting possibility about the payroll tax. I understand that, if the time comes, the Government will tax themselves as employers. Presumably they will then introduce a Supplementary Estimate to find the money. Could there be anything more cynical than that?

Furthermore, if the Government had introduced one Budget—as they should have done—instead of two, at what point in the Chancellor's statement, and with what a guilty look, would he have introduced the prescription charges and the National Health Service contributions? Would it have been before or after his Surtax proposals? Would it have been as a boost for exports, or as an incentive to higher production? In February, we said that the increased welfare charges, amounting to as much as £40 million or £50 million, should have been included in the Budget. We were right.

In November, we sounded a warning that after the taxes on the sick, the aged, and the infirm would come a top hat Budget. We were right. This has happened before. In 1957, when the Government introduced the first separate National Health Service contribution, £40 million in tax reliefs were given to those solely within the Surtax range, and for precisely the same reasons that the Chancellor gave on Monday.

But there is something else. In 1959, the National Insurance Act, with its graduated contribution, handed the Chancellor a promissory note for £100 million in extra revenue this year. This is now being honoured, and the money is flowing in. The right hon. and learned Gentleman is the only Chancellor who has had such a large slice of additional revenue handed to him on a plate before he opened his Budget. These preliminary revenue-raisers are bringing him no less than £300 million extra this year, and this large sum consists of Health Service contributions, prescription charges and National Insurance graduated contributions, out of which no graduated benefits will be paid.

I see that the right hon. and learned Gentleman the Chancellor is wondering about this figure. I took it from a speech of the Financial Secretary to the Treasury on 16th March this year. These extra taxes had been slapped on the mass of the people before the Chancellor rose on Monday and announced an £83 million tax relief for 300,000 Surtax payers, which is an average of £276 in tax relief a year for 300,000 people. That is £56s. a week, which is 14s. 6d. a week more than we pay 5½ million old people to live on.

I have nothing against Surtax payers. Many of them are merely working men who are earning more than most working men. It is perhaps not a good thing that Surtax payers are in a class apart. It would be better if there were a single progressive tax instead of two taxes, and I hope that the Chancellor will apply his mind to that solution. But the Committee must admit that for the purposes of this debate we are bound to refer to Surtax payers because they are in a class apart, and they are the ones who are getting the tax reliefs.

They are the better-off people; there is no doubt about that. They are the economic and social "top brass" of Britain. Hon. Members on this side of the Committee would agree that those who are working at anything worth while deserve to be encouraged, but what does it profit industry if skilled workers, technicians, foremen and supervisors lose that incentive which management is supposed to gain from the Budget? Why are they left out? There are many heavy tax burdens on those below the Surtax level, despite the reliefs which have been given in the last ten years. There has been no change in the main personal allowances since 1955.

In 1959, the then Chancellor said that it was the turn of the standard rate, and last year, when we were pressing upon him improvements in personal reliefs, he said that nothing substantial was possible in the circumstances of last year, and that the most he could do was to improve the housekeeper allowance and introduce a small new relief for widows the widowers, with children, who did not employ resident housekeepers. This year, when, in normal conditions, we might have expected that it would be the turn of personal allowances, we find that it is the turn of the Surtax payers. I wish that I was as happy about the spirit and morale of the workers under this Government as I am about that of management. That point is worth study in connection with Britain's performance in the export trade, and in the rather sluggish growth in our economy.

I would favour some relief in Surtax—though not on the present extravagant scale—at the same time as reliefs further down the scale. But when Surtax relief is chosen as the principal and, indeed, almost the sole tax reduction in a counter-inflationary Budget, it has to be justified on economic grounds, for it has no budgetary purpose whatsoever. On the contrary, this tax reduction subtracts from the surplus which the Chancellor wants, and to make room for it he has had to introduce compensating additions to taxation.

In more favourable economic circumstances, when relaxation rather than stringency was the keynote of the Chancellor of the Exchequer's review, some Surtax relief could be justified as an act of fiscal, if not of social, justice; but not now. We cannot, in these debates, be concerned, in the context of this Budget, with what Surtax payers would like, or with what their spokesmen and propagandists say they ought to have. Other people would like something too, but they are just not getting it. They have to pay more for their insurance stamps, and now they must nay more for their motor cycles and small cars.

We are concerned, in this Budget, with what should be done for the benefit of the nation's prosperity, with especial emphasis on exports, and every concession on the grand scale must pass the test of economic necessity, not of equity. Equity in this Budget is not enough. It is no excuse to say that industry will pay for it. That is not true. We shall all pay for it. In any case, why should industry pay for substantial salary increases, because that is what these Surtax rates are, in effect, to people not even in their employ?

It would be interesting for the Committee to see an occupational classification of the Surtax payers who will benefit. How many doctors, lawyers, civil servants, bank and insurance officials, local government officers, stockbrokers, publicans, shopkeepers and ice-cream vendors are there in this? How many exporters, importers, property sharks and parasites will get relief in this Budget?

What is all this about the disincentives of high personal taxation? This matter has been referred to in many speeches in the course of this week's debates. My hon. and learned friend the Member for Kettering (Mr. Mitchison) yesterday quoted the report of the Royal Commission on the Taxation of Profits and Income. The Royal Commission reached its conclusions before the last reduction of 9d. in the standard rate was made in 1959 and before the substantial extension of earned income relief into the Surtax range in 1957.

I shall bring additional evidence to bear on this question, because it is important that we get this clear. The Tory philosophy rests upon the doubtful and insulting assumption that the acquisition of more and more wealth and material things is the mainspring of human endeavour. It is not, and there is abundant evidence throughout our society that it is not. To the evidence adduced by my hon. and learned Friend and by my hon. Friend the Member for Gloucester (Mr. Diamond) I will add one piece more. I refer to a paper published in the British Tax Review of June, 1957, by Professor George Break, a Canadian, who undertook a survey of the effects of taxation on incentives in the latter part of 1955 and the first six months of 1956. That is almost the same period which the Royal Commission covered.

Hon. Gentlemen opposite who are certain that the disincentive effects of taxation do not apply to them might like to read Professor Break's conclusions on what effect it has on the other fellow. This study deals with those getting above £1,500 a year, two-thirds of them within the Surtax range. I will not trouble the Committee with any long extracts from Professor Break's paper. I will merely read the final sentence: Whatever may be the important causes behind Britain's post-war economic difficulties, a lack of incentives to work because of high income taxation does not appear to one of them". For almost every person he found who was discouraged by the high level of taxation he found another who was stimulated by the desire for a bigger income owing to the erosion of taxation on the income he had. Some were striving for more because they wanted more. Others were discouraged by high taxation. He found that the striving group was somewhat bigger than the dismal group. Anyhow, the paper, with its detailed analysis of the survey, is worth reading.

Before leaving the subject of Surtax I want to make two more comments. Forty-eight thousand Surtax payers, or 15 per cent. of the whole, pay less than £20 a year in Surtax. One-third, or 120,000, pay less than £50 in Surtax. One half, or 185,000, pay less than £100. Does any hon. Member opposite care to make an estimate of the economic value of incentives of less than £20, £50, or even £100 a year in this salary range? The truth is that the really heavy burden of Surtax on earned incomes is concentrated upon about 17,000 people earning over £6,000 a year. It is on them that the Chancellor builds such high hopes of greater endeavour, greater efficiency and the boost to our export trade.

With so much confusion in the newspapers about the real effect of these proposals it is worth while pointing out, as the Chancellor of the Exchequer did, that the effect of the reduction of total income by the allowances set off against earned income will bring benefits to unearned income. Since the allowances are to be subtracted from total income to produce a net taxable income, unearned income will be pulled from a higher bracket to a lower bracket by that change, and unearned income will benefit in many cases. Therefore, it will not be confined to earned income, as many people have supposed

Mr. A. P. Costain (Folkestone and Hythe)

Does the hon. Gentleman agree that men who have made savings and have their own small income, perhaps not large enough to retire on, will now have an incentive to work? They and their wives also will have a better incentive to earn money.

Mr. Houghton

I have given up wondering about whether anything will make people work more. The combined operation of allowances from earned income and the benefit they will bring on total income will undoubtedly assist many people to escape the higher level of taxation on unearned income.

I turn now to the comment made by the Economic Secretary, and, I believe, by others, in mitigation of the Chancellor of the Exchequer's proposals I suppose, that they will not come into operation until 1963. What difference does that make? We are asked to commit ourselves to these reductions in this year's Finance Bill. Parliament will be committed to these reductions two years ahead, without even knowing the state of the economy when they will come about. That is a forward commitment which has rarely been made in the past to any class of taxpayer. It is a very important commitment.

In the meantime, since the right hon. Member for Woodford (Sir W. Churchill) is here, I will say that never before has so much been expected of so few. The Chancellor of the Exchequer builds extravagant hopes upon the effect of these tax reductions on a very limited number of people. Surtax payers are now on trial. The Government tell us that the top management in Britain is suffering from an industrial disease attributable to high taxation, whereas the medical adviser to the Institute of Directors tell us that it is high blood pressure, that they over-eat, drink too much, and do not get enough sleep in the afternoons. He has given them very sound advice on how to reduce the working day. The 40-hour week asked for by the railwaymen is hard labour compared with the number of hours that the medical adviser to the Institute of Directors suggests it is safe for business tycoons to work.

Anyhow, whether it is high taxation or high blood pressure, the cure apparently lies in these Surtax reliefs. The Chancellor should now let it go forth from him that he expects the 17,000 people who are to get the main part of the Surtax reliefs to pull their socks up, look after their health, get in trim and get cracking, because much is expected of them. At the same time, he should say that if they fail him he will restore the cuts he is making in Surtax.

Mr. Charles Pannell (Leeds, West)

The Chancellor is asleep.

Sir Kenneth Pickthorn (Carlton)

Listening to this, does anyone wonder?

Mr. Houghton

The Chancellor was trying to get rid of distractions in order to concentrate on what I was saying.

The President of the Board of Trade, in his speech the other day, asked plaintively: what else can we do? What more can the Government do to assist? When I listened to that the thought went through my mind, can it be that private enterprise is failing the nation? Is that the painful conclusion to which the Government will shortly have to come? If people can make a good thing out of selling at home, why should they exert themselves to sell abroad? There is not any patriotism—or not much—in business. How do we, in a so-called free society, persuade firms to make a drive for exports if they do not want to do so?

Suppose capitalism in Britain is not sufficiently interested in expansion. Suppose it does not care tuppence about doubling the standard of life in the next twenty-five years. What are we to do then? If the Surtax cuts do not do it, what else? How do we get the results we want if the monetary rewards in an acquisitive society fail in their appeal and we have nothing to put in their place?

I believe that in the present structure of society in Britain, with its class distinctions becoming more marked every year—and this Budget adds to them—there is literally no appeal to devoted and disinterested service to the nation. The whole body politic is infected with the itch for more and still more on the easiest terms possible.

Sir K. Pickthorn

Especially Members of Parliament.

Mr. Houghton

This I feel very strongly, yet sorrowfully, is where the Communist countries will win in the end.

Now I want to consider the Chancellor's timid approach to capital gains and business expenses. The taxing of capital gains has, in principle, ceased, or almost ceased, to be a party matter. There are people in favour of it in both parties. It has become largely a matter of practical administration and yield. I ask the Chancellor not to underestimate the effect of the get-rich-quick stories in the Press on the minds of men and women who work hard, very hard, for a modest living. I wish that the Chancellor—and the hon. Lady the Member for Finchley (Mrs. Thatcher) for that matter—were not so complacent about the powers already possessed by the Inland Revenue to tax profits under Schedule D. They are manifestly inadequate.

The Committee and the country are entitled to know the truth about the taxation or otherwise of those making huge profits out of transactions which, on technical grounds, might fall outside the scope of a tax on income. The Chancellor says, "On which side of the line particular cases fall is a matter not for me or the Board of Inland Revenue, but a matter to be decided by the independent commissioners of taxes and the courts." That is a regrettable thing to say. He cannot shrug it off like that. On which side of the line particular cases fall depends on whether they are heavily taxed or not taxed at all. Is he not interested in that?

Capital profits are tax-free, but they increase enormously the taxable capacity of those who enjoy them. Their resources are increased and their spending capacity is increased while their obligation to contribute to national revenue is increased accordingly. Therefore, why do we not see to it that they do so? The Chancellor cannot shuffle this off to the commissioners and the courts. They are concerned with interpreting and applying the existing law. What we need is a change in the law. I hope that the Chancellor will regard this as a very important matter for his consideration.

Will the right hon. and learned Gentleman draw aside the veil of secrecy behind which all the weaknesses of our tax administration are safely concealed and tell the country? Are the Clores, the Cottons, the Samuels and the Maxwell Josephs and hundreds of smaller fry being taxed on the appreciation of their wealth, or only on the income they get from it? Can we have an answer and be told the truth? My belief is that even the powers that the Inland Revenue has are not rigorously enough applied for many reasons, possibly because litigation can be threatened on individual cases; because when it comes to the point of whether a particular sum of money is a capital profit or a trading profit it depends upon the circumstances of each case.

Only if we have a capital profits tax can the line of division between income and capital profits be of less significance to the taxpayer and the country than it is today. We ought to know what capital profits are escaping Income Tax. We are entitled to the full story. The great mass of the workers are entitled to know what untaxed contribution they are paying to those who are "on the make" in a big way. These are very serious questions indeed. They go to the heart of the matter. If hon. Members opposite want to know why there is so much grumbling and discontent among the workers, they should know that it is this sort of thing which disillusions them, annoys them, and which, they feel, is clear proof of the unfairness of the present structure of society.

I pass to another scandal. That is business expenses. If ever a Chancellor raised the hopes of my hon. and right hon. Friends and then dashed them very quickly it was this Chancellor on this question last Monday. He said:

"This is an unhealthy feature both on business and social grounds. I ask those concerned most seriously to consider whether some curtailment in the extent and scale of entertainment can be achieved without affecting business efficiency. It is a matter very difficult to deal with by legislation, but I shall review this matter again next year and I do not reject altogether the possibility of legislative action then."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 815.]

That was not a very stern threat to those who prefer gluttony to initiative. There is nothing there which I think will cause any perturbation in the board rooms of Britain. This may be difficult to deal with by legislation, but very much more difficult things have been dealt with by legislation, and tax legislation at that. When we reach the Committee stage of the Finance Bill, we shall have some suggestions to put forward. We shall be able to discuss the matter thoroughly again and we shall take the opportunity.

One thing which I think this Committee should frown on is the growing practice of employers of paying salaries to cover expenses and then leaving the employee to contest with the tax inspector for the biggest net income he can get. The employer says, "Do not trouble me with your travelling, entertainment and hotel expenses; I do not want to see them. If you have any lies to tell, tell them to the Inland Revenue."

Mr. C. Osborne

No, no; that is not fair.

Mr. Houghton

Of course, it is fair. What is the purpose of this practice if it is not to turn the employee on to the Inland Revenue, instead of the employer dealing with legitimate claims for expenses?

Mr. Osborne

That is not a fair comment.

Mr. F. M. Bennett (Torquay)

Will the hon. Member for Sowerby (Mr. Houghton) say whether that applies to Members of Parliament at present?

Mr. C. Pannell

Who is our employer? We have not got one.

Mr. Houghton

I believe that the practice which I am describing is the cause of many dubious claims. When people are carrying out their employer's business, when they are incurring expenses in doing the job, the employer should make satisfactory arrangements for the reimbursement of expenses and not expect the Inland Revenue to do it for him.

The other big question is commercial entertainment, which has reached a pitch of extravagance which should now be sternly discouraged. If the Chancellor wants to know how we would deal with it, I will tell him. We would disallow all entertainment as a business expense charged against taxable profits. If firms want to entertain, let them do it wholly at the expense of the shareholders, and not half or more than half at the expense of the Inland Revenue. The Chancellor has done something about motor cars—

Mr. John Hall (Wycombe)

Would the hon. Gentleman apply the same principle to the entertainment of people from overseas?

Mr. Houghton

I think that there is a case for differentiation between expenses incurred in connection with exports and entertainment expenses incurred in connection with home sales, but the bulk of this extravagance has nothing to do with overseas. It is on the home front.

Finally, I want to look at the economic regulators in the general picture of the Budget and the satellite Budgets that went before it. I cannot help feeling that in all these things—the triple budgetary transactions we have seen in the last three years—the Government are out to hit the worker and curb the consumer. [HON. MEMBERS: "No."] Oh, yes, they are. They have decided to attack the level of consumption by attacking those who consume. I believe that, the Government having shown their colours clearly, and more particularly in this Budget, we on this side of the Committee must approach these economic regulators in a spirit of distrust. They certainly need much closer scrutiny. We cannot trust the Government to use them fairly. The power to vary the taxes on tobacco and beer and the Purchase Tax by 10 per cent. either way could bring prices down as well as put them up, but I venture the prophecy that if that regulator is ever used it will be used to put them up.

The payroll tax can work in only one way. It can only go on. I remember the time when the Government put on the petrol tax and later took it off, and then claimed that they were the Government who took off the tax on petrol. They may well do so with the payroll tax, and say, "We are the Government who took off the payroll tax", after having put it on. But what I want to know, and what I hope we shall hear in the course of the debates that we shall have, is what the payroll tax will be for? What will a payroll tax of 2 or 3 per cent. do for the mobility and economy of the use of labour that wages increases of from 3 per cent. to 6 per cent. a year have not already done? It seems to me that this device is more likely to be used to discourage employers from granting wage increases. The Chancellor will take the wage increases out of the pay packets along with P.A.Y.E.

No wonder that the T.U.C. is looking forward to some interesting conversations with the right hon. and learned Gentleman on this proposal. I am sorry that I shall not be there, but we on this side of the Committee must take a long-range look at the Government's proposals, as it is becoming plain that, instead of widening the base of direct and progressive taxation, they are widening and stiffening the base of taxation by contributions and more and higher regressive indirect taxes.

We are not on the way to a property-owning democracy. We are on the way back to a property-dominated society, and if the people of Britain cannot see what is happening it is because they are standing the right way up while the Government are doing most things upside down.

4.26 p.m.

The Financial Secretary to the Treasury (Sir Edward Boyle)

The hon. Member for Sowerby (Mr. Houghton), after lecturing us for quite a long time on what was wrong, proceeded in the last few minutes of his speech to make a number of interesting recommendations. The first was that we should disallow the cost of entertainment as an allowable expense. That comes curiously in a debate in which we have been told again and again that we are not making sufficient provisions for helping the export trade, because I think that that measure, of all that might be suggested, is the least helpful to the export trade.

The hon. Member then went on to say that we were attacking consumption by curbing the consumer. How else one could attack consumption he did not explain, but, if he thinks that that is a wrong thing to do, I beg him to read a recent article on economic planning by his right hon. Friend the Member for Huyton (Mr. H. Wilson), in the New Statesman, where he will find far more drastic suggestions for curbing consumption for future years than any made by the Government in this Budget. The final point I would make with regard to the hon. Gentleman's speech is this. It simply is not true, if one looks at the figures, to say that the Government are engaged in a large-scale transference of the burden from the direct to the indirect taxpayer.

On the contrary, one of the most remarkable figures in my right hon. and learned Friend's Budget speech was precisely that direct taxation, on the basis of the existing revenue, will yield £398 million more in the coming financial year than in the past. I do not want to make too much of that, but, simply, the figures show that an appreciably bigger proportion of the total burden of taxation will be borne by the direct taxpayer in the next financial year than in the last.

Mr. G. R. Mitchison (Kettering)

What about the poll tax?

Sir E. Boyle

The hon. and learned Member asks me about what he calls the poll tax. I will tell him. The total sum of the contributions, as the hon. Member for Sowerby rightly said, is going up by £300 million, but that is not all what he calls a regressive poll tax. We are not discussing National Health contributions. We are discussing contributions as a whole, and £200 million out of that £300 million is accounted for by the graduated contributions, and this takes account of differences of income.

I know that a great many hon. Members hope to take part in this debate, and because, to put it mildly, I have more opportunities of speaking in the Committee than most hon. Members, I shall, therefore, confine my own remarks to three subjects only: first, my right hon. and learned Friend's Budget judgment—that is to say, his decision to budget for a revenue surplus, above-the-line, of £506 million; secondly, the new economic regulators; and, thirdly, the Surtax reliefs.

I begin with my right hon. and learned Friend's Budget judgment, and here I think we come across a rather striking feature of this debate. Right hon. and hon. Gentlemen opposite have indicated that, for reasons which we all understand, they propose to divide the Committee this evening. Yet, compared with almost every other Budget debate that I can remember, there has been strikingly little criticism of my right hon. and learned Friend's proposals on what one might term conventional lines. Hardly any right hon. or hon. Gentleman has suggested that my right hon. and learned Friend should have increased taxes by a greater amount, or that he should not have increased them at all. Indeed, the right hon. Member for Huyton, leading off on Tuesday for the Opposition, refused even to consider this question.

We all listened to the more serious portions of the right hon. Gentleman's speech with close attention. I think that everyone in the Committee looks forward to the witticisms of the right hon. Gentleman on these occasions, but there are moments when the right hon. Gentleman seems in danger of becoming the slave of his own talent for epigram. With respect, it is not good enough for the right hon. Gentleman to dismiss the Budget as "irrelevant" to our economic problems, with a convenient reference to the Ottoman Guaranteed Loan of 1855. If the right hon. Gentleman really regards the decision to budget for a revenue surplus of £506 million as irrelevant to our balance of payments prospects, all I can say is that that comes somewhat oddly from so strong a professed admirer of the late Sir Stafford Cripps.

The prospect which faced my right hon. and learned Friend when framing his Budget this year is, I think, well understood by the Committee. It was a prospect, as the Chancellor said in his Budget speech, of strong expansionary forces working on home demand"—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 800.] and there was a serious risk that, unless they were contained, these expansionary forces would put up costs and affect our exports. In these circumstances, I have no doubt at all that my right hon. and learned Friend was entirely right, having achieved a revenue surplus of £147 million in the last financial year, to aim at a surplus of over £500 million—nearly three-and-a-half times as great—for next year, leaving an overall deficit of only £69 million. In effect, my right hon. and learned Friend has decided this year to hold on to a very large increase in revenue from the proceeds of direct taxation at existing rates. He is fortifying the position still further by a number of increases in indirect taxation.

This very large surplus will benefit the economy in three ways. First, it is designed to strengthen our balance of payments. As my right hon. and learned Friend said in his Budget speech, the Budget surplus will be a substantial factor in moderating the growth of home demand to the extent necessary to make room for increased exports."—[OFFICIAL REPORT, 17th April, 1961: Vol. 638, c. 822.] Secondly, a large Budget surplus is of particular value at a time like the present, when, as the Committee is well aware, there is an expanding trend in capital investment. Speaking immediately after the Budget statement on Monday, the Leader of the Opposition suggested that manufacturing investment was now only about at the 1956 level."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 841.] In fairness to the right hon. Gentleman it is true to say that he admitted that he was speaking without checking the figures. But if he, or any other hon. Member, will turn to page 48, Table V, of the Economic Survey, they will find that manufacturing investment in 1960 was running well above its previous peak in 1957; while, according to the figures collected by the Board of Trade, the demand for fixed capital investment in 1961 in the manufacturing sector alone is likely to be about 30 per cent. above what it was in 1960.

All of us in this Committee welcome this increase in investment, and we all recognise its very great importance to the future growth of our economy. But experience also shows us—this is true of Governments of every kind—that firm budgetary measures are essential to make room in our economy for an upsurge of capital spending. In this connection, a large revenue surplus and a very small overall deficit will help in two ways. The large revenue surplus will help to leave room in our economy for the increase in investment by holding down the level of consumption, and the very small overall deficit will mean that practically the whole of private saving will remain available to finance investment in the private sector.

Finally, a very small overall deficit will mean, as my right hon. and learned Friend pointed out, that we shall not, if things go as we expect, be looking for new money from the gilt-edged market in the financial year 1961–62."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 822.] This means, first, that the Government are well in command of the monetary situation and, secondly—this is a point the importance of which none of us should under-rate—that the gilt-edged investor can very well face the months ahead with just a little more confidence.

In short, whether one judges the Budget by its likely effect on our balnace of payments, its effect on our abilities to support a rising level of investment, or its effect on the monetary situation, my right hon. and learned Friend has shown clearly that he intends to use this Budget as the chief instrument of his economic policy at the present time. He demonstrated clearly, not only to this Committee and the country, but to the world outside, that the Government intend to pursue a policy of expansion on a thoroughly sound financial basis.

Mr. Mitchison

What about the Bank Rate?

Sir E. Boyle

I am coming to that.

I am now passing on to the regulators. Here, of course, we are dealing with a problem which affects not only the United Kingdom, but a great many other countries in the Western world as well.

The problem is that an economy which is predominantly a free enterprise economy does not automatically steer itself into equilibrium. There has to be a considerable measure of intervention by the central Government, in conjunction with the financial authorities, if such an economy is to achieve a balance between the total of its productive resources and the monetary claims upon them. I think that it is fairly widely accepted in the Committee that, in the words of the Budget speech, we need further means of stimulating or restricting the economy, by measures which can be brought into operation quickly at any time of the year, and the effect of which will be reasonably rapid and widespread."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 805.] Let me make it clear, especially in view of the intervention by the hon. and learned Member for Kettering (Mr. Mitchison), that the Government certainly do not propose to abandon the monetary methods of regulating the economy which have been a predominant feature of their policy ever since 1951. And, of course, not a feature of the present Government alone. This has been true in many parts of the Western world. There has been considerably more active use of the interest rate policy in the 1950s. I think, for example, that it would be rash to say that we should never make use of hire-purchase control as a means of influencing demand—if only for a rather important economic reason, namely, that the consumer durable industries are large consumers of metals and, therefore, compete for the same resources which are also needed for home investment and exports. I can recall very well the days of 1956, when I was at the Treasury, when we were importing quantities of steel to meet the demand of the metal-using industries and we had no option but to use the hire-purchase control drastically, although I know there were parts of the country which were considerably affected as a result.

Nevertheless, I think that it is clear that there are a number of disadvantages in relying overmuch on monetary measures to regulate the economy. In the first place, they do not operate evenly over the whole field. Hire-purchase controls bear with particular severity on a few industries which complain, with some justice, that they are bearing too much of the brunt of the corrective action which is needed.

In the same way, it would obviously be wrong to put too much of the brunt on our banking system, especially when writers like Professor Sayers point out—though perhaps one cannot go all the way with him—that the banking system is by no means the only source whereby credit can be obtained.

The second objection to overmuch reliance on monetary instruments, which we should by no means underestimate, is that the level of Bank Rate is not just a simple domestic concern. I think that we are all agreed that the free nations of the Western world should aim at greater co-operation in trade and payments policies. They may very well have to learn to co-operate more closely in their interest rate policies as well.

Thirdly, and perhaps most important of all, monetary instruments, with the exception of hire-purchase controls, have the disadvantage that, carried beyond a certain point, they operate more on investment demand than on consumer demand. It is fairly generally accepted nowadays that a rising level of productive investment and a constant exploitation of new techniques are essential if Britain is to earn her living in a highly competitive world and is to enjoy that greater range of freedom of opportunity that comes from higher living standards. This is a very strong argument for attempting to regulate the economy not by monetary means alone, but by a combination of monetary and fiscal measures.

The main fiscal regulator is, of course, the annual Budget, and I was glad to hear my hon. Friend the Member for Eastleigh (Mr. D. Price), in his admirable speech two nights ago, say that in his view the Budget ought to remain the main instrument of economic policy. But it is impossible to forecast, at the time of the April Budget, precisely how the economy will develop during the coming twelve months. I should have thought the experience of all Governments since the war had shown the need for new forms of control which can operate swiftly and directly on the level of consumer demand.

The two new regulators which my right hon. and learned Friend is proposing in this year's Budget, and which we shall have a chance of discussing fully on the Finance Bill during all its stages, are certainly powerful weapons. If both regulators were to be used at the same time, and to their maximum extent, they would constitute an effective means of reducing real purchasing power amounting to 2 per cent. of the gross national product.

If these proposals are approved I believe that my right hon. and learned Friend the Chancellor of the Exchequer will be in a stronger position to regulate the economy, and to promote a steady rate of economic progress, than any other finance Minister in the Western world. Naturally, very similar problems affect finance Ministers in other countries, and I have no doubt that many of them would wish that they had more economic weapons of this type.

I do not propose, this afternoon, to comment in detail on the first of these proposed regulators: the power to impose a surcharge or discount on the current rate of tax payable on all goods subject to indirect taxation. In view of what has been said about the second regulator—the proposed power to levy a surcharge on employers by means of an addition to the cost of the stamp— I ought to say a few words on this regulator.

Mr. Mitchison

Before the hon. Gentleman leaves the question of increases in duties, would he answer the question I put about G.A.T.T.?

Sir E. Boyle

I understand that my right hon. and learned Friend proposes to reply to that point later in the debate, but since the hon. and learned Gentleman raised it I am only too ready to answer him.

The hon. and learned Gentleman asked whether there was any possible connection between duties which are to be within the scope of the regulator and those which are or may be within the scope of the G.A.T.T. negotiations. My right hon. and learned Friend said something about this to the right hon. Gentleman the Leader of the Opposition last Monday. Import duties, which are protective duties charged under the 1958 Act, and, of course, the anti-dumping duties, are outside the scope of the scheme. The margins of Commonwealth Preference and protection in the Revenue duties would be temporarily increased to a very small extent if the regulator were used for a surcharge. Any approach to G.A.T.T. and our partners in E.F.T.A. would have to be made in regard to such increases at the appropriate time. It is of the essence of the regulator that it provides equally for a rebate so that, in the circumstances, any margin of preference would be reduced. Furthermore, the adjustment may be less than the maximum, say, 2½ per cent. or 5 per cent. either way, but even at its maximum, the amount involved would be small. So far as E.F.T.A. is concerned, the margins of protection are temporary since they must be abolished by the end of 1964.

I must make it clear to the Committee that the second regulator is an economic regulator and not a tax on employment. There is nothing altogether new in the idea of this regulator. As far back as 1944 it was envisaged that the rate of National Insurance contribution might be varied for economic purposes and this point has been raised on a number of occasions.

A number of hon. and right hon. Members have objected to this proposed surcharge on the ground that it would be unselective. But I do not believe that any Chancellor, of whatever party, faced with great pressures on our internal resources, could provide corrective action without the use of some form of general control. Any Chancellor must use some kind of general control to provide the corrective action needed. It is simply a matter of which general control to use.

Mr. A. Woodburn (Clackmannan and East Stirlingshire, East)

I agree with what the hon. Gentleman has said about having some controls to provide a form of insurance—and I say that without giving it fancy names. Surely this is a variation of the employers' contribution, as far as National Insurance is concerned, for economic purposes.

Sir E. Boyle

I am not giving the proposal any fancy names, and I say frankly that this is a surcharge on employers' contributions.

Mr. John Hall

The Economic Secretary said that he wished to use this as a check to counter pressure on the nation's economy. Will not this form of check be slow in operation? Is it not possible that it will take between six and twelve months for its effect to be felt? Will it have the result that the Chancellor has in mind?

Sir E. Boyle

I do not believe that the effect need be as slow as my hon. Friend suggests, although I concede that it is of the essence of these regulators that they should be used early by the Government when it seems that the economy is moving into a period of excess pressure on resources. We have to remember that, as far as the National Insurance scheme is concerned, this surcharge will be paid direct to the Exchequer.

Mr. Mitchison

Since both regulators are subject to Parliamentary approval, what will happen if the gentlemen in Zurich bring about an exchange crisis in September?

Sir E. Boyle

I shall be dealing with the Parliamentary aspects of this matter later.

Mrs. Eirene White (Flint, East)

The hon. Gentleman suggested that this regulator was purely fiscal, but surely the Chancellor related to it the employment of labour and economy in the use of labour. It would seem, therefore, that it is not purely fiscal and that it is intended to have some industrial effect as well. Will the Parliamentary Secretary say whether the Government are considering using a part of the funds resulting from this tax for some compensation for industrial redundancy?

Sir E. Boyle

The Government have no such intention. While it is true that my right hon. Friend the President of the Board of Trade said that the regulator would have some effect on the labour-intensive industries, the prime object of the regulator is economic. I can assure the Committee that the regulator's prime object is that it should be an economic measure to prevent excess demand on the economy, and it is not intended as a tax on employment.

Mr. Charles Loughlin (Gloucestershire, West)

Will the hon. Gentleman explain these words used by the President of the Board of Trade: The payroll tax will induce employers to use their labour, skilled and unskilled, more efficiently and give them more horsepower to their elbow".—[OFFICIAL REPORT, 18th April, 1961; Vol. 638, c. 1012.] That is the point about which I and my hon. Friends would like more information. The hon. Gentleman seems to have missed that point.

Sir E. Boyle

I was present in the Committee when my right hon. Friend the President of the Board of Trade made that speech. I have no doubt that it will have some effect in the way my right hon. Friend indicated. The hon. Gentleman the Member for Gloucestershire, West (Mr. Loughlin) will be aware that my right hon. Friend was speaking about the effect that the regulator will have.

I wish to make it plain that the Government intend this proposal as a means of preventing excess demand on the economy, and I have no doubt that my right hon. Friend the Chancellor will make reference to this point again later this afternoon.

Mr. Loughlin rose—

Sir E. Boyle

I do not want to be discourteous. I had hoped to make a relatively short speech, and I think that this is the way, if there are to be these interruptions, that hon. Members are kept out of the debate

Mr. Stanley R. McMaster (Belfast, East)

If the main purpose is an economic regulator—I hope that I am not anticipating my hon. Friend's next remarks—has he considered the position of development areas such as Northern Ireland where, obviously, such a regulator would be inappropriate?

Sir E. Boyle

My hon. Friend has precisely anticipated my very next sentence. I was about to mention Northern Ireland. I know that, because a surcharge of this kind has to apply equally to all areas of Great Britain and Northern Ireland, certain hon. Members, including some of my hon. Friends, have expressed fears that it might have an adverse effect on places with local employment problems. But when one considers that the surcharge at its maximum rate would add to the cost of employing each man only £10 a year, I simply do not believe that a surcharge at that level could materially affect problems of local employment or—and this is the point—nullify the positive measures which the Government are taking to solve local employment problems.

The Government are taking power to vary the levy on employers in respect of different categories of employees—that is to say, the retired, men and women, or boys and girls—who pay separate rates under the National Insurance scheme. I think I ought to make clear that there is no power to exclude specific types of employment, for instance, private or domestic employment. Different categories of employees may be treated differently but not different types of employment.

My last point regarding the regulators concerns the Parliamentary aspect. I quite agree that my right hon. and learned Friend's proposals have very real Parliamentary and, perhaps, even constitutional significance, but I have two points to put to the Committee on this. First, I believe that it is wholly desirable that the Chancellor of the Exchequer, whichever party is in power, should be able to regulate the economy in the short term without his measures evoking the sense of crisis, both political and economic, which has always tended to accompany autumn Budgets in the past. Further—I say this in view of what the right hon. Member for Huyton said on Tuesday—I cannot see why we should invariably have to have all the paraphernalia of a Budget and Finance Bill, with all-night sittings and the rest—brooms and brushes, pots and pans, and so on—merely because pressures on the economy have been building up at a faster rate than the Chancellor could have foreseen some months before. In my view, this does not make sense and, incidentally, it is thoroughly bad for sterling as well.

Secondly, whatever hon. Members may think about the proposals, it is worth remembering that neither of them would of itself affect the distribution of the national income. In my view, it is absolutely right that we should fight our political battles out hard on Budget matters when we consider the highly political issue of how the national income should be distributed. But I do not believe that the use of these non-discriminating regulators would justify either the amount of Parliamentary time or the degree of political excitement traditionally associated with the Budget as one of the major occasions of the Parliamentary year. What is important is that Parliament should have the opportunity each year to decide whether or not to give these powers to the Chancellor of the day for the following year, and this will be fully provided for in this year's Finance Bill.

Mr. Mitchison

The hon. Gentleman has not answered my point about a crisis in September. For some reason, it is a very critical time of the year in Zurich. Also, will he deal with this point: if the Chancellor is to take these powers, why not have them for tax avoidance, as we have so often suggested?

Sir E. Boyle

I will not be diverted to the point about tax avoidance, but I will answer the other question which the hon. and learned Member asked. We all know that in many spheres, both at home and abroad, the early autumn is a rather critical time. I certainly would not rule out the possibility of the Government using one of these regulators and putting it into force at a time when Parliament was not sitting. I think it is of the essence of the regulators that they may on occasions have to be used, if there is a critical time.

Mr. Gordon Walker (Smethwick) rose—

The Temporary Chairman (Sir Harry Legge-Bourke)

Order. I ask hon. and right hon. Members to remember that there is a long list of Members anxious to speak. There have been many interruptions during the Financial Secretary's speech, though I do not suggest that they were in any way unfair. However, in fairness to the general run of hon. Members, I think that it would be appreciated by the Committee if interventions were much reduced.

Mr. George Brown (Belper)

What you have said, Sir Harry, is quite right, if I may say so, and I am sorry to seem in conflict with it by rising to speak, but the hon. Gentleman has just made a somewhat surprising assertion, on the face of it, that this power which, so we are told, is to be exercised by affirmative Resolution is not ruled out for use when Parliament is not sitting to make an affirmative Resolution. Is that not something which should be cleared up?

Sir E. Boyle

I did not say that. It is well known that, where indirect taxation is concerned, Parliament cannot vote to put up indirect taxes before the taxes themselves are raised. I was merely saying that, in the case of a crisis, I could well imagine that a circumstance could arise in which it might be necessary for this regulator to be used at a time when Parliament was not actually sitting. But, of course, Parliament would have to approve the affirmative Resolution. Just exactly what the arrangements would be, whether Parliament would be recalled or not, and so forth, would be a matter for those more senior than myself. As I say, I think it is of the essence of these proposals that the Chancellor should be free to use them if there is excess demand on the economy at the time.

Mr. Gordon Walker

How could the Chancellor use them without an affirmative Resolution?

Sir E. Boyle

Then, of course, Parliament would have to pass an affirmative Resolution. With respect to the right hon. Gentleman, there is no difference here from the case of other indirect taxation because, invariably, steps have to be taken, the taxes have to be imposed and then, of course, we pass the Bill. It is impossible to give notice of an intention to raise indirect taxes. In any case, it is a matter which we can discuss in greater detail on the Finance Bill.

Mr. McMaster rose—

Sir E. Boyle

No. I must not give way again.

I come now to my right hon. and learned Friend's Surtax proposals. I say at once that I do not feel in the least apologetic in defending them. Of course, if one looks at the reliefs by themselves they appear large reliefs, but I maintain that, if one is to view the question at all fairly, one has to consider my right hon. and learned Friend's Surtax reliefs in the context of fiscal and social policy as a whole during the past ten or twenty years.

It is not true to say that the present Government have favoured Surtax payers at the expense of other members of the community. As my right hon. Friend the President of the Board of Trade pointed out on Tuesday, Surtax rates have not changed at all during the past ten years, while real wages have risen by 32 per cent. and social service expenditure has risen by 90 per cent. I think that one needs to look back even further than that. A married man with two small children who earns £3,000 a year today would have earned £1,000 in the last tax year before the war, 1938–39. In that year, he would have paid £111 12s. 6d. in Income Tax. Today, he pays £753 3s. 4d. in Income Tax and Surtax, the Surtax element included within it being £75. I refuse to believe that even a Labour Chancellor, had he been in power in 1938, would have wished to levy Surtax on a man earning £1,000 a year at that time. By the same token, I cannot see the justice in levying Surtax on top of a high standard rate of Income Tax on a man earning £3,000 a year today. The truth is that it is absolutely right for the whole structure of Surtax to be revised as the nation gradually becomes richer, as it has done fairly rapidly during the past ten years.

The same is true of the finances of the social services. My hon. Friend the Member for Halifax (Mr. Maurice Macmillan) in an extremely interesting speech yesterday pointed this out, and of course, he was absolutely right.

Furthermore, we have to consider in this connection not only our own British tax rates but also the comparison between our rates and those of other countries. I mentioned just now the case of a married man with two small children having an earned income of £3,000 a year. Until now, if he could raise his income to £4,000 a year, he was able to keep, after paying Income Tax and Surtax, only £539 of the extra £1,000. A man in the same circumstances in Western Germany would keep £673 of the extra £1,000 and in the United States he would keep £793. Under my right hon. and learned Friend's new proposals he will keep not only £539 of the extra £1,000 but £699. In other words, he will be treated slightly more generously than his opposite number in Germany but considerably less generously than his opposite number in the United States.

Speaking for myself, and I believe on behalf of all my hon. Friends, I have not the slightest desire to see Britain continuing at the bottom of that league table. It cannot be right that our tax treatment of men earning salaries in the region of £3,000–£4,000 should be substantially less generous than that of our two principal trade competitors. Like the author of what seemed to me a particularly helpful and sensible leading article in the Guardian, I find it hard to believe that the sharp rise in marginal rates of taxes borne by executives in the middle ranges has not had some effect in blunting the competitive drive of industry. I hope in this connection that no hon. Member will be misled by what the right hon. Member for Huyton said about importers last Tuesday. It sounded a good point and it greatly amused the Committee, but it was entirely misleading. A curious feature about the right hon. Gentleman's speeches is that he gives us twenty minutes of serious economic analysis and then makes a point which reminds me of nothing so much as the late Sir Alfred Munnings discussing Picasso or Matisse at a Royal Academy dinner.

It is, of course, nonsense to say that we want to encourage the efficiency and productivity of those who are connected with the export trade, but that we want to do the reverse for those who are concerned with importing and selling on the home market. Surely our aim must be to improve our productive efficiency right along the line, realising that the strength of our balance of payments reflects our competititive economic performance over the economy as a whole. We need to reduce our costs of production and to increase the real productivity of our resources in every aspect of our economic life, and this includes importers and people who work for the home market, just as well as exporters. What tends to make our imports too big relative to our exports is not that our importers are working unduly hard but that our production in the country generally is carried on at costs insufficiently low relative to other people's costs.

The right hon. Gentleman, like many of his hon. Friends, had a great deal to say about what he termed social justice. Obviously we are here dealing with deep divisions of political attitude—divisions which probably, more than anything else, decide on which side of the Committee we sit. But I should like to say, for myself, that justice consists in giving everybody his or her due and in the recognition that everyone has an equal right to be treated fairly. [HON. MEMBERS: "Oh."] Let us see how that principle works. I should certainly agree with the hon. Member for Jarrow (Mr. Fernyhough), to whose speech I listened with great interest the other night, that it is one important mark of civilised society that there are minimum standards of welfare below which no one is allowed to fall; and I am bound to say that when I consider the rising curve, in real terms, of expenditure on National Assistance in recent years, I cannot help thinking that Britain today comes off fairly well by this test.

But, with the greatest respect, it is not the only test. In my view it is just as important, for example, to ensure that children of good average ability—the sort of children one often meets nowadays in the top streams of our secondary modern schools—are given widening areas of opportunity as a result of the education which they receive. I would say to the hon. Member for Sowerby that that will do more to break down class attitudes in this country than almost anything else. I certainly do not consider that it is a mark of a just society that it penalises success and blunts, by excessive taxation, rewards for exceptional ability. In any society, of all scarce resources exceptional ability is the scarcest of all. If we cannot, as a nation, retain our share of able people, we certainly shall not be able to play our full part as a member of the Western Alliance of free nations. And when we are considering the incidence of our tax system, how it compares with that of other nations and how it impinges on the ablest people in our society, we must think not only of those who are paying Surtax now but also of those younger men of ability who know that they will get into the Surtax range before long. Judging by all these tests, I believe that my right hon. and learned Friend's proposals have been entirely justified and that they should receive the wholehearted support of the Committee.

The hon. Member for Sowerby raised the question of people with mixed incomes. He will agree that no one with a pure rentier income will receive any benefit from these proposals. But if we consider the man with a mixed income, I do not think that it would be sensible, taking the case of a man with £4,000 a year earned income and an investment income of £100 a year, to tax the £100 alone at 25 per cent. Do we want to do that? I do not believe that it would make sense, and it surely must be a deterrent to savings. In my view, to tax the £100 at the high rate of 25 per cent. and not at the rate of 10 per cent. when we do not tax the £4,000 earned income must be a deterrent to savings, and indefensible.

Mr. Houghton

I was not criticising that feature of the proposals alone. I merely wanted it to be clear.

Sir E. Boyle

I think that the hon. Member wanted it made clear with a slightly displeased intent. That is why I raised the point.

By far the greater part of these Surtax proposals are to be paid for by a further increase in Profits Tax, but I would remind the Committee that while Profits Tax is being raised, the investment allowance remains unaltered. In this respect, as in every other respect, my right hon. and learned Friend is combining a policy of budgetary firmness with a full recognition of the crucial importance of economic growth. In short, while deciding to restrain the growth of consumer demand this year, my right hon. and learned Friend has at the same time taken steps which should lead to a faster and steadier rate of expansion in the future than we have had in the past.

We have heard a great deal in the debate about stagnation, and I think that much of this has been very exaggerated. I do not believe that there is any need to be too gloomy at the prospect for increased production during the forthcoming year, although it is of the essence of my right hon. and learned Friend's proposals that the full extent of their benefits to the economy will be felt not only in the short term but in the longer term, too.

I commend all of my right hon. and learned Friend's proposals which I have discussed this afternoon—the Budget surplus, the regulators and the Surtax proposals—to the Committee with every confidence.

5.8 p.m.

Mr. Bruce Millan (Glasgow, Craigton)

The Financial Secretary to the Treasury said that he would make only a short speech but in fact he took a long time and covered a number of subjects. I wish to take him up on one or two points which he made. He uttered some quite worthy sentiments about social justice, and what he said about ensuring that the more intelligent and able members of our community had a proper share of what was going was something with which none of us disagrees. I refer to proper opportunities for a full education, for instance. That is common ground amongst us all.

But it was revealing that he said that one of the tests of social justice in the community which we have in this country was to look at the National Assistance payments over the last few years. The very fact that he mentioned the National Assistance payments in these approving terms demonstrates the great gulf between the two sides of the Committee.

The Government fail to realise that we on this side of the Committee want to see our normal, ordinary, social security benefits being paid at a sufficient level to ensure that only very few people, in exceptional circumstances, are forced to go to the National Assistance Board. We are not against the National Assistance Board on principle and we think that it has an important part to play in our social services, but we very much resent and oppose the attitude of hon. Members opposite and the Government's deliberate policy over the last few years, which has been to keep down the basic level of social security benefits and to force more and more people to have recourse to the National Assistance Board. That is why it is particularly revealing that the Financial Secretary, who usually chooses his words carefully, talked about payments made by the National Assistance Board as a test of social justice in this country.

From the point of view of the ordinary man, and certainly from the point of view of the recipients of National Assistance, the fact that more National Assistance payments were made over the last two years proves that there has been a considerable growth in social injustice over the last few years. The growing disparity between what is available to the better-off members of our community and the relatively small sums now available to those who are less fortunately placed is one of the most disturbing features of what has been happening in Britain.

I wish to take up another point concerning the payroll tax. The Government will have appreciated by now that this proposal has had a thoroughly unpopular reception, even among hon. Members opposite. I do not think that it is very profitable to argue whether the payroll tax is to be an economic regulator, part of our fiscal structure or a purely economic element in the Government's control of the economy. I do not think that matters very much. The important point is what is likely to be the effect of the payroll tax if it is imposed. If the Financial Secretary has taken account of the reaction to this proposal in Scotland, for example, where, as he knows, we have serious unemployment problems, he will realise that, not only Scottish trade unionists, but Scottish employers and other organisations, such as the Scottish Council for the Development of Industry, have said that they thoroughly disagree with the Government's proposal for a payroll tax. I hope that the Government will take a note of these criticisms, which do not come merely from one source of political opinion in Scotland. The same applies to other development areas.

If the Government ever have to impose a payroll tax, it will be a question, not of what amount of money they will draw by it, but of the psychological impact that the imposition of it will have on employers. I am sure that in many areas which are difficult from the employment point of view, where many employers who are in difficult circumstances nevertheless try to retain labour, one of the results of it, even at 4s. a week, will simply be to encourage employers to get rid of workers. However justifiable that may be in areas where there is a tremendous demand for labour, it would certainly prove a considerable blow to areas like Scotland where the opposite is and has been the case during the last few years, and, so long as we have the present Government in power, it is likely to be the case during the next few years.

The Financial Secretary spoke about the very large surplus for which the Chancellor was budgeting and drew attention to the effect that it ought to have on the economy as a whole, particularly on investment and exports. The hon. Gentleman seemed to have forgotten that the then Chancellor of the Exchequer last year was budgeting for a considerable surplus. The surplus above-the-line for which he was budgeting last year was £300 million. The out-turn was only about half that figure. But the difference between £300 million and £500 million is not as significant as the hon. Gentleman suggested this afternoon.

The fact is that, after the Chancellor budgeted for that considerable surplus last year, we had the worst export and balance of payments results for ten years. There was also stagnation in industrial production. Therefore, there is not necessarily a direct connection between the large surplus which is being budgeted for this year, even if the figures as they eventually emerge substantiate the estimate, and the problem about which my right hon. Friend the Member for Huyton (Mr. H. Wilson) was speaking the other day. It is true that investment, including industrial investment, went up considerably last year, but again that was a year in which we had the worst balance of payments results for about ten years. Last year there were not the adverse international factors with which the Government of 1951 had to contend The thing above all other things which is preventing the economy from moving forward rapidly and consistently is the tremendous difficulty that we in this country have in getting the exports that we need. I do not think the Government disagree with that. My right hon. Friend the Member for Huyton criticised the economic relevance of the Budget from the point of view of the export situation. It is not enough for the Financial Secretary to attempt to deal with my right hon. Friend's point that Surtax concessions are an encouragement to importers as well as to exporters by saying that the Government are trying to give a lift to the whole economy and that they are trying to bring about more production and more investment. These are all worthy objectives, but the objective of increasing exports is the most important objective of all. The Surtax concessions are completely irrelevant from that point of view.

The Government have recently introduced one or two provisions on exports which will be of some assistance from the point of view of the Export Credits Guarantee Department. But these are marginal items only. I do not think that, by themselves, they will make a substantial impact on the exports problem. I do not wish to say much about this, but one thing which is worth saying is that this is not simply an economic problem. It is also partly a psychological problem. One of the things which strikes the objective observer of the progress of the European Economic Community over the last few years is that those concerned have found the answer to the problem of getting a consistent economic dyniamism. That is precisely what we do not have. Europe also has manufacturers and industrialists who consider that export markets as well as home markets are essential to their prosperity.

Unless we get some of the dynamism in the British economy which the European Common Market has managed to achieve in the last few years, there is no doubt that our lack of progress over the last few years will continue. There is nothing in the Budget which deals with this admittedly extremely difficult and almost intractable problem. The criticisms of my right hon. Friend about it have by no means been answered by the Government.

The Surtax proposals are the part of the Budget which has given rise to the most controversy. There is need for incentives to all sorts of people, but the plain, brutal fact is that this Budget gives nothing to anyone earning less than £40 a week. That is something which no amount of sophisticated argument on the part of the Financial Secretary or anyone else can deny. The people earning less than £40 a week—and they make up easily the majority of people in this country—get nothing from the Budget. If we want to bring about incentives, we must take into account, not merely the 300,000 Surtax payers, but the mass of the people.

When some hon. Members on this side of the Committee speak about the Budget being economically neutral, they misjudge it, because the Surtax concessions will have very considerable social influences. For example, I imagine that trade unionists will put considerable pressure on their trade union leaders for increased wages. Who can blame them when Surtax savings which amount to double or three times the annual wages of hundreds of thousands of people are going to those with much higher incomes? These people will not look upon the Surtax concessions as making the boss happy, as the hon. Member for Eastleigh (Mr. D. Price) suggested. They will regard the Surtax concessions as a direct incentive for them to go forward with their wage claims to ensure that, if there is this additional prosperity which is meant to be going about in the economy, they themselves share in it.

Fax from the Surtax concessions being economically neutral, they will certainly create conditions in which trade unions and others are far more vigorous in their pursuit of wage claims, and old-age pensioners will be far more bitter about the Government's treatment of them than even they have been in the past. The Government are completely misjudging the temper of the people and crediting them with considerably less native intelligence than they have if they imagine that the kind of arguments which have been put for this drastic improvement in the standard of living of Surtax payers will satisfy the vast mass of people, because I am sure that they will not. Neither will they satisfy the many members of the middle-management class who are earning less than £2,000 a year.

Some hon. Members opposite have such large incomes that they forget that there are hundreds of thousands of important people engaged in management who have never paid Surtax because their incomes have never come up to the Surtax level. These people also who are holding responsible jobs require incentives but, again, they have absolutely nothing from the Budget.

Another point about the Surtax concessions which is well worth making, and one which has not been made so far, is that the way in which the Surtax concessions have been given, apart from the general iniquity of the proposal, is such that the single man comes off much better than the married man. I am talking not simply of the actual remissions of taxation which have been given by the concessions, but about the net income which is left to the married man as compared with the single person, even at the kind of figures which hon. Members opposite have been quoting to us. For example, the £5,000 a year single person is left with an income of £3,560. The married man with two children and who earns £5,000 is left with an income of £3,680. In other words, the net difference between the married man with two children and the single person, even at an income of £5,000, is now only £120 a year.

If the Government had to give these concessions—and we bitterly oppose giving them at all—could they not at least have done something to ensure that rather more of the money available went to the married man with family responsibilities? Why should the married man with two children and earning £5,000 a year have a net income only £120 more than a single person with the same gross income but nothing like the same responsibilities? This does not apply only to Surtax payers, but it applies right down the scale of Income Tax allowances. In effect we are not paying proper attention in our Income Tax and Surtax allowances to the circumstances of the married man, particularly the married man with children. If the Government had this £83 million to give away, they would have been far better advised to give some of it in Income Tax concessions, particularly to married persons, than to give away this tremendous sum of money to Surtax payers, many of whom deserve no concession at all.

Another point that is worth quoting on the question of Surtax is that it does not seem to be generally realised that the exemption limit for Income Tax for a single man is only about £4 a week. In other words, the single man with an earned income of £4 a week begins to pay Income Tax, and the married man with an earned income of £6 a week begins to pay it. If the Government wanted to ensure that in no circumstances would people with small incomes like that pay Income Tax, it should not be their first priority to give substantial sums like £1,200 a year Surtax remission to the £10,000 a year man or £1,800 Surtax remission to the £20,000 a year man. We have been forgetting the plight of the smaller wage earners in the Income Tax concessions which have been given over the last few years. It is scandalous that with the cost of living as it is today, people should begin to pay Income Tax at either £4 or £6 a week.

The Government have justified the Surtax concessions partly by saying that they are being paid for out of the Profits Tax, but this suggestion does not stand serious examination. It is true that Profits Tax is going up this year by £1½ million, next year by £45 million, and by £70 million in the following year. The tax on heavy oils, however, is going up this year by £48 million and by £50 million next year. Why should we not say that we are paying for Surtax concessions equally by imposing a tax on heavy oils? There is no direct connection between the Surtax concessions and the increased rate of Profits Tax.

Why should we not say, as is equally to the point, that we are paying for the Surtax concessions by the increases in the National Health charges and the National Insurance contributions that were made two months ago? The Chancellor in his Budget statement and other Government Front Bench speakers have admitted that the £60 million which the Government will receive by these provisions over the next year has been an important factor in their general assessment of the Budget position. That is equally valid, and in the eyes of many ordinary people—I do not blame them—the Surtax concessions will have been paid for, not by Profits Tax or the tax on heavy oils, but by the National Health Service and the National Insurance contributions increases which have just been imposed upon them. In any event, it is a mistake to say, as the President of the Board of Trade said the day before yesterday, that even if the Surtax concessions were financed out of Profits Tax, which I do not admit, they would be paid for by the equity shareholders.

The simplest answer is to consider what happened to ordinary share prices on the Stock Exchange the day after the Budget announcement. There has been no drop in Stock Exchange prices and I am willing to warrant that there will be no drop in dividend payments in the coming year because of the increased Profits Tax. There was an increase in Profits Tax in last year's Budget, but the increase in dividend payments during 1960 must have been the biggest increase for many a year. My view is that there will be no reduction in dividend payments this year because of the Budget increases in Profits Tax. It is a complete misrepresentation of the position to say that the equity shareholders will pay for the Surtax concession, because that simply will not happen, as the developments over the next year or so will show.

It might just have been possible on their own terms, and this might have helped to satisfy hon. Members on this side, for the Government to have substantiated their Surtax concessions by introducing a capital gains tax. I am extremely disappointed that the Chancellor of the Exchequer, who has been congratulated by many hon. Members on his side of the Committee for his imagination, should have dealt with the question of a capital gains tax so perfunctorily in his Budget statement and that we have had from no Government Front Bench spokesman or any back bencher opposite any serious attempt to deal with the question of a capital gains tax.

I have not the time to go into the matter in detail, but the Government seem to be relying on the estimates of the yield from a capital gains tax which were given by the Inland Revenue at the time of the Royal Commission on Taxation. The Government should be reminded that the Minority Report of the Royal Commission explicitly rejected the assumptions on which the Inland Revenue estimates were made. I defy any member of the Government to read the Royal Commission's Report in detail and to read the statement by the Inland Revenue attached to it and not to come to the conclusion that the Minority Report of the Royal Commission much more accurately represented what was likely to happen concerning share and property values. It has been proved that the Minority Report of the Royal Commission gave a far more accurate estimate of the likely yield from a capital gains tax.

It is disgraceful that the Chancellor of the Exchequer and the other members of the Government have given no serious attention to this matter. It is the most conspicuous lack of justice in our taxation system that we do not have any provision for the taxation of capital gains. On grounds of practicability, obviously there are difficulties, but they could be surmounted. On grounds of justice and of equity, there is an irrefutable case for imposing capital gains taxation. I understand that a number of hon. Members on the Government side are now in favour of this and I dare say that we might see a minor attempt at a capital gains tax when we approach the next Genera! Election; but we have not had it this year and it is the most conspicuous source of inequity in our taxation system that there should be no taxation of capital gains. The Chancellor's complete inadequacy in that direction, taken with the concessions which have been given to the Surtax payers, is eloquent testimony to the kind of inequitable and reactionary thinking that exists on the other side of the Committee on these taxation problems.

5.33 p.m.

Mr. Peter Walker (Worcester)

I would ask hon. Members to exercise their customary tolerance to a Member making his first speech in this Committee. I hope that if, in the course of my remarks to the Committee, I make what are considered to be constructive criticisms of the Government's economic policy, this will not be considered indicative of a person representing a constituency noted throughout the world for its production of sauce. Indeed, in Worcestershire, we do not live by sauce alone. In fact, we have in the constituency of Worcester probably a greater diversity of industry and mixture of farming than any other constituency in the country. This alone makes it difficult to be a worthy Member for such a constituency, and my difficulties are added to by endeavouring to attain the high standards of service to the constituency and to this House made by my noble and gallant predecessor, the former Secretary of State for Air.

I should like to comment upon the views expressed by hon. Members opposite to the effect—and on this I certainly consider that there is some justification—that if we do provide incentive by means of Surtax reductions it is not necessarily a direct benefit to the export market. I think that Her Majesty's Government have to endeavour to see that, whatever incentive is given to greater effort as a result of this reduction in Surtax, it is directed towards our export effort.

One of the problems, I believe, is that many of those who will be affected by such incentives are people who, if they decide to make a greater effort, will make that greater effort in the home market, primarily because they are not aware of the processes and arrangements involved in exporting. We must endeavour to create the type of atmosphere which exists in Western Germany where many of the business men consider that in some respects it is easier to export than it is to sell to the home market. One reason is that they get their money quicker. They use similar services to those provided by E.C.G.D. in this country and, in co-operation with the vigorous banking system existing in Western Germany, they are able to find means of disposing of their goods with every possible speed and obtaining their rewards for selling those goods.

I would suggest to my right hon. Friend the President of the Board of Trade that he should look into the possibility of seeing whether the very excellent facilities which he has provided through E.C.G.D. could be brought more vigorously to the attention of some of the smaller manufacturers in this country. We cannot do this, I suggest, by advertising to people the need to read the booklet on what E.C.G.D. covers, because the type of manufacturer concerned would not dream of doing that. I suggest to my right hon. Friend the President of the Board of Trade that he should endeavour to make an approach to the chairmen of the joint stock banks asking them to use their very close association with small business men and manufacturers throughout the country to make known to them, through their bank managers, the methods involved in exporting. For example, the President of the Board of Trade might suggest to them that they should make arrangements for the branch managers of the banks either to attend a conference or to be briefed in some other way by the officials of the E.C.G.D., and through them to contact their customers. This, I believe, would ensure a very substantial increase of knowledge of the services provided in this country.

The other point on which I wish to comment is the concern with which I view the very sharp decline in the trend of our Commonwealth trade. In the years 1954 to 1959, we had the unfortunate position where the rise in the imports of the overseas non-sterling countries was not as great as in the rest of the world. This was a reasonable excuse for arguing that our exports were not rising to the same degree as those of other exporting countries. But, in the year 1960, we saw a position in which there was a very sharp rise in the imports of overseas sterling countries. But, alas, this country did not obtain its share of that very sharp rise. In fact, we saw a position where, if we had maintained our proportion of Commonwealth trade over the years 1954 to 1960, we should have exported last year to the overseas sterling markets about £300 million more than we did. This in itself would have met the deficit of trade which we showed last year.

I suggest that it is the urgent duty of Her Majesty's Government to pay far more attention to the markets of the Commonwealth than they have done in the past. I certainly feel that there has been something of a negative attitude towards the Commonwealth markets. There has been a tendency, because we have been closed out of the Common Market, to call the Finance Ministers of the Commonwealth to this country not to discuss and formulate a vigorous policy for expanding our trade with the Commonwealth but to discuss the concessions which they may be willing to make to get into the Common Market countries. This is a matter which, I believe, has contributed to this large fall in the proportion of Commonwealth trade enjoyed by this country. In fact, it would appear that we are beginning to give away the substance of Commonwealth trade for the potage of possibilities elsewhere.

I ask the Government to give far more attention to the problem. There are many things which we could do in the long-term and in the short-term to increase trade and economic development within the Commonwealth. I suggest that we should look at the possibilities of a policy based on the three fundamentals of economic growth—men, money and markets. During the last General Election it was commented by the party on this side of the Committee that there was a need probably to provide some form of education appropriate to executive training, similar to the education provided by such institutions as the Harvard School of Business Administration. I ask Her Majesty's Government to give some consideration to going ahead with a project, possibly on a Commonwealth basis, whereby we could obtain or create an élite of business executives of the future, Commonwealth-minded and well aware of the potentialities of that market.

As for money, I find it difficult to argue that there is need to spend a vast amount of money on the military defence of the Commonwealth—with which I agree. I do not in any way support a policy of disarmament, unless under international control, and I certainly do not take a unilateralist view—but to argue that it is correct to spend a great deal on the military defence of the Commonwealth and then do relatively so little for its economic defence is something which I believe is to many hon. Members a matter of very grave concern.

When one notices the increase in economic penetration by the Communists in the countries of Africa and Asia, I believe that we shall very soon have to decide what vehicles we shall use and what new methods we shall employ to bring about a far greater and faster development of under-developed territories within our Commonwealth. To this end, I would very much urge upon the Government to consider whether or not one of the problems involved is the question of Ministerial responsibility and the fact that there is no Ministry which has the responsibility of arousing the interest of this country in the problems of Commonwealth economic development.

My right hon. Friend the Colonial Secretary and my right hon. Friend the Secretary of State for Commonwealth Relations are both heavily involved in political problems abroad, in the Commonwealth countries, and neither can be expected to try to arouse the economic interest of this country in the problems of those countries. We should give thought to this so that in time we shall have meetings of Commonwealth Finance Ministers and economic advisers to create the kind of dynamic, vigorous, Commonwealth economic policies which will stimulate Commonwealth markets and bring about an expansion of the economy of this country.

5.44 p.m.

Mr. Maurice Edelman (Coventry, North)

I am glad to have the honour of following the hon. Member for Worcester (Mr. Walker) in the debate and of congratulating him on a maiden speech which was eloquent, cogent and well argued. I noted with the greatest admiration that he spoke without the benefit of the lifebelt of notes, which so many of us who have been so much longer in the House of Commons cling to so grimly. May I say, speaking on behalf of the whole Committee, that I am sure he will very worthily uphold the distinguished record of his predecessor who was equally regarded and respected on both sides of the Chamber. I hope that we shall have the pleasure and opportunity of listening to the hon. Member on many other occasions.

The debate is concerned with a Budget which I would describe as a class Budget. The most striking aspect of it is the manner in which the Chancellor of the Exchequer has shown himself not only to be an accountant, putting a jigsaw of money together, but, much more than that, a Tory philosopher who applies his philosophy in the reality of his fiscal arrangements. Therefore, one of the most striking things about the Budget is the manner in which the Chancellor has set about rehabilitating the middle classes and seeking to crystallise the class divisions of our society which, after 1945, had become fluid.

I am certain that since last Monday the Chancellor has become the toast of the "Jaguar band" and that all over the the country, wherever there are Surtax payers, he is one of the most popular of men. As has been emphasised time after time from this side of the Committee, the concessions which the right hon. and learned Gentleman has made to the Surtax payer will have to be paid for by somebody. It is certain that eventually they will have to be paid for by manual workers. It is perfectly clear that all the benefits that he has distributed with such a lavish hand—and I cannot help feeling that there are certain political considerations involved in the concessions to Surtax payers who are the commandos of the Tory parties in the constituencies—will ultimately have to be paid for, not only in cash but in the resentment and grievance which will be felt more and more, as the year proceeds, by manual workers.

Sir Alexander Spearman (Scarborough and Whitby)

Does the hon. Member not think that if the Chancellor's only object was to please the rich section of the community he would have made some difference to those who pay Surtax on investment income? They receive nothing at all from the Budget.

Mr. Edelman

I should have thought that the splendid gift which the Chancellor has given to the Surtax payers on earned income would have been sufficient bonus for one Budget. I am quite sure that the weight of his next Budget, if he presents one, will be addressed to those who received unearned income.

It has become manifest during its ten years of power that the whole trend of Tory Party policy has been to perpetuate and deepen the inequalities in our society. One of the most manifest expressions of that is the way in which the Chancellor has totally and abjectly failed to tackle those who make the ostentatious capital gains which cause such great resentment throughout the country.

The Home Secretary occupies himself at various conferences with the crime wave and with organised crime, but the right hon. Gentleman need not look very far for the source of the trouble. It lies in the social and moral climate created by the fact that people are able to make these take-over bids and obtain great capital gains. The result is that when criminals see the way in which that form of theft from society has been legalised they naturally imitate it and ask themselves why, if it is so easy to make large sums of money overnight by take-over bids, they should not break into a bank and also take over large sums of money.

I am sure that the mood of our society derives from the fact, which is half-intimated by the Press day after day in its social columns, that these people who make take-over bids and capital gains make vast fortunes and that this makes the hard-earning producer feel that crime pays. The way we are going, crime has become a form of take-over bid by other means.

The second aspect of the Budget, which also springs from the manner in which the Chancellor has imposed a Tory philosophy on his fiscal approach, is the curious way in which the Financial Secretary said today, in a rather glib and unobstrusive manner, that the Government proposed to introduce regulators which are, in effect, another form of control. It is interesting to see how the word "control", which, at one time, was a term of abuse by hon. Members opposite, has now been slipped into the Budget statement—quite properly, of course—as a technique of economic arrangement.

The Financial Secretary described these regulators as having an economic basis. I looked up the word "regulator" in the Oxford dictionary. It means control by rule. The innovation contained in the Budget is that the Tory Government, for the first time, have shown that they are at last converted not only to the idea of controls to regulate the economy but also to the idea of planning, which the Federation of British Industries advanced earlier in the year for the first time as a word devoid and stripped of its pejorative sense.

Through this Budget, the Chancellor is looking ahead to a suitable time at which to make industrial arrangements which, I believe, will be to the detriment of the manual worker. Although the Financial Secretary put a gloss on the Chancellor's words, he kept emphasising that the purpose of these regulators was purely economic. When challenged by one of my hon. Friends, who suggested that the purpose was industrial, the Financial Secretary seemed rather to deny it, or, alternatively, to suggest that if there were industrial consequences they would be incidental and not the main object of the exercise.

The Chancellor, however, took a different view in his Budget statement. He too, was challenged, and I shall quote what he said. Referring to the payroll tax, the Chancellor said: The use of such a measure as an economic regulator would have the added advantage that when we are faced with a situation of chronic shortage of labour, it would act as an incentive to economy in the use of manpower and to investment in labour saving equipment."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 808.] Economy of manpower is a subject which has exercised the mind of the Government—I am glad to see the Minister of Labour present—ever since the recession began in the motor industry. If I concern myself with this issue for a few minutes, it is because I believe that the origin of the anxiety in the Government's mind about the need to shed labour from specific industries coincided with the origin of the recession in the motor industry, when the idea of a payroll tax was fully ventilated.

In Coventry, during the last few months, there has been a great deal of talk about the possibility of a payroll tax. I discounted it, because I could not imagine that the Government wanted unemployment in our city. It was with a sense of shock on Monday that I realised that these rumours had had some basis in fact.

It is a notorious fact that the President of the Board of Trade had conversations with motor manufacturers, and was constantly urging them to get rid of a certain proportion of their labour force. Those manufacturers, partly out of prudence, but perhaps even more because of the organised resistance of the trade union movement, side by side with the political wing of the Labour movement, resisted this attempt to press them into creating full-scale unemployment and not merely part-time working inside the industry.

In Coventry, we have certain redundancy agreements, and these put the brake on the intentions of employers who wanted to sack men instead of putting them on short time. A short time ago Messrs. Rootes, Limited felt that it should sack approximately 800 men. When the firm started to send out dismissal notices, it was met by the organised resistance of the trade unions in Coventry and the political wing of the Labour movement. We resisted the dismissals because we felt that an industry which had made such large profits over so long a period was in a position to carry its labour force until it reached better times again, when the men could be restored to full employment.

Let us envisage a hypothetical situation for later this year. I do not think that the motor industry is out of the wood by any means. As the summer boom begins to deflate and we approach winter, we may get urgent recommendations—quite proper from a certain point of view—from the Government that employers should occupy themselves with automation and mechanical methods of production which will reduce the need for physical manpower. There will then be a repetition of short time, or dismissals, in Coventry.

I believe that this may well happen, and that this is the sort of situation which the Chancellor envisaged in introducing the payroll tax. If that happens the employers, instead of being in a mood to argue and to consider the just claims of the men, may say, "We cannot do anything. We are the victims of circumstances. The Government have imposed on us a tax of 4s. per week per head, which makes it uneconomic to maintain a labour force greater than we directly need for full-time production."

In such a situation, we will get dismissals—or whatever euphemism the Government use; perhaps "economy in the use of manpower"—and the transitional hardship felt in Coventry in the past few months will become the chronic hardship which has been felt under Tory administration in other parts of the country, including Northern Ireland, Wales and elsewhere. There has been great hardship in Coventry during these last few months, with men and women on short time who were committed to hire-purchase agreements, to rent and to other obligations based on the standard of living they had previously enjoyed.

Mr. Ellis Smith (Stoke-on-Trent, South)

If such a situation does arise, it would mean a repudiation of a national agreement between a number of the trade unions and the engineering employers, which says that systematic short-time should be worked wherever practicable in preference to discharging men.

Mr. Edelman

I am grateful to my hon. Friend. That sustains my argument. I forecast that the Government will think twice about this proposal, but if they try to implement it it will mean disrupting large numbers of industrial agreements and will cause the bitterest resentment among workers throughout industry, and, in particular, the motor industry.

Mr. Christopher Chataway (Lewisham, North)

Is the hon. Gentleman an out-and-out Luddite? Is he against any means of encouraging the substitution of machinery for men, such as investment allowances, which have exactly the same effect as the proposed payroll tax?

Mr. Edelman

I am certainly not a Luddite. On the contrary, I very much believe in the use of machinery and automation to lighten the labour of the worker, but I am also in favour of planning the country's economy so that there should be not this seasonal unemployment in the motor industry, but a planned pattern of employment. We need a planned economy instead of this arbitrary, fiscal system whereby, in carrying out a gastrectomy the Chancellor, instead of using a scalpel, uses a hatchet.

Mr. John Hall

I was interested in the hon. Member's statement that he believed in planning the economy to avoid a fluctuation of demand. How will he manage that when the motor car industry depends a great deal on exports?

Mr. Edelman

I believe that it is possible to plan production to relate it over a broad period to the demand. I think that that is the simple answer. The old technique of dismissing men from the motor industry in the winter belongs to the bad old times of Toryism. It was abolished in 1945, when there was a Labour Government, and from 1945 to 1951 there was steady employment and planned production throughout the industry.

May I turn to the relevance of the payroll tax to a progressive idea about which the Ministry of Labour knows well and which has been ventilated inside the motor industry by both employers and trade unions? That is the possibility, in order to produce serenity in the industry, which it has lacked for many years, of introducing an annual contract, or at least a six-monthly contract, which will give the worker some security of tenure in his job. Instead of the malaise which has afflicted the motor industry because the worker felt that he would be turned out of his job with the seasonal fluctuation, there would be serenity because he would feel that he had security of tenure.

My hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) said that a payroll tax would interfere with many existing industrial agreements. I believe that it will also interfere with, and possibly stymie, any attempt to achieve that progressive form of contract which is envisaged by the trade union movement, namely, a guaranteed annual contract through which the worker feels that he has security of tenure.

In those circumstances, I hope that the Chancellor tonight will announce, or at least foreshadow, a decision to renounce this fantastic, unworkable and dangerous idea of a payroll tax. Such a tax will merely cause unrest in industry and will undo some of the good work which the Minister of Labour has done in trying to achieve industrial peace, particularly in the motor industry. When I say that I am not only speaking for myself, but am expressing the feelings of the local branch of the Confederation of Shipbuilding and Engineering Workers in Coventry, which has been seriously worried about this matter.

We all welcome the excellent performance of some motor manufacturers in the export market, but the Minister of Labour will agree that the motor industry is by no means out of the wood. It is true that some specialist cars have sold extremely well in the United States, but if one looks at the pattern of export sales one sees that the small motor cars, which represent the bulk of the output of the motor industry, have sold in no way as successfully in the United States as have the specialist and sports cars.

I therefore beg the Chancellor to approach this question of the payroll tax with great caution. The motor industry will have to face many difficulties in the coming months and I hope that he will not add to those difficulties by imposing an obligation on employers which will be the equivalent of direction of labour. The concept of direction of labour has evil memories for many trade unionists. If direction of labour is to be restored in a different form in the shape of a payroll tax, I can assure the Chancellor that, far from achieving the industrial tranquility for which the Minister of Labour has been working, we shall enter a new period of industrial unrest and disturbance which must handicap exports and have a most damaging effect on the home market. It will, in short, produce the very opposite of the results which the Chancellor professes to seek.

6.7 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I am glad to follow the hon. Member for Coventry, North (Mr. Edelman). He said that he would make a class speech, and, in fact, he did. He went on to talk about his entrenched attitude towards the motor industry, and I shall have some views to express on that later.

I welcome the Budget and congratulate my right hon. and learned Friend on having introduced it in the way that he did. No speech is fashionable without a reference to the spaceman. I would say that the Chancellor's performance in producing his Budget on Monday was fully up to the space age. Unfortunately, his expenditure has rocketed; it has risen by 5.7 per cent. this year and rose by 7.2 per cent. last year. In my view, insufficient has been said about that in the debate. There has been practically no rise in the cost of living and very few, if any, new commitments have been entered into in the last few years.

I wish to look at our expenditure for a few minutes from three different angles to see whether we can think of new ideas, not necessarily to restrict expenditure but to be certain that we are getting value for money in this vast amount which we spend. It is a fallacy nowadays, to believe that the amount of Government expenditure should necessarily, and healthily, grow with the growth of the gross national product. The idea is that if the national product is growing by 5 per cent. a year, then public expenditure should grow by at least 5 per cent. I do not necessarily accept that. Many essential services can increase their efficiency in the same way as a very large company can increase its efficiency—and is continually being exhorted to do so. In education, health and the Home Office responsibilities their is room for introducing efficiency methods which would prevent the bill from mounting year by year.

For example, the Home Office estimates have risen by 17 per cent. this year, the Commonwealth and Foreign estimates by 30 per cent. and Trade Labour and Aviation by 22 per cent. I cannot comment on these from personal knowledge, because I do not know the full details which lie behind them, but it is a fallacy that these increases should be welcomed. Nobody can look forward to a reduction in taxation in ten years' time for all sections of the community while we maintain our expenditure at this high level.

We ought to look at the problem from the point of view of how we are to control expenditure rather than to restrict it. I am not suggesting that much of the expenditure is not vital. Indeed, in some cases it should be increased. But I welcome the Chancellor's decision to set up a committee to study the growth of expenditure as a proportion of the gross national product over five years. That is a most interesting development, and I hope that we shall hear more of it from time to time.

I think that we should also look at our additional commitments. Disraeli once accused an hon. Member of thinking that prosperity is a pack-horse, always ready to be loaded. Some hon. Members still have that point of view. They take the view that because the Government spend £6,000 million a year, a little extra will make no difference. These new commitments of expenditure should be scrutinised very carefully in the Cabinet, in the Treasury, and in the House of Commons, to make certain that no new commitment is born unless we are completely happy about it, because once these babies become children they have an alarming habit of growing bigger and bigger. I am certain that contraception is a far more successful means of controlling them than trying to starve them after they have been born. In this connection, it appears that the Cunard baby and the National Theatre baby are about to be born. I hope that they will be the only members of those families and will not be allowed to have brothers and sisters.

The third direction in which we can look at expenditure is the one mentioned by my right hon. and learned Friend, that of cheeseparing and saving candle ends. We must continue to do this. We must not think that it is mean, or that it is beneath us to look at every detail of expenditure. I notice, for instance, that the grant to nine museums in this year's accounts and grants to the arts and sciences are up by 7 per cent. That may be justified, but I should like to know why the museums require more money this year. How can we make certain that this year by year increase, even in a period of steady costs, of about 6 per cent. to 7 per cent. is justified and is necessary?

We find this happening even in non-expanding services. For instance, the National Parks Commission costs progressively more each year. The maintenance of Osborne House, in the Isle of Wight, is another example. One has many questions to ask, but few opportunities to get answers.

Mr. Scholefield Allen (Crewe)

I do not know whether the hon. Gentleman is a member of the Arts and Amenities Committees of the Conservative Party, but that group and the Labour group of the same name have for some years been pressing the Chancellor to give more to the arts and more to the museums. In the last year we have been rather successful. That is the explanation of the 7 per cent., and it was long overdue.

Mr. Ridley

I am a member of that group, but I do not in all instances press for more money to spend on all things. That is the difference between the hon. and learned Gentleman and myself. I am asking only that these things should be examined.

As is said in Lloyds Bank Review, to which my right hon. Friend the Member for Finchley (Mrs. Thatcher) referred yesterday, the control of this expenditure is out-of-date. This point needs further examination, and the only effective control we have seems to be through the Estimates Committee. I hope that it will be possible to still further examine the chance of expanding the Estimates Committee, and of examining a greater number of Estimates. This should be done so to speak under a microscope, and, what is more, it should be done in public, because we do not know what goes on when a thing is done in private, and the public have a right to know that any awkward questions which might be asked are asked, and that all the relevant information has been brought to light.

If we cannot achieve some progress in that direction, my right hon. and learned Friend will have to say, with Lloyd George: No one need be afraid of any taxes being taken off in my time. If we permit ourselves no reduction in expenditure, we can look forward in our lives to no reduction in taxation.

We often gaze with envy and interest at the Common Market. The hon. Member for Glasgow, Craigton (Mr. Millan) talked a lot about the economic dynamic which the Common Market has engendered. The right hon. Member for Huyton (Mr. H. Wilson) talks about league tables in which he always finds us at the bottom and the members of the Common Market countries doing very much better. The right hon. Gentleman is beginning to bore us with this table, although we recognise that it has a message for us.

Mr. Loughlin

Did I hear the hon. Gentleman say "bore"?

Mr. Ridley

Yes, the hon. Gentleman did.

I should like to examine the reasons why the countries in the Six are prospering and going ahead very much faster than we are. Nobody would claim that they have Socialist systems, or that they are relying on nationalisation or controls for their success. They have as their aims—and the Rome Treaty is there for all to see—the dismantling of internal tariffs and the removal of all internal subsidies in all their industries; the full mobility of labour, capital and management; a complete ending of all restrictive practices by both sides; and, finally, the harmonisation and equalisation of wages, costs, and of social benefits and all forms of fiscal affairs. Those are their objectives, towards which they are making admittedly slow progress. They have not always stuck to the rules. Their progress is slow, but that it what they are trying to do.

Mr. Edelman

The hon. Gentleman is advancing an argument about an upsurge in the economy of the Common Market countries to which the fiscal and tariff changes cannot be related, because many of them have not become operative. The rise in the German economy was due to the fact that for many years the Germans had no arms burden, and that in the case of the French economy there was the Monnet Plan of 1945 for the re-equipment of French industry. It was completely reorganised in a planned way; it was reorganised by the kind of planning which the hon. Gentleman and his friends so frequently deride.

Mr. Ridley

The hon. Gentleman has anticipated the next part of my speech. I assure him that 1945 has no relation to what they have been doing in the last two years, because it is only recently that this dynamic has made itself apparent.

The point is that they know their objectives, and they are progressing towards them. They are undergoing a commercial renaissance. They have a new ideal of what they should be trying to do with their industries, although the regulations have not forced them into that position. They have the objectives which I have already mentioned, the mobility of labour, the end of restrictive practices and the harmonisation of policies throughout the country. They have seen the success which this is bringing them, and they are forging ahead.

If hon. Gentlemen opposite wish us to emulate this performance, to emulate these ideals, they should improve efficiency in our factories to make us competitive, to enable us to remove subsidies and tariffs, and to enable us to bring about a similar situation to that which exists in the countries of the Common Market.

It does not matter whether we join the Common Market. If we do join it, it is an obvious and essential policy that we should prepare our industries for that change. If we do not join the Common Market, we must try to compete with the countries in it, and in that case we must go along these lines even quicker than we are doing now in order to be competitive.

It is in that light that I have looked at the Budget. I am convinced by reading one paragraph of my right hon. and learned Friend's speech that he has the same idea at the back of his mind. He said: The reduction in tariffs, for which we are working, may have a beneficial effect in this respect. Labour relations, standards of management, techniques of selling, are, in some cases, below what is needed in the present day world. Certain industries are still, in my view, handicapped by restrictive practices which are completely out of date. There is much that is good about British industry, but there is quite a lot that is not good enough."—[OFFICIAL REPORT, 17th April. 1961; Vol. 638, c. 801.] That is an immensely important declaration of objectives, and it is in this light that I look at the payroll tax, about which so many hon. Members have talked. There is some substance in the criticism that this tax should be selective by areas—excluding those areas where there is no shortage of labour and where, in fact, there may even be marginal unemployment. I hope that it will be possible for my right hon. and learned Friend to improve this weapon and to make it bite harder in areas where there is a high employment density. To use the Financial Secretary's words, £10 a year is the maximum which can be paid per employee under the new proposed tax and this will not bite in the over-employed areas. At the same time, it is too much to put upon employers in the difficult employment districts, who are struggling to keep as many men employed as possible.

It should be selective, and very much higher, and having proposed it I hope that the Chancellor will not be frightened to use it. I would have preferred him to have used it already. I would have preferred the tax to be imposed from now on instead of the imposition of the Profits Tax, which seems to me to put one more burden on to the backs of industry. We already have an extra fuel tax to absorb, and we are now to have extra Profits Tax, as well as one or two other little things. I am told that the increases in the Budget may well mean another 10s. on the price of a ton of steal. This will not help our exports or our competitive position.

We have shifted the burden of Surtax on to industry. In my opinion, the burden should have been shifted on to consumption. The share which industry has to pay should be paid through the payroll tax rather than Profits Tax. We are working, through G.A.T.T., towards lower tariffs, and in this context we should look again at our system of agriculture and try to phase it towards our possible entry into the Common Market, and also towards a saving of part of the very large subsidy which we now give it.

The Surtax concession must be right. I have no doubt that it is good economics and good social justice. But I wish that my right hon. and learned Friend had been able to couple it with a more painful drive upon expenses, to re-establish the good principle of, "What you have and what you share came out of your own pockets rather than out of the pocket of the firm." Hitherto, it has been impossible for this to come out of people's pockets, but the new proposal provides a lead in the right direction, and this is the ideal moment for a drive against wrong and incorrectly used business expenses.

I should have liked to see the Chancellor move more against restrictive practices on both sides of industry. I welcome the new document on the profitability of the nationalised industries and their commercial obligations. I hope that my right hon. and learned Friend will succeed in his efforts to simplify taxation and present up-to-date Government accounts. The whole imaginative nature of the Budget seems to indicate that he is aware of the great competition which stands in front of us, either within the Common Market or—if we stay out of it—from the Common Market itself. We must prepare this country to proceed along the lines on which the Chancellor is leading us, in order to be able to meet this competition in the not too distant future.

6.25 p.m.

Mr. Charles Loughlin (Gloucestershire, West)

I trust that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) will forgive me if I do not follow his arguments, although there is one point of clarification which he might make to the Committee. He was talking about the shifting of the burden on to industry, in the form of Profits Tax. He said that that had resulted in putting up the price of steel by 10s. a ton and that he felt that the burden should have been placed on consumption. I do not know what he means by consumption. If the cost of steel rises by 10s. a ton I can only assume that the Profits Tax has been put on consumption. Perhaps the hon. Member has in mind the fact that it might be placed on the consumption of durable goods. That would be in keeping with the philosophy outlined in the debate and in the proposals and actions of the Chancellor and Minister of Health in recent months.

We cannot consider the Budget proposals apart from the context of the actions taken in recent weeks by the Minister of Health. It is a little ironical, and perhaps tragic, that at half-past twelve this morning we were sitting here debating a Prayer which sought to stop the Government from implementing a proposal which would deny to expectant mothers and babies those welfare foods which the whole medical profession has argued are necessary in the interests of the health of the nation. There we were, debating the saving of £1¼ million, and now we are debating the transference of about £80 million into pockets of people who have already got sufficient, or Who have such a standard of income that they are paying Surtax.

We cannot expect to ensure the necessary co-operation between both sides of industry if we take such action as we did in February, of increasing the industrial workers' insurance contributions by 10d. per week and of compelling those people with whom the workers have most in common—the aged, the sick and the infirm—to pay increased charges for prescriptions, and then, shortly afterwards, tell them that as a result of what they have done it has been found possible to relieve Surtax payers to the tune of £80 million.

How mad do the Government think we are? How long do they think they can go on fooling the people into thinking that they believe in co-operation with both sides of industry? Do the Government think that I, as a trade union official, am fooled, or will fool my members by persuading them to pursue a policy of wage restraint, as was asked for by the Chancellor during his Budget speech, to enable the right hon. and learned Gentleman to give £1,700 rebate in Surtax to Dr. Beeching? Is that what I am required to do? Do the Government want me to say to my workpeople, some of whom receive wages of less than £10 a week, that they should be satisfied in the next twelve months to have a 3 per cent. increase in wages, while Dr. Beeching can have £1,700 in one slice—and all the other Dr. Beechings can be treated likewise?

The Government talk about the necessity to increase the export drive, and I agree. Unless we increase our share of world trade the standards of this nation cannot be maintained. That is the responsibility of the Government, but let me tell the Chancellor in no uncertain terms that unless he secures the co-operation of the trade unions and maintains harmony in industry he will not find himself in a position to compete in the export markets, no matter what he does. If this is the way that the right hon. and learned Gentleman thinks he can create an atmosphere of co-operation with the trade unions in industry so that we may advance in the export drive, he has another think coming.

This is a class Budget. The Government once more are paying off. They paid off the landlords and the brewers, and now they are paying off the Institute of Directors, which made such a wonderful contribution to the election expenses of the Tory Party during the last General Election. They are pursuing the policy, which they have pursued since they came into office, of a redistribution of income in favour of rent, interest and profit and against the policy pursued by the Labour Government of a redistribution in favour of work income. That is all that this Budget amounts to, simply a class Budget designed to satisfy the people whom a Tory Government represent.

There seems some dubiety in the minds of some right hon. and hon. Members opposite about the primary purpose of that new economic regulator to which we have referred as a payroll tax. But the President of the Board of Trade seemed in no doubt and neither did the Chancellor of the Exchequer. I think it important to get this payroll tax into a correct perspective. I think that in one sense it will be inflationary and may well prove a factor which will make exports from this country less competitive in the overseas markets. But I wish to deal with its social implications.

During the last few years, when we have been in a semi-recession, we have been able to share the burdens of industry. Instead of pursuing the age-old policy of Tory Governments, and the Tory Party philosophy, we have said that by a reduction in the working week we could continue to maintain almost a full labour force, and so share the difficulties and ensure that not too many people were dismissed from their employment. From the statement of the Financial Secretary this afternoon, I take it that the Chancellor intends to impose this tax quickly. What will happen if he imposes this tax of 4s. a head, which amounts to £10 a year.

Of one thing I am certain. Many employers would desire to share the burden among their workpeople, and would be prepared—although to them as a trading establishment it would be uneconomic—to carry an excess number of workers. But the additional burden imposed upon them by the Chancellor will compel them to dismiss workers instead of continuing the policy pursued in the past few years. The people in industry know that will be the effect. Do the Government think that they will be prepared to sit down and do nothing about it if there is the slightest suggestion of a likely recession in any industry? We on the trade union side say that if there is to be any loss of jobs, it is better that our people should work four, three, or even two days a week. But as a result of the Chancellor of the Exchequer saying that employers will pay a tax of 4s. a week for every employee—

Sir A. Spearman

Is not the hon. Gentleman arguing against the mobility of labour? If labour is to be discouraged from going where it is needed, and away from where it is not needed, how is there to be a growth in the economy?

Mr. Loughlin

I will deal in a moment with the question of mobility of labour, but, first, there are other aspects to which I wish to refer.

I am now warning the Chancellor. If, as a result of this policy, employers decide that it is not economic for them to maintain the existing arrangements whereby loss of work is shared—if I may use that phrase—does the right hon. and learned Gentleman think that we shall stand by and do nothing about it? Does he think that we shall say, "Well, boys, that is all we can do. You can only sign on for the dole"? Not in all cases does it follow that if there is a recession in an industry there are other jobs available in other industries in the area.

I shall deal now with the question of mobility of labour. I prefer mobility of labour, provided it can be carried out, but in many senses that is just a nice-sounding phrase and nothing more. Unless we have the institutions to cater for those who have to be made mobile, we cannot have mobility of labour. We cannot have mobility of labour unless there are houses for the people in the area in which we want them to transfer. We cannot have mobility of labour unless we have the shops, the churches and other physical institutions which make a community. There can be only a limited degree of mobility of labour. It is no use exercising our minds thinking that we can move great numbers of people from one area to another. Before that were done we should have to have another Minister of Housing and Local Government to produce the houses to which those people could go at rents which they could afford to pay.

In some areas we have the problem of pits being closed. There are two such pits in the Forest of Dean. Neither of those pits is economic, but they are being maintained because the National Coal Board, in addition to its normal trading policy, pursues a social policy. Throughout Britain there are pits which are kept open by the Coal Board on the basis of its social policy. Hon. Members opposite do not like nationalised industries and they do not mind if additional burdens are placed upon them. What effect will this proposal have on the Coal Board? It will mean a further drain on its finances. I cannot imagine those running the Coal Board being prepared to say that because an additional tax of 4s. per head is imposed upon them they must close pits which are uneconomic.

If the Board did so it would cost a lot more money to pursue that policy. Then we might find the President of the Board of Trade exerting himself to get other industries into those areas which need them. From the debates we have had in this House it does not seem that he can exert himself on anything. The President of the Board of Trade seems to think that we have now reached a position in which the Government have done everything that can be done to assist exporters in securing new markets.

When we look at column 1011 of the OFFICIAL REPORT for Tuesday, and read the statement of the President of the Board of Trade, we wonder what is to happen in a few years' time. Is this all that the Government have to offer for exporters? Do they believe that the recent concessions they have made in trying to assist exporters comprise the sum total of what they can do? Do they not consider it necessary at some stage to attempt to anticipate market trends on the Continent and to plan Britain's resources so that we may have alternative goods to go into those markets when our present export commodities are in decline?

If we want to ensure a decent standard of living for the people, we ought to be projecting our thoughts five or ten years ahead. We ought to be seeing what difficulties we are likely to face in export markets and how we can collate necessary information so that we can capitalise to the full the position we shall have in those markets. Not only do we need to know the needs of the markets of the future and to know about new markets, but we need to collate that information with the planning of our industry to see that we have the right type of commodities to replace those which are on the way out. That is the task of the Government. The task of the Government is not to live day by day, but to plan the resources of Britain to make sure we are able to compete in a more intensely competitive world in the next five or six years.

What we had from the President of the Board of Trade was a disgrace. If the Government have done all they possibly can to assist exports, exporters are now on their own. If that is the philosophy of the Government, heaven help them in the next five years.

6.46 p.m.

Sir Lionel Heald (Chertsey)

In his Budget statement, my right hon. and learned Friend the Chancellor of the Exchequer spoke of increasing concern over the national expenditure and stressed the importance of the Plowden Committee's Report on administrative economy.

My right hon. and learned Friend very rightly insisted that if those economies were to be achieved all those charged with the use of public funds must take a very strict view of their responsibilities and maintain a very high state of efficiency in their daily work. No one, I am sure, would disagree with that. Equally, I am quite sure my right hon. and learned Friend would wish to recognise the consistently high standard of the work which is done by those who actually bear this responsibility, and notably the members of Her Majesty's Civil Service. They are always an easy target for criticism and sometimes, unfortunately, for ignorant abuse, but we know that their integrity and devotion to duty are recognised and admired all over the world.

Civil servants are not by any means highly remunerated. If their morale is to be high and they are to be able to discharge their tasks with the maximum efficiency, it is most important that they should not suffer from any avoidable sense of grievance, particularly about the manner in which they are treated by their employer, the Government, either during their service or after it. I hope and believe, therefore, that hon. Members of the Committee will support me in asking the Chancellor, before he obtains our consent tonight to the expenditure of further large sums of public money, to consider the desirability of meeting a very real grievance which is strongly felt by a particular category of civil servants including many First World War ex-Service men. This concerns the question of so-called unestablished service in relation to superannuation.

That grievance has received a most remarkable degree of sympathy on both sides of the House, as is proved by the Order Paper. The Order Paper contains a non-party Motion which I had the honour of sponsoring in association with hon. Members from so far apart, both geographically and politically, as the hon. Member for Sowerby (Mr. Houghton), the hon. Member for Orkney and Shetland (Mr. Grimond), my hon. and gallant Friend the Member for Croydon, North-East (Vice-Admiral Hughes Hallett) the hon. Member for Manchester, Openshaw (Mr. W. R. Williams) and my hon. Friend the Member for Tynemouth (Dame Irene Ward). That Motion now bears the names of no fewer than 393 right hon. and hon. Members.

That is by far the largest number of names I have even seen on a Motion in the short time that I have been in the House. I am informed by the Officers of the House that there has been nothing approaching it since the war. They consider that it can only have been very seldom, if ever, that that number has been exceeded in the history of the House—393 Members from all parties.

The Motion reads as follows: That this House has taken note of the Report of the Royal Commission on the Civil Service, 1955 (Command Paper No. 9613), and the observations of the Commission in Chapter XV, paragraph 743, on the subject of the reckoning of unestablished service for superannuation purposes in the Civil Service, to the effect that there is no question of merit or principle outstanding, and it is in fact now common ground that it is right that unestablished service should reckon in full, and that in the view of the Royal Commission the sole consideration is that of cost; and this House is of opinon that the time has come for Her Majesty's Government to authorise discussions to take place on the Civil Service National Whitley Council with a view to arriving at a reasonable settlement of this long standing problem. It will be agreed, I think, that the Motion is worded in moderate terms, and I believe that my right hon. and learned Friend will feel that it has been handled, at any rate up to today, in a restrained manner, considering the overwhelming weight of opinion that there is behind it. Perhaps it might also be a point in favour of the Motion to say that it does not ask for anything now except that the subject shall be tabled for discussion in the Whitley Council.

The rigid refusal of the Government over the past years to allow the matter even to be on the agenda of the Whitley Council has caused vary strong feeling—almost more feeling than the financial aspect itself. These people take it very hardly that they should not be heard. They believe, as most of us do, in natural justice, and they are very concerned that they are not given a hearing. Indeed, they no: unnaturally suggest that one of the reasons why something is not put on the agenda is that there is no good answer to it, and that is a very natural point of view.

As the Royal Commission's Report clearly indicated, the refusal of consideration of the matter can no longer be based on any argument of principle. Any remaining doubt was removed by the "touchstone of fact" that in the 1949 Act the principle was conceded by giving full recognition for service after 1949 and half for service before. So there is now no ground whatever for any suggestion that bringing up the pre-1949s, if I may so describe them, to 100 per cent. would involve any question of principle. Still less is there any ground for the hoary old Treasury excuse that it would cause serious repercussions and implications with all kinds of entirely different people. That kind of pretext was, no doubt, trotted out in 1949. It was not successful then, and I hope that it will not be successful now.

I am most anxious this evening not to prejudice any negotiations which we hope will take place, but I think it right to say, in view of certain most misleading statements which have been circulated in one way and another, that it is quite untrue to suggest that, if there are negotiations, any attempt would be made to press for the uttermost pound of flesh. For example, in respect of the retrospective recalculation of lump sums already paid, I am quite sure that it will be found that there is no intention to press that. Equally, I believe, no one will press that we should go back beyond 1919, which is, in fact, the date to which the half-baked or half-rate arrangement did go back.

As for the cases that should be included and how they are to be dealt with, I should not be at all surprised to find that there would be general willingness to accept a scheme under which, for example, we might first bring in the 70-year-olds, and then perhaps come down by two years at a time so as to bring it down to the 60-year-olds in five years. Something of that kind could well be worked out. After all, it is the old people whom we particularly want to look after, and, in a number of cases, they are the famous old soldiers who fade away, and we want to help them while they are fading away.

There has also been much exaggeration on the possible commitment in the year 2020, 2030, 2040 or 2050. It is only necessary to do a very simple sum to see how absurd that is. No one can be included after 1949, because they are all in already. Anyone who came into the new scheme, say, the youngest now coming into consideration, could hardly have been born later than 1930, and at the end of the century there will not be many of them going very strong.

I venture to think that the give and take which one hopes would be present in these discussions could well reduce the cost to the Exchequer very considerably. It is entirely wrong to say, as has been suggested, that this might cost £30 million. I believe that that is an extravagant figure. Although I have no right to speak for those concerned, because I have no interest except a sympathy for and an understanding of their case, I believe that for well under £10 million a year we could get a scheme worked out, and, one hopes accepted, which would be generally regarded as fair. In any event, I know that I can speak for these people when I say that they are not grasping in this matter. They have served their country well and are entitled to be proud of having done so. All that they ask for is a fair deal.

I know, also, that my right hon. and learned Friend the Chancellor—I am very sorry that he is not here at the moment, but I am sure that these remarks will be conveyed to him—can be relied upon to be sympathetic in this matter, not only on personal grounds and the background which we all know of him in peace and war, but also in his capacity as a good employer. But sympathy is not enough.

I feel a great responsibility in this matter. When one has to speak, as I am doing, for 393 right hon. and hon. Members of this House, it is a heavy responsibility. I have talked with many of them. No notice could be given that we were to discuss the matter this evening, because we must take an opportunity when it is offered, but I hope that no one will think that the fact that there is not a very large number of hon. Members present in the least means that they do not feel strongly about it. During the last few days, I have talked with many people, and I have found that they were speaking from personal knowledge of cases in their own constituencies. I should also like to say that when I started on this operation, several months ago, I did not have the slightest idea that it would produce such an avalanche of names as it has done. I speak with a great sense of responsibility on behalf of all those hon. Members, irrespective of their parties.

I ask my right hon. and learned Friend most sincerely to tell the Committee tonight that he has decided to direct—and all that is required is that he should give a direction; and, whatever anyone else may tell him should or should not be done, he is the one man who can give a direction—for unestablished service now to be considered and given a full and impartial hearing.

Sir E. Boyle

I will, of course, convey what my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) has said, but I was unhappy at the distinction which he drew between my right hon. and learned Friend the Chancellor and the Treasury. Any letters which have been sent to hon. Members on this subject from Treasury Ministers have gone out with the full authority of the Ministers concerned. While I will certainly convey to my right hon. and learned Friend what has been said, I should not like the Committee to get the impression that the Treasury holds one view and Treasury Ministers another.

Sir L. Heald

I did not intend to suggest that. The only time I used the word "Treasury" was when I said that there was a hoary old Treasury excuse, and I would associate that with my right hon. and learned Friend as much as with the Treasury.

7.1 p.m.

Mr. William Baxter (West Stirlingshire)

There is one aspect of the Chancellor's speech to which I can subscribe. It was when he spoke of his experience as a back bencher and said that he had gone to the Treasury with some preconceived notions about simplifying Treasury matters. If I say that I agree with that part of his speech, that is all I need to say about what the Chancellor said. It may be that distance lends enchantment to the view and that when the Chancellor came to the realisation of his dream he found that it was a nightmare when he tried to simplify the Treasury's methods of taxation.

However, as a mere back bencher, I look upon this matter as the Chancellor once did. I think that the whole system of taxation should be simplified to the greatest possible degree. We have five principal methods by which money is brought into the Treasury. The first is taxation on earned income, wages, salary and interest. The second is taxation on the profits from the operation of large and small businesses. The third is through import duties, which we sometimes call tariffs. The fourth is the indirect taxation method and the fifth comes under the heading of loans and savings.

I am somewhat concerned about one of those aspects and it is that to which the Chancellor and many hon. Members devoted some time—the question of balancing our imports with our exports, a very serious matter.

The Chancellor said nothing about the Outer Seven agreement, which was to be only a temporary phase in our agreement about international trading and commerce. That temporary phase has meant a considerable loss and will mean an even greater loss to some of our basic industries, particularly the paper making and board making industries of Scotland. If this agreement continues to run without appropriate alteration, the paper industry of Scotland, which employs 17,000 workers, will lose its various tariff concessions of 16⅔ per cent., equivalent to £7 million a year. That will ultimately bring ruination to that industry unless the Chancellor and the President of the Board of Trade soon make up their minds either to go into the Inner Six or come out of the Outer Seven and make more use of the resources of the Commonwealth. They have the two alternatives, but they cannot remain as they are. Every day that passes, every moment that passes, impairs the structure of the British economy and leads to drastic effects on the people of Scotland.

This is a very urgent matter and I listened with great care to the Chancellor hoping that he would state his view about it. He did not do so, and I look forward to the Government making some definite declaration in the near future about whether we are to come out of the Outer Seven and develop the Commonwealth, or have an agreement with the Inner Six and develop a united Europe.

One of the Government's proposed methods of raising taxation is a 10 per cent. taxation increase on consumer goods, which the Chancellor will be able to operate in the future. Fundamentally, it is a bad tax. I do not much like indirect taxation at all, but when it is upon consumer goods, it hits the poorest section of the community, old-age pensioners and the unemployed and those with low wages, more than it hits others. It is not so heavy on the shoulders of the well-to-do. We all recognise that, unlike the poorer sections of the community, who have to buy their household requirements from week to week, the well-to-do can stock their households for long periods. They have more than one suit of clothes, of course. Indirect taxation is not good, because it places a heavier burden on one section of the community.

It may be said that there is a luxury aspect to this tax and that it will be levied on drink and cigarettes and other luxury goods. That is true, but the tax will still strike only at the people who actually consume those goods. Those who are not smokers or drinkers or who do not buy other luxuries will not pay their full proportion of tax, and on any ground this tax is fundamentally wrong. Indirect taxation is the worst form of taxation and even a luxury tax falls only on certain individuals.

The Chancellor very quickly skimmed over loans and savings, an important part of the Government's revenue. The Budget does not encourage people to save more and to lend more to the Government. There is no proposal in the Budget to encourage people to save or to lend money to the Government. What do the Government propose to do to help those people who lent money to the Government by buying War Loan? Is there any hon. Member who has not received letters from old people who lent money to the Government in that way and who now find that their incomes have gradually dwindled and their capital almost gone? It is the Government's responsibility to give confidence to people who are willing to lend to them. They should be fair and equitable to those who lent money in the past, but it is obvious that this is an aspect of Government responsibility that hon. Gentlemen opposite are not prepared to shoulder.

Sir E. Boyle

If the hon. Gentleman will read the speech I made this afternoon, he will see that I did not ignore that subject.

Mr. Baxter

Perhaps wisdom dawns slowly on some hon. Members opposite. The Chancellor is doing very little to encourage savings, yet here is where opportunities are being lost, for the savings of the public could be increased to the benefit of the nation.

I cannot understand why the Government have proposed the introduction of a payroll tax, unless it is a red herring drawn across the trail to suggest that while Surtax payers are being given something back, the Government are levying a further tax on industry. Perhaps they are using this method to soften up the public. I cannot believe that the Government seriously propose to operate this payroll tax.

If they are serious, what will happen to the coal-mining industry, where the cost would be about £6 million, and the shipbuilding industry, which is desperate for exports? Is the engineering industry to be levied in this way, thus putting an even greater burden on an industry which already has enough problems in obtaining markets overseas? It is the Government's responsibility to encourage these basic industries and hon. Members cannot be content to see an additional burden placed on industries which already find it difficult enough to get foreign markets. We should be doing our utmost to encourage these industries to expand, rather than to be overburdened. It is a crime against Britain's basic industries that industry is to be re-rated. It is the Government's duty to see that Britain's industries expand and bloom and become prosperous, not only for the benefit of the owners and shareholders but for the vast majority of workers and the people of this country.

Have apprentices been considered in the drawing up of these proposals? We have heard a lot about the education "bulge" and many lads and lasses will soon be leaving school. There will be no jobs for them and, aware of these facts, the Government should be encouraging industry and business to take up the training of these young people so that we have sufficient manpower and skill for the future. The 4s. payroll levy will not help to do that. In encouraging industry to accept more trainees, the Government will have to look to the smaller businesses. The large building firms, for example, do not employ apprentices, and that example can be repeated in many other industries.

The Government claim that the payroll tax will create mobility of labour. Have they considered that mobility of labour in Scotland has resulted in 27,300 people leaving the country in 1960? With that sort of mobility of labour Scotland cannot afford to lose the best of its manpower—and another tax, such as that proposed, will make the situation even worse. This lack of responsibility is one of the tragedies of this Government.

There is, however, one method by which taxation is both fair and equitable—not a payroll tax or a 10 per cent. consumer goods tax—but a tax levied on each according to his means; the Pay-as-you-earn basis of taxation. This form of tax not only applies to everyone, but helps to curb inflation, and the machinery is already in existence to adjust that tax as the Government see fit. As one who operates this form of taxation in my own business, I know that in the months that lie ahead, should the need arise for a curb on expenditure, curbing it through P.A.Y.E. would assist the economy. The Bank Rate is not sufficient to do the job. The only method of being fair to all section of the community is to spread the burden over the entire working population.

I recognise the fairness and sensibility of some form of capital gains tax, but I also recognise that there is power at the moment under the Acts pertaining to Inland Revenue whereby, if a person seeks to make two transactions of a similar type, the proceeds from those transactions are looked upon as being part of his business. Are these regulations being used to their full extent, especially where the tycoons are concerned? I know only too well that these regulations are utilised against the smaller man, but is the powerful man getting away with it?

Mr. John Hall

I do not think that that applies to ordinary share transactions for the investor or speculator.

Mr. Baxter

That may be so, but I am pointing out that if there are two land or property transactions, Inland Revenue look upon those deals as being part and parcel of the stock-in-trade of the person concerned, and an inspector of the Inland Revenue has a right to make an assessment. Then it is up to the recipient of an Inland Revenue notice of assessment to prove that the transactions were not a part of the recipient's job or business. Thus, the onus of responsibility rests not on the Inland Revenue, but on the person concerned.

Many eminent hon. and right hon. Members have spoken in the debate. I am just an insignificant back bencher. I believe that business and commerce are of paramount importance to everyone in this Committee and to every person in the land. It should be our duty and responsibility to see that a healthy expansion takes place, and we should all be prepared to make sacrifices in some way to accomplish that end. Whether industry is owned by private or public enterprise is a matter for debate and consideration. That is not the fundamental question today. The fundamental question is: are we to expand or contract? If we are to expand, as we must, each one of us must be prepared to sacrifice.

If I were the Chancellor preparing a Budget, my Budget would be different from the one which the right hon. and learned Gentleman has presented to us. Here are my simple suggestions. First, I would encourage savings and loans to the Government. I will not go into the details now, although it would be quite simple to do so, because there is no time. Second, I would abolish Purchase Tax on all the necessities of life because it is an unjustifiable tax on any count whatever. Third, I would have a single graduated tax on all incomes, be they earned or unearned. It is our duty to encourage people to invest their money in industry or in other ways, and we should not penalise them when they do that act of saving in their own interests and on behalf of the country. We should encourage them. A new single graduated tax taking into consideration all types of income should be the Chancellor's immediate concern.

Fourth, there should be new regulations—this is my reply to the hon. Member for Wycombe (Mr. John Hall)—in respect of all people who make a business out of speculation and capital gains. It should not be out with the wit of man to conceive such a method. If the Chancellor has any difficulty in having his officials work out a suitable system, it is time that he had different officials advising him in the Treasury. There is no doubt about that. If those who are there at the moment find it too difficult, we can offer nominees who would be quite capable of devising very simply a tax method which could be used for that purpose.

Fifth, there should be a maximum stipulated for the expenses of individuals, on a graded basis, and the same should apply to companies. As a small business man with 300 employees, I know quite well how one can draw expenses here and here, but I know very well that there is one rule for one type of business and a different rule for others. The large limited liability company quoted on the Stock Exchange has a better expense allowance than the small limited liability company working in a small way. This should not be so. Why should inspectors of taxes have one law for some and a different law for others? These things require investigation.

Last, but not least, savings could be made in defence. I have no Whip in the House of Commons. I am a more or less independent person speaking tonight. There is another method—the right hon. Member for Huyton (Mr. H. Wilson) mentioned it—whereby the Chancellor could save a considerable amount of money. The Treasury should ensure that the money spent on the Armed Forces and in preparation for war is examined more carefully. Together with many hon. Members, I had the privilege of listening to Professor Parkinson, the originator of "Parkinson's Law", not long ago. At the end of the meeting, he was asked how he would seek to save certain moneys. His answer was quite simple: in the Defence Estimates there is plenty of room for that. He said that in Singapore there are 10,000 people being used in a more or less obsolete establishment for shipbuilding and repairs looking after three old ships of the British Navy. If that is true—I have no reason to believe that it is not, since no one has contradicted it—and if there is that sort of wastage in the Services, apparent to outsiders as it has been apparent to me in the past, there is ample room for saving £100 million or £200 million of the taxpayers' money.

If the Chancellor had the willpower, the vigour and the determination, he would be able to bring in a Budget which would not wholly satisfy his own side of the Committee but which would satisfy this side and would expand Britain's economy and make us a worthy nation in the years to come.

7.23 p.m.

Mr. Cyril Osborne (Louth)

I congratulate the hon. Member for West Stirlingshire (Mr. Baxter). At least, he has some fire in his belly and he believes in what he says. When the hon. Member says that those who have lent money to the Government ought not to be swindled and defrauded in the value of their savings as a result of inflation, I entirely agree. When he pleads for sacrifices from us all so that our nation might expand its production, I entirely agree. The hon. Member talked very much like an independent.

The hon. Gentleman said one thing with which I could not agree. He said that we ought to go into the Common Market, and that, if we could not join the Common Market, we ought to leave the Seven. We have certain obligations to the Seven, and we could not in honour walk out on the Seven if we could not join the Six. I agree with him that we should go into the Six, because I believe that what this country needs above all else is competition—really good, healthy competition. The businessmen of this country have had it far too easy for far too long, and we need competition in both capital and labour. One thing that the Common Market would do for us would be to let the cold chilling winds of competition blow through our business life, driving out of business the inefficient among both employers and workers.

At the beginning of this week, the Evening Standard said that there would be a blistering and prolonged attack by the Opposition on the Government because of their Budget proposals. A few moments ago, there were six hon. Members on this side of the Committee and seven on that. I looked up, and even the Press Gallery was almost empty. Even the public were not interested.

Mr. Loughlin rose—

Mr. Osborne

No; the hon. Member has had long enough already.

Mr. Loughlin

The hon. Member knows that both parties have meetings at this time.

Mr. Osborne

The prophecy about a blistering attack has not come true. It was not true yesterday or the day before. There have been fewer than 20 hon. Members in the Committee from time to time.

The other reflection I have after listening to most of the debate, a sad one for a back bencher, is this. I sometimes wonder what good we do sitting here and making speeches. I wonder whether anything we say affects the Treasury bosses who really rule our country. I wonder whether we do any good in that way, though I suppose that if we have something in the blood it has to come out.

Mr. Houghton

When will the hon. Member defend the Budget and stop being so self-righteous?

Mr. Osborne

I hope that I was not being self-righteous. I always thought that that came from the other side of the Committee.

Mr. C. Pannell rose—

Mr. Osborne

No. Please let me get on. The hon. Member for Leeds, West (Mr. C. Pannell) has just walked in.

Mr. Pannell

The hon. Member is often away abroad for weeks and weeks on his own business, going to China and elsewhere. Then he comes back and lectures us about the Chamber being empty on the few occasions when he is present.

Mr. Osborne

I was making a reflection upon what the Evening Standard had said about the prospect of a blistering and prolonged attack. I am sorry if I have caused irritation.

I welcome the Budget for many reasons. I am glad that my right hon. and learned Friend is to tackle business expenses. There is a good deal of scandal in that respect, and I hope that he will clear it up.

In my view, the most important proposal in the Budget is the one which has received the least attention. My right hon. and learned Friend proposes to create a £500 million surplus, and I regard this as the key to the whole Budget. I hope that he gets it, and, what is more, I hope that he keeps it. I wish it were double. Moreover, I hope that he will now warn all the spending Departments that he will not allow any Supplementary Estimates at all during the coming year. If he would do that, he would do more to help our economy than he could by any other single measure.

Last year, the Supplementary Estimates amounted to £246 million. Will my right hon. and learned Friend now say to all the spending Departments that they must live within their own Estimates, within their income, and tuck away the £500 million surplus so that he will have it at the end of the year not merely budget for it and hope to have it? He would do a great deal for us if he did just that.

I recognise that the overall policy which decides how the money shall be spent must be the result of joint Cabinet responsibility. However, if the Chancellor—I hope that I am not out of place in saying this—said now that, if the spending Departments do not keep within the limits of their own Estimates, he will resign, I think that he would get his own way and we should have a curtailment within the spending Departments of the extravagances which many of us think is possible. The Chancellor is responsible for providing the money. If he said that the spending Departments could not have any more and that, if they wanted to change their policy slightly this way or the other, they would have to make economies within their own Departments to pay for them—in other words, if he made them live within their incomes—he could crack the whip over them which we in the Committee are unable to do.

Mr. G. Brown

Has the hon. Gentleman taken into account the experience of the Minister of Aviation, who, when he was Chancellor, did exactly this over £50 million and who has now re-entered the Government when expenditure now is about £500 million?

Mr. Osborne

I do not think that any Government could stand a second Chancellor departing on this issue. I say this seriously. We can talk as much as we like, but we back benchers have no control over Government expenditure. We have our debates, but the Treasury and the spending Departments go on in their own way. The only person who can control and limit Government expenditure is the Chancellor.

The function of the back bencher has completely changed in the last fifty years. Previously, we were the guardians of the public purse. Now we are the people who urge the Treasury to spend more and more on pet subjects which affect our constituencies, or in which we are particularly interested.

Mr. Richard Marsh (Greenwich)

Surely the hon. Member has the right to vote against the actions of the Government if he feels so strongly about them.

Mr. Osborne

That was equally true when the Opposition were in power. I was in the House from 1945 to 1950 when similar protests were made by hon. Members opposite, some of whom are now sitting on the benches opposite. This is true of all parties and Governments.

Today, the back bencher has little or no control over Government expenditure. It is the Treasury, and the Treasury alone, which can stop the spending Departments coming along with inflated Supplementary Estimates and asking for more money. I have been on the back benches for sixteen years and I have had a long time in which to watch various Chancellors of both parties operating. Nearly all Budgets are ruined by the Supplementary Estimates. If the Chancellor said to the spending Departments, "During this year you will have no more money; you have to live within your Estimates", the £500 million surplus for which he is budgeting would be there and it would bring to our economy the degree of deflation which I think is necessary. It is the one thing that will save us.

In past years, both jobs and profits have been too easy to get and too easy to earn. What we require is a rather more difficult time in which we live, a slight difference in the atmosphere. I think that on both sides of industry generally things have been too easy. We have become soft. I do not believe that a soft nation will easily survive in a tough world. That is what the Romans discovered 2,000 years ago.

We have honoured all the promises that we made in 1951 to get rid of the then Government and to win power, except one. We promised that we would mend the hole in the purse. Instead of doing that, it has become bigger. That is why I am preaching Government economy to my hon. Friend the Financial Secretary. I remind him that, whereas, in 1939, the £ was worth 20s., by 1945 its purchasing value had dropped to 12s. 7d. In 1951, when we made our promise, it bad dropped to 8s. 11d. Today, it is worth 7s. 2d. That is not mending the hole in the purse. I appeal to the Chancellor of the Exchequer to bring back honest money. I want him to honour the 1951 promise. If he is to do that, he must make the nation live within its income. It is no good the Government appealing to the private individual or to the nation as a whole to live within their incomes if the Government are all the time presenting Supplementary Estimates and are spending money like water.

The way in which fixed interest bearing investors have been treated in the last thirty years in scandalous. A few days ago I asked a Question about how much stock carried a fixed rate of interest. I was astonished to find that there was £43,000 million worth. As, since 1939, the value of the £ has dropped from 20s. to 7s. 2d., the owners of those securities—building societies, trustee savings banks, National Savings certificates, and so on—have been robbed and swindled out of £28,000 million worth of value.

Mr. Douglas Jay (Battersea, North)

The hon. Gentleman is right in what he is saying, but does not he agree that particularly scandalous is the fact that the Government should have invested all the National Insurance contribution money in the gilt-edged market?

Mr. Osborne

I agree. It is high time, even to the point of sacrifice, that we brought back honest money and stopped swindling those people who put their money into Government securities in order to support the Government. As I see it, the way to do it is for the Treasury to say to the spending Departments, "This is your limit. You will have no more".

I now wish to make one or two observations on the Economic Survey. I remind hon. Members of the four important facts in the Economic Survey which show our position in 1960. Production was stagnant. At the beginning of the year the figure was 120 and at the end of the year 120. To produce that stagnant amount of wealth we paid ourselves in salaries and wages £900 million more to do the same work. We spent on ourselves, consumer expenditure, £700 million more while producing the same wealth.

Sir E. Boyle

What my hon. Friend is saying will not do. I agree that production did not increase last year, but over the whole year production was 6 per cent. above the previous year. It is that figure that we must take into account when considering the movement of prices of income. It is not a fair comparison to say that production was flat over the year and income increased.

Mr. Osborne

I agree, but it is said in the Economic Survey that during the second three-quarters of the year production was static. The increase came about during the first three months. In the second half of the year exports were also static.

As I have said, we paid ourselves £900 million more to produce the same amount of wealth. We spent on ourselves £700 million more. These are figures in the Economic Survey. We borrowed, personal debts, another £500 million to do it. This is the way to ruin. We are borrowing more, we are spending more and paying ourselves more but are not producing any more. Is it any wonder that it is difficult to sell our goods abroad when their prices are comparatively high? This is the key to the whole matter. People keep saying, "Why do not we export more?" We do not do so primarily because our prices are too high. Our prices are too high because we are paying ourselves too much to produce what we want to sell. I want my hon. Friend to speak to his right hon. and learned Friend the Chancellor about these issues.

In this evening's paper, we see that Lord Chandos, who was a distinguished Member of this House, has just been telling his shareholders and his employees that as he, one of our greatest industrialists and a man for whom we all had a high regard when he was in this House, sees the position, the prospects for our exports next year are worse than ever. He is saying that his great industry has reached the point when it cannot absorb any more extra costs without affecting the prices at which it must sell abroad. That will make it even more difficult for us to pay our way.

Let me give one other figure that my hon. Friend the Financial Secretary will remember. Last year, the adverse trade balance was £344 million and the invisible income had fallen from £229 million two years ago to £22 million. There is no sign of that invisible income increasing again. Our position is not good. It is bad. It is unpopular to say so, on both sides of the Committee. The only crime of a politician, on either side, is to say the bitter economic truth that the knaves on the opposite side, which ever side it may be, twist to lose votes for the other party. The only thing that matters in politics is that one does not lose votes for one's side. It is not that one speaks the truth as one sees it.

I wish that my right hon. and learned Friend the Chancellor of the Exchequer would try to do what the late Sir Stafford Cripps did in 1948–49, when we were faced with this same problem. He got the F.B.I., the chambers of commerce and the trade unions together and explained the position to them patiently and for a long time. He appealed for restraint in wages, in salaries and in dividends and he got a good reply from both sides of industry.

This is the most urgent need today, I feel in my bones that if the Chancellor would follow the steps of Sir Stafford Cripps in that example, he would get a favourable reply from both sides of industry; but it is no good preaching to the workers that they must show restraint in wage demands unless there is restraint in dividends.

Mr. Houghton

Does the hon. Member think that after this Budget, the Chancellor would have the same moral authority in making that appeal as Sir Stafford Cripps had in 1948?

Mr. Osborne

That is the last point I want to make. Yes, I do. [Laughter.] I beg hon. Members opposite not to laugh until they have heard the argument. They have bitterly attacked the proposal to increase the Surtax level to £5,000. They have attacked it largely on the basis of equality because it is unfair. The policy of hon. Members opposite is one of equality. That is what Socialism is about, as I have read many times. From a social viewpoint and from the point of view of justice, hon. Members opposite say that the Surtax proposals are unfair and contain no sense of equality. I remind hon. Members opposite that the Surtax position has not been altered since 1920, when, basically, the £2,000 level was fixed.

Concerning equality, I was impressed by something that I read in an aeroplane when flying last October from Canton to Shanghai. The Communist authorities gave out the usual highly-coloured magazine, printed beautifully in English, and I took the following extract from a Soviet Union document, No. 126, dated 1960, which I pass on to right hon. and hon. Members opposite: Socialism in the true scientific sense of the word, as distinct from the Philistine's interpretation of it, admits of no levelling of incomes. In a Socialist State, the principle is payment according to work done. This is not to be laughed at. This comes from the Mecca of Socialism. It continues: Those who do more for society get more in return. That is the best defence that I have found for what the Chancellor is doing in his Surtax proposals. Whilst there are exceptions, I agree, on the whole the men who get big incomes earn them. They have to work very hard for them and they take great responsibilities in earning them.

Mr. Houghton

Is the hon. Member suggesting that the Chancellor of the Exchequer is a Communist?

Mr. Osborne

No. I am using the home of the pure doctrine of Socialism, to refute—

Mr. Loughlin

That is not true. The hon. Member is mixed up.

Mr. Osborne

I am using the doctrine which I brought back from Communist Russia, which claims to be the home of pure Socialism, to destroy the arguments with which hon. Members opposite have attacked my right hon. and learned Friend over his Budget proposals.

In Peking, I picked up a booklet, printed in English, which contained Mao Tse-tung's doctrine on this issue. I commend this to both sides of the Committee, for what it says about China applies to this country, and I beg of my right hon. and learned Friend the Chancellor to preach this gospel. This is Mao Tse-tung's doctrine: If we want to see China rich and strong"— that is exactly what we all want our country to be, rich and strong— we must be prepared for several decades of intensive effort, which will include, amongst other things, carrying out a policy of building our country through hard work and thrift"— that is the old gospel of Cripps— and of practising strict economy and combating waste. If the Treasury would insist upon those things in the spending Departments, and would set an example to industry and to the private individual, it would get a finer response than it realises.

Mr. Loughlin

May I correct the hon. Member? We do not accept the concept of Socialism that is practised in the Soviet Union. I am not criticising Russia's concept. Has the hon. Member ever heard of the precept of British Socialism, From them according to their abilities, to them according to their needs"?

Mr. Osborne

Of course I have heard that. But the document which I happened to see last October, on the way to Shanghai, puts forward another version on Socialism and rather takes away some of the indignation which has been expressed on the benches opposite against the Chancellor's proposals.

7.48 p.m.

Mr. Edward J. Milne (Blyth)

I want to begin by mentioning the point raised by the hon. Member for Louth (Mr. C. Osborne) at the start of his speech by drawing attention to the sparse attendance during certain of the Budget debates. This was a little unfortunate, because while the hon. Member was raising the point, I asked one of my hon. Friends who the hon. Gentleman was, because although I have been an hon. Member of the House for only about four months I had not seen the hon. Member sufficiently often to be able to recognise him at a glance.

When I discovered who the hon. Member was, I wanted to pay my belated thanks to him. As a youngster in the Labour Government, giving lectures and doing propaganda work, I found that, to put it bluntly, the hon. Member for Louth was often a rich source of quotations to use to "blow the gaff" on Tory-ism. Whilst I say "belated thanks", I am also grateful to the hon. Member for doing the same thing tonight. I am certain that he will not expect me to follow him in his meanderings from Peking westwards, leftwards, rightwards and so on, during his speech, which had a certain amount of value and of merit.

Mr. C. Osborne

I thank the hon. Member.

Mr. Milne

I say that sincerely and in no way deprecatingly.

In this four-day debate, two points have emerged that are bound to attract the attention of somebody who, like the Chancellor of the Exchequer, is dealing with his first Budget in the House of Commons. Questions of Surtax and the mobility of labour have been bandied about a great deal on the benches opposite. The claim that the Surtax concession has been made to increase exports has been more or less exploded.

If that were correct and if the argument is true that people who do the heavy, difficult and responsible jobs in industry are entitled to their reward in the shape of the concession which the Chancellor has given them, surely it is equally reasonable for those who turn the wheel, the people who do the work in the factories, workshops and other places where the goods are made, also to be given concessions.

In addition, the families of those people who are entitled to the same sort of benefits that accrue from the increased wage packet of the wage-earner or breadwinner in the family as are the families of those in the higher wage bracket. The unfortunate thing about the Budget, however, is that the concessions made by the Chancellor have been filched in the previous six months from precisely that working section of the community.

The Chancellor of the Exchequer, unfortunately, is not present. A distinguished predecessor of mine once threatened the right hon. and learned Gentleman that one day he would have a Ministry of his own. He was then dealing with the position of the right hon. and learned Gentleman as Foreign Secretary being in the shadow of the Prime Minister. I think that as the Chancellor of the Exchequer now the right hon. and learned Gentleman is still very much in the shadow of the Prime Minister. The Prime Minister is so accustomed to parading around the country, mouthing platitudes and election slogans, that he allows the Chancellor, at this stage, to be the centre of attraction, but the Prime Minister will move in later when any cheers and praise are accruing.

Then there is the question of the mobility of labour. There have been one or two interventions from hon. Members opposite on this subject. In my constituency, and in the north-east of England particularly, the question of the mobility of labour is not a problem. What we are troubled and worried about is that the Government, who have been in power for the last ten years, have failed to direct, attract, or divert industry into the areas of high unemployment in order to give people jobs.

When we talk in terms of increasing our exports, obviously the industries which are exporting goods can find the labour they want by transferring themselves to the places where there is high unemployment. The type of mobility that worries my people is the thought that they and their families in the very near future—and thousands of them have already had to do it—will have to seek jobs in the already overcrowded areas of the Midlands and of London. This Budget has signally failed to tackle this problem or to pay any concern to it.

If the Chancellor were sincere in his statement that exports would expand and that Britain would take its rightful place in a challenging, competitive world, he and the Government would lay down policies to ensure that every available man, woman and child able to work was given useful employment. I say "every man, woman and child" because young people in my area are leaving school without the prospect of employment in the area in which they and their families reside.

I have mentioned the Prime Minister and the Chancellor of the Exchequer. There have been two big occasions in the political life of the Chancellor—Suez and his Budget of 1961. The decision, the attitude and the action of the Chancellor on each of those big occasions sprang from the same source, a complete inability to understand the position and the rôle of Britain in the second half of the twentieth century. After ten years of Tory rule in Britain, that is still the supreme tragedy. In the most challenging decade in British industry, when the rest of the world has been outstripping us in many aspects of trade and commerce, we have had a Government completely unfitted to make us a great industrial nation. I think that that is a suitable commentary on the type of Budget that we have been given.

I have been surprised that the hon. Member for Louth and other right hon. and hon. Members opposite have referred to 1945–51. The Financial Secretary to the Treasury is very fond of saying, "We are doing it, and a Labour Government did it in the years when they were in power." Are they so thoroughly devoid of knowledge of the times in which we then moved? Is there any reasonable person in Britain, or in this Committee at the moment, who would make a comparison between the position in the years that followed the Second World War and the position now after ten years of Toryism in Britain?

Rightful tribute has been paid to the moral stature and courage of Sir Stafford Cripps as a Labour Chancellor of the Exchequer during the six years following the most devastating war in history, and a period when the ordinary folks in this country began to count for something. We were then able to tackle our tremendous economic problems without making drastic inroads into the living standards, of the British people. The reason that we have lost sight of that vision and failed to travel that road is because the eyes of this Government have been fixed on the need for profits and not on the hopes and aspirations of the British people.

What is to be found at the background of the broad canvas of the Budget proposals? When industrial workers ask for wage increases they are fiercely resisted and, in the cultured accents of clubland, we have been told that the thing to do is to "treat them mean and keep them keen". That is the type of response made to the desire of these people to increase their standard of living, but when it comes to the Surtax payers and the financial journals preceding Budget day begin to fly kites and put out suggestions of Surtax relief, we are not told, as the workers are told, that the economic situation is so grave that increases should not be given.

The Surtax payers were told, "You are not working hard enough but we know that you can do better and we suggest that the tax reliefs that we shall give you will possibly do the job". Those who look at the figures will realise the manner in which the British people have been hoodwinked at three General Elections which the party opposite was able to win. Almost without exception, the Surtax concessions in the industries covered by those concessions exceed by a considerable figure the weekly wage rates paid to the workers, yet the Leader of the House finds himself able to talk about "the opportunity State."

If we on this side of the Committee are to show our gratitude to the Chancellor, as many hon. Members opposite have done, we must confine that gratitude to one point. During the 1955 General Election, Sir Anthony Eden coined the phrase, "The futuree beckoning with a golden finger." We now realise in this context precisely what he meant. Figures have been advanced to demonstrate that as a result of the Budget the British people are better off than they have ever been.

I should like to apply this yardstick to national prosperity at the moment. This fallacy of an affluent society must be examined in the light of present conditions and the difference between what the people should have and what they have, and between what they have and what they could have if our economy and industry were geared to their needs. Those differences are greater today than at any time in our history. One should not start comparing the present day with 1914 and 1938. One should look at the tremendous increase in the nation's productive capacity and the standard of living which the people ought to be enjoying as a result. If one does this, one realises precisely what ten years of Toryism have done to the country.

The President of the Board of Trade said on Tuesday that the Budget promoted social justice and helped to solve the country's economic problems. The right hon. Gentleman also used the phrase: Merit is entitled to its reward, as need is entitled to its care."—[OFFICIAL REPORT, 18th April, 1961; Vol. 638, c. 999.] I agree wholeheartedly with that quotation, except that it does not apply to this Budget. The question of merit has been confined to a small section of the community, and the question of need being entitled to its care was thrown out of the window when the Minister of Health brought in the prescription charges and the other attacks which he made on the people's standard of living.

We are, therefore, reaching a stage where the Government are finally discredited in the eyes of the people. They are even discredited in the eyes of those who returned them to power in 1959. The stigma of their deeds and misdeeds will remain in the memories of their fellow-countrymen long after they have ceased to exercise power and a Government more fundamentally matched to the nation's needs have taken their place.

8.4 p.m.

Mr. John Hall (Wycombe)

I listened, as the Committee has done, with great interest to the speech of the hon. Member for Blyth (Mr. Milne). I had the impression, from its tenor, that he was very quickly picking up the error into which all politicians fall in the House of Commons, of forgetting that he has been appointed to this place and of thinking that he has been annointed.

I was particularly struck by one phrase in his speech which I took down. The remark made me gasp a little. He referred to action taken by the Labour Government between 1945 and 1951 and spoke of the things that they had been able to do "without grasping inroads on the standard of living of the British people." It made me gasp because I remembered that the real value of wages fell in the last period of the Socialist Government whereas the real value of wages has risen consistently under the present Government.

I could not understand what the hon. Member meant by saying that the Labour Government were able to do these things "without grasping inroads", the inference being that there had been grasping inroads under the present Government.

Mr. Milne

I did not say "grasping". I said "drastic".

Mr. Hall

That does not make a great deal of difference to what the hon. Member said.

Mr. Milne

There is a difference between "annointed" and "elected".

Mr. Hall

One great disadvantage of speaking on the last day of the Budget debate is that everything that can be said about the Budget has been said not once, but a number of times. Speakers from the Opposition benches have concentrated largely on attacks on the Surtax relief and, in general, on both sides of the Committee, the concentration has been mainly on the payroll tax proposals and on exports. I do not think, however, that anybody has used the quotation from the late Mr. Edmund Burke, who said: To tax and to please no more than to love and be wise is not given to man. I am sure that the Chancellor has realised that, after listening to criticisms from both sides of the Committee of the taxes which he proposed to take off and those he proposed to put on.

I remember that in my maiden speech about nine years ago I gave a quotation from Colbert, who wrote: The art of taxation consists in so plucking the goose as to procure the greatest quantity of feathers with the least possible amount of hissing. The Chancellor will have realised by now that there is another art in taxation, that of reducing the plucking of some over-plucked geese so as not to attract the hissing of the remainder of the geese. The Chancellor did not find it very easy to do that with his Surtax remissions.

I have been engaged for many years in tabling Questions on Surtax and I welcome the remission because it represents a long overdue piece of fiscal justice and removes some of the anomalies and absurdities of the existing tax scale. I had always known that the Surtax scale was a bit ridiculous, but I did not realise how ridiculous it was until I tabled a Question in February, 1956, when I asked what salary the Chancellor of the Exchequer of that time would need to equal in purchasing power, after tax, the salary of his predecessor in 1938. I was staggered by the answer given by the then Financial Secretary, who is now Minister of Housing and Local Government. He said that the figure was £75,000 a year. That brought home to me the complete absurdity of the Surtax levels at that time. It was reinforced recently during an interchange of questions across the Floor of the House when the appointment of Dr. Beeching was announced. It emerged, after a great number of interruptions from the Opposition, who did not seem to want to hear the answer, that the £24,000 a year salary to be paid to Dr. Beeching would yield a net income of only about £6,500, which means, in terms of 1938 values, an income of about £2,000 a year net.

To give Dr. Beeching even that income the Government had to increase the salary of the office by £14,000 a year so that he would have a net increase over his predecessor of about £1,800 a year. Those figures show how distorted the tax system is today.

In December, I asked what the Surtax figure should be if it was adjusted to compensate for the fall in the value of money as against the figure in 1927, when Surtax was reorganised in the Finance Act of that year. The answer was that the figure should be £5,000. Taking into account the earned income relief now allowed against Surtax, that figure is about equivalent to the one we are discussing in this Budget. Thus, we have waited from 1927, when the Finance Act introduced Surtax as we now know it, until 1961 to restore the position to what it was then. That does not seem to me to be a very great or extravagant concession to make to Surtax payers as a whole.

I do not believe that the Surtax change will have a great effect on exports. We may get a marginal effect on them, and also an effect on productivity and the effort put in by people throughout the country. It will, however, do several other useful things. It will make it much easier to persuade senior executives to move from one place or one firm to another, especially when they are called upon to go into industrial areas which are perhaps less pleasant than the areas in which they are now living.

No doubt many hon. Members have the same sort of problem that I have faced in trying to get a man, earning £4,000 a year, to move from a pleasant part of the south of England to a Welsh industrial valley or to the North. One cannot give him a net increase in income which makes it worth while for him to uproot his family and take them to an area where they do not want to live.

The change will also help to persuade executives already earning considerable salaries to undertake greater and more arduous responsibility. I can give an example of this. Not long ago I tried to persuade an executive, a first-class salesman, to undertake new responsibility which would mean his spending much longer abroad then he had previously done. It meant greater responsibility and worry, and being away from his family for long periods. The salary offered him was another £1,000 a year, but the net increase from that extra amount was so small that he was very reluctant to accept.

He did accept the new responsibility from a sense of duty and desire to help the company in developing an export market, but it gave him no adequate return for his greater efforts and responsibility, and left him with a sense of frustration and injustice in the feeling that this tremendous additional effort he was making could not be rewarded more adequately. That has been the experience with many other such people.

The raising of the Surtax level will also help to cure the "expenses racket", as it is described. So often, to give an executive a net increase, recourse has been made to all sorts of Income Tax avoidance—to put it no higher—and one of the reasons why the expenses racket has grown is that many people have felt a great sense of injustice in being prevented, by the tax system, from earning a fair return for their efforts. This change will help to remove that attitude, and to prevent what I might describe as the caviare luncheon and the bread and cheese supper economy—the caviare luncheon on expenses and the bread and cheese supper at home with one's wife and family.

Having welcomed the Surtax concession, I cannot give unqualified approval to the other parts of the Budget. The Conservative Central Office publishes the Weekly News Letter, which I commend to hon. Members opposite because it has a lot of valuable information they would otherwise miss. In last week's issue, there was a quotation from a speech made by my right hon. and learned Friend the Chancellor of the Exchequer ten years ago, in speaking on the Finance Act of that year, when we were in opposition. These were the tests which he was applying to the Budget: Is it a spur to an increase in prices or in costs of production, distribution or in the cost of living? Is it an incentive to effort and production; or is it an incentive to saving?"—[OFFICIAL REPORT, 8th May, 1951; Vol. 487, c. 1886.] Those were the tests which my right hon. and learned Friend said, ten years ago, that we should apply to a Budget. Curiously enough, the present Budget answers and meets all those tests. The new taxes will act as a spur to an increase in prices, to increased cost of production and distribution, and also, I think, to the cost of living. At the same time, the Surtax change will act as an incentive to production, and also, perhaps, as an incentive to saving. On the other hand, the increase in the Profits Tax may be a disincentive to company saving. Thus, in a remarkable, and, I am quite sure, unintended fashion, my right hon. and learned Friend's Budget meets all the tests which he enunciated ten years ago.

The payroll tax has been warmly criticised by both sides, and has not met with a great deal of approval. I understand that it is claimed that it will be an economic stabiliser and may lead to economy in the use of labour. The first claim, that it will act as an economic stabiliser, is over-optimistic. I doubt whether the effect will be felt in time to have any worthwhile check on inflationary tendencies in the economy. It will be six to twelve months before the effect of such a tax would be felt.

The second claim is that it may lead to economy in labour, but it is bound to be very uneven in its effect. In my constituency, I have a number of small firms in the furniture trade and others, and many craftsmen firms. Small firms with 10 to 30 employees have no room for flexibility of labour and cannot reduce their manpower to any extent. Nor can craftsmen firms do so. Schools are very unlikely to be able to reduce their labour, either of teachers or anyone else. Can hospitals economise in labour? Perhaps they may be able to do so on the administrative side, which the medical boys claim is overstaffed. Then there are the local authorities; and what about employees such as domestic helps?

One can think of private, public and industrial undertakings which will find it quite impossible to reduce their labour forces. Industry can pass the cost of this on to the consumer, and undoubtedly will. Non-industrial undertakings cannot do so. The worst thing about this payroll tax is that it does not distinguish between the high labour content and low profit margin undertakings and the low labour content and the high profit margin undertakings.

I can give an example from a firm whose accounts I looked at only a day or two ago. It is a firm employing about 650 people and if the payroll tax were put on to the full amount that would mean an additional imposte for this firm of about £6,700 a year. The firm is making a profit of £52,000 a year, so that the additional tax would represent about 12½ per cent. of its profit before taxation. That is a very high additional cost to have to bear. This firm is trying to export and about 15 per cent. of its turnover goes to exports and it is trying to build up that figure to 25 per cent., but that is very expensive.

If this weapon is to be retained, it should be more selective and it should be definite and not vague. The threat of this weapon hanging over industry is bad. Any firm making a tender for a long-term contract is bound to take into account the possibility that it may have to pay this tax, and it will include that in its costing. It is far better to be definite and to say that the tax is to be imposed and not to hold it over industry as a threat. If it is to be imposed, it should be associated with much greater encouragement to develop automation and produce labour-saving machinery and so on, more encouragement than is given in the Budget which merely leaves the investment allowances as they are without doing more about it.

There were a number of other topics which I wished to raise, but I am certain there are many other hon. Members who wish to speak before the debate is wound up, so I will come immediately to the subject of exports. I have said that Surtax will not have more than a marginal effect upon exports, but I cannot see anything in the Budget which will appreciably help the export problem. On the contrary, so far as I can see, the proposed additional taxes will make industry's position in the export markets more and not less difficult—the addition of the payroll tax and the additional tax on heavy oils, which, for a company I was studying at random today, will cost another £6,500 in a full year. Those things will make our competitive position overseas not easier, but much more difficult.

I know that much of the problem of selling overseas is not a problem for the Government to solve. The Government do not export. They can produce an atmosphere which helps concerns which are exporting, but they do not do so themselves. Much of our problem lies in the lack of aggressive selling by our own industrial concerns, often lack of imagination and a sense of complacency.

Above all—and this has been mentioned once or twice in the debate—we have one overriding problem in a nation which, at least on the face of it, appears to be prosperous. It is that a prosperous nation with a high standard of living tends to become soft, physically, mentally and spiritually, and to lose the incentive or desire to go out and fight for business in the markets of the world. That is one of the snags we are up against.

I have one suggestion which can help in the export drive. We should introduce a market development allowance, a percentage allowance for special development expenses on export turnover achieved in a new overseas market and allowed for the first three years of that development. We could allow a lower market development allowance for export turnover in existing markets, where the company was already trading, or in the new markets after the expiration of the initial three years on the higher allowances.

It may be that that would be against the G.A.T.T. in that form. I do not know, but even if it is, then it is time that we negotiated a change in the G.A.T.T. It may also be argued that our competitors would follow suit. It would not matter much if they did. It would not remove the effect of the tax incentive on our exporters, but merely put our overseas competitors on the same basis as our companies. That is the competition we would have to face. We have to meet competition, and sooner or later the time will come when we will have the Common Market and will have to meet intensive competition from overseas. We will have to learn to meet it, because it is only by meeting competition that in the long run we will be able to survive.

I want, finally, to refer to financing National Insurance. I have said this before, but I think that the time has now come when we can no longer try to finance our social services through the flat-rate weekly contributions, as we now do. This cost must be included in the fiscal system in one form or another, either merged with the existing form of direct taxation on incomes, or as a separate social service tax. It can no longer be carried, even in part, by the weekly contribution, because that places far too great a burden on those people who, generally speaking, are least able to afford it.

Not long ago, I asked whether the pension of the 10s. widow could be increased. I was told that it could not be, even though it would cost only £2¼ million, because to do so would be unfair to those widows who, for one reason or another, even now, have no pension at all. From time to time, and even in this Budget, we have given unequal benefits to certain people, and I see no reason why we should not increase the pension of the 10s. widow at least to compensate her for the fall in the value of money since that pension was first introduced. I commend that suggestion to the Chancellor and perhaps he would like to pass it on to his right hon. Friend the Minister of Pensions and National Insurance.

There are many other things which I wish to draw to the attention of the Committee, but I will exercise a self-denying ordinance and sit down so that other hon. Members will be able to speak.

8.26 p.m.

Mr. Richard Marsh (Greenwich)

The hon. Member for Wycombe (Mr. John Hall) began by making our hearts bleed for the poor Surtax payer at the £24,000 level. It is time we stopped this nonsense. We have heard just about enough of the tragedy and heartache which afflicts these poor souls struggling along on £10,000, £15,000, or £20,000 a year.

Mr. John Hall

No one suggested that it was tragic or heartbreaking.

Mr. Marsh

I do not pay Surtax, but I should be perfectly willing to swop my non-Surtax income with the income of any hon. Member opposite who pays Surtax and be prepared to pay his Surtax. The majority of people who pay Surtax are among the section of the population which is at least far from being the worst treated section.

The hon. Member went on to suggest that there was a need to provide incentives to British businessmen to seek new markets overseas. That is very important, because one of the things which is wrong about the Budget is not just one aspect of it, but the whole attitude in the country which has become fat, lazy and complacent in spite of the difficulties of competition with which it is faced.

It is time that it was pointed out that there are large sections of British business and industry which could do much better than they are doing and which could make a much more positive effort to seek new markets overseas instead of sitting back waiting for trade and business to come to them like manna from heaven.

We always enjoy listening to the hon. Member for Louth (Mr. C. Osborne). Like my hon. Friend the Member for Blyth (Mr. Milne), I think that every young Socialist in the present generation has learned to value the speeches of the hon. Member for Louth and to write them down in notebook and quote them at meetings almost ad infinitum.

The hon. Gentleman mentioned what has been apparent to us—this lack of interest throughout the Budget debate. We have reached the position where, after eleven years of Tory Government, the country has sunk into a period of economic stagnation and everyone accepts that this once great industrial power—there is no need to refer to league tables—is today putting up probably the poorest performance in the world among the highly industrialised countries. What is so serious is not only that the situation exists, but that people have come to accept it and that nobody seems to care very much.

After eleven years of Conservative Government the only thing about which we can be proud is that industrially we are ahead of Belgium and Luxembourg. This is a matter which people of all political opinions should stop to consider and then ask where we are going. The serious aspect of the Budget is that it ignores our position and produces no alternatives and no remedies. For example, there is no alternative in the Budget to the problem of productive stagnation. We have a Budget which hands out a little bit which quietens the 1922 Committee, which quietens a few Government supporters, which ties up a few loose ends, but which is no nearer to meeting the problem this year than it was last year.

We are faced with ever-growing competition from the Soviet Union, from Western Germany, from Japan and from every industrialised country in the world, yet the Government sit there contemplating their political navels without any idea of where to look for a solution.

As one would expect with a Conservative free-enterprise Government, it is clear that they have no idea of economic priorities. We continue to jog along complaining bitterly about the lack of progress in the export field. It is rather like religion in the Christian Church. Just as the Archbishop of Canterbury takes a dim view of sin, Her Majesty's Government think that we ought to do something better in the export field, but nobody gets down to doing anything apart from odd speeches by the President of the Board of Trade. We worry about exports, yet we concentrate on consumer services. We worry about exports, yet our investment in the metal-producing and chemical industries, the fields in which we could find markets overseas, is far from satisfactory.

This is the real problem which always faces a Conservative Government. They cannot decide Whether to radically re-examine their approach to our economic affairs. Because of this threat of economic competition, which gets worse each year and from which we have been sheltered since the end of the war, it is no use fiddling about with Surtax and trying to kid people that the Surtax concessions are anything other than a way of paying off one's friends. It does not assist the country in the position in which it is placed.

The hon. Member for Wycombe said that the Surtax provisions were a matter of fiscal justice. Nobody would deny that the Surtax payer has a case. He has, but a lot of other people have a case. The aged have a case for increased pensions. The 10s. widows also have a case for more money. Persons paying Schedule A tax, especially those in small homes—because they are the only people who pay the tax these days—have a case for assistance.

What is wrong with the Surtax case is the type of person the Government have chosen as the first priority. Nobody denies that the Surtax payer can produce a case for increasing the level of Surtax, but no one can justify it at this time. This argument has been made many times. In a situation where, one month, a sum of £65 million is to be raised from the sick, it seems ludicrous to pay out £85 million the next month to people earning over £2,000 a year. If the Government have £85 million to spare, why should it be given to people who, with all their justifiable grievances, are certainly not suffering hardship, as the hon. Member for Wycombe rightly said.

We criticise the system of priorities, and we are told that Surtax levels were raised because it was necessary to the British economy that they should be raised. We are told that all these exporters have been on a kind of unofficial strike, refusing to export because the Surtax levels were too low, and that now that they have been raised the exporters will go galloping off exporting. What absolute bunk! Hon. Members opposite do not believe it—at least, very few of them do—and I am sure that very few of their supporters do. As my right hon. Friend the Member for Huyton (Mr. H. Wilson) pointed out, if we put forward the argument that exporters export more when they get more income the same can be said of importer, runners of striptease establishments, gamblers and everybody else.

The Surtax proposals are an inflationary move. The hon. Member for Louth, who uttered some very shrewd comments on the situation, paid great tribute to Sir Stafford Cripps and the policy of the wage freeze and the halt to inflation which he attempted to impose when he was in office, under very difficult circumstances. The hon. Member was asked whether this Government could rely on the sort of support that Sir Stafford Cripps had. Hon. Members know that no Conservative Government could implement a wage standstill at present. No Conservative Government could gain the trust of the majority of the working population at all levels in order to obtain a standstill in the economy to enable us to get our breath. Men earning £15, £16, £17 or even £20 a week, who are worried about mortgage repayments, and who have been told that they must pay more for their National Health prescriptions and higher National Insurance contributions cannot be persuaded to rely on a Government who, within a few weeks, give £83 million to people earning over £2,000 a year.

The Government do not have the confidence of most of our people, economically. They make the electioneering point that they did nicely in the county council elections, and also in the last General Election. We all know that. But one of the things that impress most people who go to the Iron Curtain countries—people like myself, who profoundly dislike their system—is the way in which even those people who disagree violently and completely with the régime feel that they have a stake in the progress of their country; that they are a part of it, and are involved in its advance. That is something which our people do not feel. There is stagnation in British industry because there is stagnation in the country as a whole. It has no sense of leadership, and no belief in where it is going or how it should get there.

It has become clear that this country cannot be run without central economic planning. Hon. Members opposite have woken up to the facts of life and have discovered that there must be Government intervention in aviation, cotton and almost every other form of our national life. The only difference between the two sides of the Committee is as to how much intervention there should be, and the method by which it should be achieved. I am convinced that until this country is prepared to plan its economy—to realise what resources it has and then what priorities it will allocate to those resources—year after year we shall have to face balance of payments crises and other crises of one sort or another.

Inevitably, by the law of averages, we shall find ourselves at some time in serious economic difficulties. We shall have a situation in which a Government who came to power because of their alleged support for a great industrial nation and its industrial know-how tipped this country down the drain, economically—not deliberately but because they were not prepared to take the measures which were so obviously essential.

8.40 p.m.

Mr. F. M. Bennett (Torquay)

For the same reasons of restrain which the hon. Member for Greenwich (Mr. Marsh) and my hon. Friend the Member for Wycombe (Mr. John Hall) observed, I shall not follow up the interesting points they made. I know that they will forgive me for that. I shall concentrate the few remarks I wish to address to the Committee at this late stage in the Budget debate on one or two matters. In common with some other hon. Members I have now sat through every Budget debate since I first came to the House in 1951.

One feature of Socialist criticism of successive Conservative Budgets has run in a single unchanged pattern throughout the last nine years. Whatever steps we take, we are always told that the Budgets are designed to help the rich and our well-off supporters at the expense of the poorer members of the community. We are told that we help the brewers, the millionaires, the property speculators and all those sorts of people. The astonishing thing is, if this criticism is true, that there must be a thundering lot of property speculators and brewers in this country at election time—about 16,500,000 or so, or whatever the figure of Tory supporters was. Though these attacks have been made by the party opposite and we have an adult political electorate which has plenty of time to think of these things between the Budgets, the best evidence that these attacks are nonsense is that so many people, whose interests we are always alleged to ignore, vote Conservative in increasing numbers.

What can be the explanation of this phenomenon? Surely it is that the British people are not fooled by these criticisms. There are far too many of them—millions of trade unionists and their wives—who, election after election, have by their votes refuted all the criticisms of the Socialists after successive Tory Budgets. The electors of this country in all sections of the community realise that successive Conservative Chancellors and Governments have tried to balance the resources available so that each class of the community in turn will benefit. We have kept the priorities as I think they ought to be kept.

This is the ninth or tenth successive Conservative Budget and only now are we dealing with the Surtax payers. If it is said that it is not right to do that now it would be interesting to know when would be the right time to provide relief for this section of the community. In order to find the resources to give this relief we have increased too Profits Tax to an almost exactly similar amount. No one can say, therefore, that this has been done by sacrificing the interests of those poorer members of the community.

Two reasons have been given by Her Majesty's Ministers in the last few days for the change in the level at which Surtax becomes payable. One has been treated so exhaustively that I do not think it profitable to pursue it much further. I refer to the incentive to work harder and to export more. We have different views about that on either side of the Committee, but I do not think there is much point in arguing them further, except in one context I will come to in a few moments. The other reason is that it is a simple act of justice.

In that context the argument is based fairly on the fact that the figure of £2,000 at which Surtax is paid was fixed in 1920, and since then not only has the value of money fallen, and the cost of living increased vastly, but other taxation has increased heavily. Obviously, therefore, there should be a change on the grounds of social justice alone. If £2,000 was the right figure in 1920, and even when a Socialist Government were in office in 1929–31 and from 1945 to 1951, it must be wrong today; or else the figure was fixed far too high then and the payment of Surtax ought to have been fixed at a much lower figure in 1920 and the successive years.

Although I appreciate that the priorities have made it necessary to concentrate on earned income this year, I hope that we shall not allow ourselves to get into the position of indefinitely penalising so-called unearned income in this context. I say that, not from any feeling of wanting to come to the aid of extremely rich men with inherited fortunes. If, however, the Government are to say, as successive Governments of every political complexion have said, that the people of the country ought not to spend all their available money but should invest more in industry and put more into savings, it is not right to treat the income which they thereafter derive by those means as something which should be penalised in a different way from other sources of income.

If we are to look to the industrial future of the country we must remember that there are not only two partners, management and labour, but a third partner, capital itself. If we are to go on encouraging people to play their part with this third section to ensure the industrial future of the country, I should have thought it not only fair but logical that when the first possible moment comes we should not shirk from the need to make similar changes in Surtax rates on unearned income, which are still on exactly the same basis as when fixed in 1920. We ought to take some steps in regard to unearned income as well as earned income.

In criticising the country's general economic purpose, various hon. and right hon. Members opposite have made the usual comparison with the league tables of countries overseas. Hon. Members on this side of the Committee are getting used to those comparisons, but oddly enough, we never have pointed out to us any particular reason why those other countries are supposed to be doing—and in some cases are doing—so much better than we are. It certainly is not because West Germany and the United States of America are following economic and social policies advocated by the party opposite and are therefore doing well.

No one would suggest that the President of the United States or the President of Federal Germany is following the advice of hon. Members opposite, but, oddly enough, there is one feature which is never referred to. Although we are told that the present rate of taxation, particularly on the management and technician level of income has no effect at all on output in this country and that no fresh incentive is required, we find that in those same league tables the rates of direct taxation on precisely the same levels that we are changing on this occasion are considerably lower than they are in this country.

Mr. Brown indicated dissent.

Mr. Bennett

The right hon. Member for Belper (Mr. G. Brown) shakes his head, but I cannot argue about this because I am particularly anxious to allow other hon. Members to speak in this debate. I am quite willing to quote the figures if necessary. In fact, the net income kept by people in the levels we are now debating in Germany and America are considerbly higher than they are here. They will remain higher even after we have made changes under the present proposals.

When we say that we are to cancel Surtax on earned income between £2,000 and £5,000 one is sometimes left with the impression, listening to the criticisms made, that that means those people will pay no tax at all. They will still be paying an extremely high level of Income Tax, amounting to nearly 40 per cent. of the total anyway. If we compare the figures in the document which the right hon. Member for Belper has, we shall see on reflection that, even when these changes have been made, a comparable person in Germany or America or France will keep more net income than the person in Britain.

Mr. G. Brown indicated dissent.

Mr. Bennett

This must remain a matter for everyone concerned to check for himself later. I am perfectly prepared to withdraw at some future date if it can be shown by the right hon. Member that I am wrong. I hope that he will do likewise if he is wrong. I am in fact quite willing to bet him a Premium Bond that I am not wrong.

There is another altogether different point I want to make. I have my doubts about one aspect of the payroll tax, which otherwise I find an original and interesting idea. I fear that, as long as this remains a potential threat in the background, it will be very difficult for those who tender for long-term contracts not to take that possibility into account by increasing their estimates of costs for the coming months—and even years ahead in the case of long contracts—because no business that failed to do so would be very sensible. They might find themselves caught up in the middle of a contract with something involving a large new element of new cost. Therefore, I hope that, by one method or another, this danger can be overcome. I have one or two possible suggestions on how it can be done, but I do not wish to weary the Committee with them now.

There is one other small point. I should like to know as soon as possible—perhaps it is too early yet to get the information—how the new regulations and new methods proposed by the Chancellor last year for dealing with those who make large tax-free incomes under the guise of capital gains are going along. Have these regulations proved sufficient, and are they doing the job? Here I think I should find common ground with hon. Members on both sides of the Committee. What people in this country object to is not successful investment but the activities of those who under the pretext of capital investments step up incomes and avoid the payment of tax upon them. For that reason, the Chancellor last year took very great pains to find means of overcoming this difficulty, and I am looking forward to hearing from him whether the method has proved effective or not.

I wish to make one other suggestion in the same field. I should not have minded if the Chancellor had announced that, just as one has to pay, in the ordinary way, Stamp Duty of 2 per cent. on all share transactions, one should now pay the same Stamp Duty being paid on all share transactions carried out within the account. At this moment, if we are trying to discriminate between blatant speculation as opposed to genuine investment for future capital appreciation, no one can say that one is doing other than speculating if one tries to buy and sell shares within a single account.

We were promised a few days after the Chancellor's proposals were announced, in nearly all the newspapers and by speakers on the radio, a sustained and vigorous Socialist attack on my right hon. and learned Friend's proposals. If the last three days have been a sustained and vigorous Socialist attack, I do not think that the Chancellor need do other than sleep very easily during the coming months.

8.52 p.m.

Mr. A. V. Hilton (Norfolk, Southwest)

Towards the end of this four-day marathon, when time is running out, I hope that the hon. Member for Torquay (Mr. F. M. Bennett) will not expect me to follow him in detail, because I want to say a few words about the effect or the non-effect of this Budget on my constituency and others like it.

I represent a constituency the main industry of which is agriculture, and in which most of the workers are on the lower rungs of the wages ladder. I can assure the Chancellor that his Budget, which was presented so pleasantly, has given no satisfaction at all to constituents of mine, and it is not likely to receive any sort of welcome.

The Chancellor has made a tremendous concession to Surtax payers. I agree that some consideration was due to Surtax payers, but this large concession is out of proportion at this time. Many hon. Members, particularly hon. Members opposite, have emphasised the importance of giving incentives to management in industry in order to try to increase production, and we are all anxious that our production should be increased. Indeed, one of the main complaints of the Labour Party has been that we have had stagnation for so long. We therefore agree that we badly need greatly increased production and that incentive is necessary. But there are two sides to industry—the manual workers and the Surtax payers. It seems strange to me that, according to the Chancellor, only one side needs an incentive.

It cannot be denied that the production record of farm workers equals that of any other workers in this country. Their present basic wage is £8 9s. a week. Farm workers are being asked to do overtime, but they are taxed on their overtime earnings. There is very little incentive for young farm workers to drive tractors with head lights on, sometimes nearly all night, when they are taxed on their overtime earnings, and at the same time the Chancellor gives this tremendous incentive to Surtax payers. It seems strange to me that it had to be a one-sided hand-out rather than that both sides of industry should share it.

My hon. Friends and I were interested in the antics of hon. Members opposite when the Chancellor reached this part of his speech. We had been watching the antics of the hon. Member for Kidderminster (Mr. Nabarro) under his "topper", and we noted the jubilation with which he received the Chancellor's announcement about Surtax concessions. He was so overjoyed that since then we have seen him in the House for only five or ten minutes, and that was at midnight last night when he went through the Division Lobby.

No doubt the new Chancellor will be the hero of the hon. Member for Kidderminster and his henchmen. It seems that the hon. Member for Kidderminster will not be after the new Chancellor's blood as he was after the blood of his predecessor whom he threatened so frequently, especially at this time of the year.

Last week, with many others, I was concerned in the county council election campaign. I noticed that some Tory politicians at that time said that there was little difference between the two main parties. We have only to look at what has happened this week to see the difference between the outlook of the two parties. A few weeks ago the Minister of Health proposed to double the prescription charges. I believe that that is still the biggest thorn in the side of our people, especially the sick and aged.

It was noticeable on Monday that, although the Government Front Bench was packed, there was one notable absentee—the Minister of Health. The right hon. Gentleman did not have the pluck to come along to hear the Chancellor hand out this large "lob" to the wealthy, knowing that a couple of months earlier he had soaked the poor and needy by doubling prescription charges and increasing National Health contributions. When those charges were increased, the Minister of Health said that everyone would pay the increases, be they the humblest worker or the Surtax payer.

Another proposal of the Chancellor will affect all car owners, whether they own Rolls-Royces—and are Surtax payers—or seven or eight h.p. vehicles—the family oar of the workers. All will pay the increase, as happens when anything has to be paid to this Government. When it comes to giving a hand-out, it is a different story. Only a small percentage of the wealthy will benefit under the Chancellor's Surtax proposals.

Tory propagandists have been trying to tell the electors that in matters of policy there is little to choose between the two parties in the House. If that Budget statement is not an eye-opener, I do not know what is. The people to whom these Tory propagandists have been speaking are the people who will have to pay the increased prescription charges and National Insurance contributions, and they are wondering why they, too, will not share in this week's Budget hand-out. The reason is simple. The hand-out is going to the Chancellor's wealthy friends, the people who support the Tory Party at election time and no doubt this is that party's way of returning the thanks.

The payroll tax is not welcomed in areas such as my constituency. Although we tend to speak in terms of 4s. a week, let us remember that that amounts to £10 a year. The farmers, for instance, find it difficult to pay the minimum agricultural wage. Many farmers have to be persuaded to employ more labour and we do not want to make the task of persuasion even more difficult. I fear that if we overburden them, they will tend to reduce their labour force—and in the years between the wars I had experience of unemployment.

The tax on fuel oil is also not welcomed, especially by horticulturists. The Government recently gave them grants for modernisation and for heating equipment on their holdings and many horticulturists have recently changed over from solid fuel to oil. Naturally, this increase in the price of oil will increase their overheads.

I regret that the Chancellor has been unable to do anything for the holders of post-war credits or to give more help to widows and pensioners, on whose behalf a number of hon. Members on both sides of the Committee have made representations to the Government. This typical Tory budget is anything but welcome, not only in my constituency, but throughout the country.

9.5 p.m.

Mr. George Brown (Belper)

I am sure that everyone who has been able to listen to much of the debate will agree that there have been some outstanding speeches. Picking any out for comment, of course, is always invidious. Much depends on one's opportunity to hear certain speeches and not others, and, of course, the basis of one person's judgment may differ from that of another.

Nevertheless, I think that no one will mind if I mention, first, the maiden speech of the new hon. Member for Worcester (Mr. Walker), who is not at present in the Chamber. He made what I thought was an uncommonly competent and well-delivered speech. On my own side this evening, I was particularly struck by the speeches made by my hon. Friends the Members for Greenwich (Mr. Marsh) and for Glasgow, Craigton (Mr. Millan), both of which seemed to me to be very significant.

I must say also, to show how fair I am, that I was struck by the speech of the hon. Member for Wycombe (Mr. John Hall). The hon. Gentleman had precious little comfort for the Chancellor, not that the Chancellor heard much of what he said, and his speech seemed, from our point of view, to be both cogent and well argued.

I ought not to omit a reference to the Chancellor's own speech. Both his and the contribution made today by the Financial Secretary were, I think, impressive in their delivery, although we, of course, have other views about their content. About the President of the Board of Trade, I cannot say the same. I pass rather quickly from his and the other Government contribution to the debate made from that side of the Committee.

One thing about the Budget is to the credit of the Chancellor. It combines a novel awareness that things have gone wrong with the economy and a long overdue admission that Government policies have been inadequate and ineffective. This is an advance. It is an advance which has not yet quite sunk into the mind of the hon. Member for Torquay (Mr. F. M. Bennett). He has not yet understood the point, nor, apparently, has the Prime Minister, whom we are all happy to welcome to our debate.

I am particularly pleased to see the Prime Minister here, because I wish to start with a reference to something which he very recently said. I have with me a copy of this evening's Evening News. It is clear that, although the Budget was put back for a week to allow the Prime Minister to be here, what the Chancellor had to say did not really go home to the Prime Minister either at the Cabinet meeting, where, presumably, it was disclosed to him, or at any later stage. The headline in the Evening News tonight is, "Booming Britain". Of course, the Prime Minister was among his Tory women, and perhaps that is not the best atmosphere for sticking strictly to accuracy and the facts.

According to the report in this newspaper, the right hon. Gentleman said that Industrial production is 12 per cent. higher than two years ago. Our exports are running at a record level. Capital investment in new factories and new machinery rose by no less than 16 per cent. last year. A further 30 per cent. increase is expected this year". What does the Prime Minister think that the Chancellor was talking about? The Chancellor said that On any basis of calculation, the balance of payments during 1960 was very unsatisfactory". A little later, he said: But the other side of the medal was…the signs of a return of increasing costs and prices, the failure of our exports to increase sufficiently, and the consequence serious weakness in our balance of payments. It cannot be denied that it was a year of prosperity. Equally, it cannot be disputed that that prosperity did not rest on a sufficiently secure foundation."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 797.] A very different speech from the one the Prime Minister delivered this afternoon.

Mr. William Hamilton (Fife, West)

A different audience.

Mr. Brown

We are all well aware that the Prime Minister is given to this kind of political presentation, which does not necessarily have to accord with the facts. Often, when I read what he says, I am reminded of a remark once made to me by the late lamented Aneurin Bevan, in one of the rooms in this Palace, just after he and I had had a difference of opinion. I said, "You want to get hold of the facts". Mr. Bevan said, "One of the things you will learn is that a knowledge of the facts often impedes the best speeches". I am bound to say that one would have been impeded this afternoon.

Every hon. Member knows that, leaving aside whatever political advantage one tries to get out of it, there is a serious side, if I may choose uncontroversial words, to the economic situation of Britain at present and which faces us in the future. One thing that we have to do in such a situation is to put the facts before the people and give them the sort of lead which will inspire them to the action that ought to be taken. How can that be done if the Prime Minister, when he speaks in the country, uses the sort of words and evokes the sort of headlines which leave everyone thinking as the hon. Member for Torquay thought, namely, "As long as you do not listen too much to the silly Socialists everything in the garden will be delightful". This is exactly what is not true and exactly what the Prime Minister ought not to put before the country.

What is the basic problem which faces us? Let us try to see it as clearly as we can and as it has emerged from the debate. The first thing is that the industrial production of the country is not rising fast enough and, except for a short period, has not done so for quite a time. In so far as it is rising at all, it is doing so far more slowly than that of our competitors. Various right hon. and hon. Members opposite have pretended that it is wrong, or not very important, when my right hon. Friend the Member for Huyton (Mr. H. Wilson) and others produce what are called league tables.

Unless we listen to the note of warning that is surely being conveyed when every one of our competitors in the world is going ahead productively faster than we are, how will we wake up to what is happening? We produce these tables—T will not repeat them now—not merely because we want to show that other people are doing better than we are, but because in this table of productivity, and even of our exports, lies the clearest warning to us of where we shall finish if we do not pull our socks up and do something serious about it.

Our industrial production record is and has been very worrying over a period. We can start by considering whether the Budget is addressed to the real problem which faces the country and then we can see what we think ought to be done about it. The slow rise in production has been paralleled by a totally inadequate rise in exports. In the second and third quarters of 1960 exports declined while import rose at an alarming rate. There was a slight recovery in the last three months of 1960, but the value of exports in the final quarter, after seasonal adjustments, were 3 per cent. less than the value of exports in the first quarter of the year.

This is not a booming situation. It is a frightening situation, one which can land these islands, peculiarly dependent, as we are, on imports and, therefore, needing the means to pay for them, in very considerable trouble. The President of the Board of Trade was one of those yesterday who, on the question of the league tables and comparisons, seemed peculiarly to want to make light of it. I do not know whether that was his intention, but that was the impression which he gave me. He did not appear to regard it as a serious business. The Chancellor, however, made a quite different impression. He not only referred to the insecure foundations, but he warned us about the balance of payments and about how far we had to go in building up exports. He went on to say that the solution to the balance of payments problem was not to be found in checking the growth of the economy, as the Government have so far been doing, and so on.

If the Chancellor's own side of the Committee had been listening to all that analysis of his instead of waiting so expectantly simply for the reference to tax reductions that hon. Members opposite hoped would come later, some of the speeches that have been made today on the Government side would not have been made. All that the Chancellor said in the analysis was excellent, but when it came to what to do about it, it was a very different story.

There is one thing that I should like to get clear and I ask hon. Members opposite to think about it. It is repeatedly being said—it was said again just now—that part of the reason for our problems is that we have either too many strikes, higher wages, or higher taxation than our competitors, or higher costs of social services. A variety of things like this are said.

If one looks at the comparison between us and our European competitors in particular, that is simply not true. There was a time when we were ahead of them in wages and social services. Now, however, if we take the true labour cost, both what is paid in money and what the employers have to pay in other ways—and social benefits in the other countries are often carried by the employer—it will be found that far from being penalised, we are in many cases behind other countries. It cannot be said that it is this which is holding us back. Other countries are going ahead and carrying heavier burdens in this respect than we are.

There are two key factors with neither of which the Budget comes into contact. The first is the shortage of scientists and technologists in British industry. I will return to Surtax presently. Folk who think that scientists and technologists are in short supply in British industry because of a marginal difference in the amount of Surtax which they might have to pay when earning £10,000 a year are barking right up the wrong tree. The reason is quite different. It has something to do with industry's very late recognition of the part that this kind of person has to play. It has a great deal to do with the kind of salaries that are offered to these people, not only at the starting point, but for a very large part of the time while they are working.

The second key factor is the inadequate pace of expansion of the British economy and of innovations in it. I believe, quite contrary to what some people have said, that there is nothing in the Budget that will stimulate investment or get investment to the places where it is needed. This is as much a part of our problem as the overall problem of expansion. It is the business of planning a longish period ahead and being selective in what one wants to achieve. On the contrary, not only does the Budget not attach itself to this task, but over the past nine years the Government's policies have actually held back long-term investment and have discouraged investment in the areas in which we ought to have it.

The biggest single cause of the balance of payments crisis that the Chancellor spoke about seems to us to exist in the tremendous rise in imports in the last year or so. The Government's Economic Survey does not say this. It states that the expansion of the economy over the past two years has resulted in a substantial increase in imports. That is not true. With great respect to the President of the Board of Trade, that is not the real truth. If the right hon. Gentleman will not look more deeply than that into this, we are in a tragic way.

Of course, there has been some increase in raw materials. There has been an increase in the materials required for industry, but that is not where the big increase has gone. The big increase in the last year, for example, has been in the imports of manufactured and semi-manufactured goods, which have risen in a single year, I am informed, by over one-third and which have added to our import bill an extra £150 million and £247 million respectively. These two increases taken together, were responsible for more than enough to account for the whole of last year's enormous balance of payments deficit on current account.

This, in our view, is where the weight of it happened. This happened because of the right hon. Gentleman's own premature dismantling of import controls, which would have allowed him to keep the economy steering the right way. He, more than anyone else, is personally responsible and it is not due, as the Economic Survey puts it, to an expansion of the economy.

The President of the Board of Trade (Mr. Reginald Maudling)

Imports during the last two years have risen by £800 million a year. Sixty per cent. of that was for materials for industry. Only one-quarter was for finished manufactures and, of that one-quarter, two-thirds was for capital equipment for industry. At the same time, our exports of finished manufactures, particularly of machinery for the people who were sending the goods to us, increased much more than our imports.

Mr. Brown

If the right hon. Gentleman is right—[HON. MEMBERS: "He is."]—then the Chancellor's reference would be wrong. The Minister is now using such highly selective figures for his gullible back benchers that the Chancellor cannot get his message over.

I am now very sure, talking of briefs, who gave the Prime Minister his misleading brief earlier today. He obviously did not get it from the Treasury, as he should have done, but from the Board of Trade, and that is a terrible mistake.

I turn quickly to two of the new proposals, the so-called new regulators. Here, I ask the Chancellor, before I talk about them in general, a detailed question that we ought to have cleared up tonight. When the Financial Secretary spoke earlier today about the two new regulators, he introduced a second "Boyle's law", which, in some ways, seemed a little more dangerous than the first. He said, in answer to interventions, that these regulators entitled the Government to interfere with the economy, to raise duties and taxes and that they could be used in the autumn, which, he said, was one of our difficult times, even though Parliament was not sitting.

The hon. Gentleman was asked how this could be done if, in fact, these regulators required affirmative Resolutions. He gave some explanation about our being able to do this first and Parliament would pass an affirmative Resolution later. This would not be affirmative Resolution procedure at all. We need to have it clearly from the Chancellor whether this is a matter which Parliament will always have the chance of discussing before it takes effect.

In so far as the Chancellor has accepted that the kind of fiscal controls which the Government have left to them to up to now are not enough for doing the job, this is a welcome step forward but I cannot say that we regard with anything like confidence the particular ones that he has put forward in the Budget, the additional fiscal weapons with which he has armed himself. It seems to us that the two weapons he has chosen are totally inadequate, and that became very apparent from the conflicts there were between the various Ministers both about their purpose and the way that they would operate. I ask the Chancellor to spend a moment or two on this subject a little later.

It seems to me that the power to alter indirect taxation by affirmative Resolution outside the Budget has many dangers and doubts in it. Has the Chancellor thought about the effect on trade of the operation of this kind of change or surcharge—and I leave out the rebate although that too will be difficult? Has he thought about the effect on stocks and the degree to which it would worry trade over large periods of the year?

Is it a good way of stimulating the economy to think in terms of a tax rebate which, for the most part, will stimulate consumer spending, to a predominant extent on luxury goods which, on the whole, we want to discourage, instead of stimulating productive investment at the key points of the economy? Apart from the political point which has already been made about the use that this could be put to for electioneering purposes, it seems to me that this could have economically a very discouraging effect, and the opposite of what is intended, on the country's trade.

As to the payroll tax, as an hon. Member opposite said earlier today, this has had a very hot reception everywhere. Hardly anybody is persuaded about it and I would draw attention to the completely different approach by Ministers as the best evidence that they have not themselves thought it out yet. The Chancellor chose to concentrate on the fact that this would have the effect of redeploying labour. On the other hand, when we ask the Economic Secretary how this would apply to Remploy—and the purpose of Remploy is to employ labour, not horsepower—he tossed it aside and did not seem to think that it was a very relevant or important issue. But if this did what the Chancellor said it would do, it would be an absolute disaster for Remploy.

The Financial Secretary to the Treasury said this afternoon, in so many words, "At the sort of rates the Government are proposing, this would have little effect on labour, if any at all, and the real point is that it is a new fiscal measure which will enable us to take a large amount of money out of people's pockets and out of the market". For three men who hold responsible Governments posts to have such completely different views on its purpose, suggests that it was not thought out at all. No one will have missed what the President of the Motor Car Manufacturers' Society has said about it.

This is quite a frightening business for large areas of industry, for the development districts, for Scotland, and for Northern Ireland. Areas of heavy unemployment must be very frightened of a tax of this kind being imposed to discourage the employment of labour. For industries that cannot change their labour intensity very easily, for the public services and for the non-industrial trading services a tax of this kind is of no particular value and can only make their position much more difficult.

Since it is in any case an increase in labour costs and can only have the effect of putting up the cost of labour for production and services, no matter whether somebody can pass it on or not, and since the Chancellor spent so much time talking about cost-inflation and the part that it is playing in holding back our exports in competition with other countries, it seems to us impossible to understand why the right hon. and learned Gentleman thinks it useful to add this degree of cost-inflation on top of the cost-inflation of which he already says we have too much. This is not a well thought out plan. Frankly, I doubt whether it will ever come to fruition.

I promised to sit down at a certain time, but I have just time to raise another issue on which public attention has been concentrated and which is the most important part of the Budget. The Budget is not addressed to the economic problems facing us, and that is the most worrying thing about it. The only thing on which there is unity on the Government benches is the Surtax proposal.

The Government have said that they are taking the money out of companies through the Profits Tax and returning it to individuals, but there is no evidence to support that highly distorted presentation. What they have done is to take £70 million in increased taxation last month from one group in the community and to give it to another group through reduced taxation this month.

These are the only two groups of persons involved. Some taxpayers will now pay more as a result of what happened last month, while some others will pay a lot less as a result of what has happened this month. That is the true comparison. Over the last five years, Surtax payers, one way and another, have had over £117 million a year taken off their tax burden, while the people at the other end of the scale, the ordinary people, have had their position worsened, for they are paying more. Let us remember that if the man at £5,000, £10,000, or £20,000 needs an incentive, so does the man at £10 or £15 a week.

A family with £10,000 coming in has £2,000 less per year to pay now; the family with £5,000 income now has £861 a year less to pay. Those in that group are doing well. Most of them have one-third less to pay. Yet, together, they only account for one-quarter of 1 per cent. of all incomes. What about the other 99¾ per cent.?

A further 5 per cent. will pay only slightly less tax. Those earning £2,000 and upwards will have their tax reduced by about £23. A family earning £1,250 will have a tax cut of only about 37s. The remaining 95 per cent. of the people are left with the situation that any tax reliefs they have received over the past five years are more than offset by increases in insurance contributions.

A family with £600 a year is actually paying at least £12 18s. 4d. more than it was paying five years ago. A family with a £1,000 income is paying £5 more than five years ago. In fact, any family with less than £23 a week is paying more in taxes and contributions than it was five years ago.

It is evident that this involves a vast degree of social injustice. It is a deliberate choice by the party opposite, whatever its reason may be, to make those at the bottom of the scale pay more in order to allow those at the very top to pay a lot less. It is not the young scientists, or the young technicians, or the young managers to whom these incentives of the Budget apply. They hardly apply at all to those earning between £2,000 and £5,000 a year.

It is the man on £5,000, even more than the man on £10,000, and even more the man on £20,000 a year, to whom there will be any major benefit. This is not a matter of incentives, but a straightforward plum awarded to people who are far better off than the bulk of their fellow citizens. There are not more than 17,000 out of more than 50 million of the population who get any real benefit out of the Budget. These concessions are not incentives, but a straightforward redistribution of the tax burden from the very rich to the poor.

We will divide the Committee against the Budget tonight, somewhat unusually, on the grounds which I have put to the Committee. The Budget does not address itself to our real problems. It holds out no hope that the Government will now apply the policies which they ought to have applied. So far as it does anything specific, it does something which is regressive, bad and offensive by every moral, ethical or social standard in redistributing tax like this, and we invite the Committee suitably to show its opposition.

9.36 p.m.

The Chancellor of the Exchequer (Mr. Selwyn Lloyd)

I begin by thanking the right hon. Gentleman the leader of the Opposition, the right hon. Member for Huyton (Mr. H. Wilson), the right hon. Member for Belper (Mr. G. Brown), and other hon. Members who have spoken so generously to me about my Budget speech. I realise that that does not in any way involve them in any commendation of the contents of the Budget, and I shall remember that in future, but I very much appreciated what they were good enough to say.

I have listened to a great deal of the debate, and I heard at 3.30 this afternoon with a slight nostalgia a demand for a foreign affairs debate, after a considerable absence of such a debate. There is no need for there to be a demand for a debate on the Budget or other financial business. I realise, as the hon. Member for Norfolk, South-West (Mr. Hilton) said, that this is the beginning of a marathon and frankly I am looking forward to it.

There have been many speeches, and I should like to congratulate my hon. Friend the Member for Worcester (Mr. Walker) on his maiden speech. I will try to deal with the matters which have been raised. I will carefully study what my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) said. We have already had certain discussions about this matter, and I promise him that I will give careful attention to his speech.

During the debate, we have had all the usual arguments about the state of the economy. The right hon. Member for Belper quoted Mr. Bevan saying that knowledge of the facts impeded the best speeches. He did not quote the converse of that proposition.

As I said in my Budget speech, there is considerable difficulty about an objective discussion of the state of the economy. If the Government say that anything is good, they are accused of complacency. If they say that anything is bad, they are accused of having admitted the fault of their economic policies. If the Opposition acknowledge that anything the Government have done is right, they are in difficulty, and they have to say that everything is awful.

But we should be a little careful when we are dealing with the state of our economy about decrying it too much. There has been a great deal of talk about the slow rate of growth of the economy. My right hon. Friend the President of the Board of Trade dealt fully with that question on Tuesday, but I agree—and this was a matter raised by the hon. Member for Greenwich (Mr. Marsh)—that, while not for a moment trying to imply that one is satisfied with it, the level of investment has been rising steadily for some years.

It has now gone up to 18½ per cent. and that is to be compared with the figure of about 14 per cent. five or six years ago. There has been a steady growth in that investment and that is a matter for some commendation of those involved. It is a good augury for the future if we can make use of it; that is to say, if we have the energy and enterprise to match our expanding factories and machines.

I also think that it gives a rather misleading figure always to look only at the average figures. It is quite true that production overall was fairly stable last year after the very fast growth of 1959, but I think that it is quite wrong to say that it was a year of stagnation because many industries, and in particular many of those most closely concerned with capital investment, increased their output.

Perhaps I might give some examples. Consider the metal-working and machine tool industries. In the last quarter of 1960, compared with the previous twelve months, they put up their output by 16 per cent. Contractors' plant is another example—about 17 per cent. Commercial vehicles—13 per cent. This growth is taking place in chemicals, in steel, and in many other aspects of our economy.

Hon. Gentlemen opposite are always saying that the key to progress is more investment. I think that there is more to it than that. Though the figures that I have given show that we are very far from the position of stagnation, I am not the least complacent about the situation, and in introducing my Budget I tried to speak frankly about whether the economy was sufficiently resilient and flexible to meet the demands on it.

My Budget has been criticised because it does nothing for exports, so it is said. I do not think that that is a fair criticism, because one point of the surplus of over £500 million for which I am budgeting is to make room in the economy for exports, and the purpose of withdrawing another £80 million of purchasing power from the economy is to stop the overloading of industry which might otherwise have led to our losing export orders.

I am asking for power to use, if need be, the two economic regulators so as to make quite certain that if £500 million is not enough I can correct the position later in the year.

It is true that I have been urged by some of my hon. Friends—in particular by my hon. Friend the Member for Peterborough (Sir Harmar Nicholls) and my hon. Friend the Member for Aber-deer, South (Lady Tweedsmuir)—to use the Budget to give direct incentives to exporters by the remission of tax on profits earned by exporters. This is a very important matter and I want, if I may, to put some points to my hon. Friends about it.

Both sides of industry have been opposed to differential taxation of this kind. In recent years the Federation of British Industries has consistently advanced the view that the Government's aim should be to remove deterrents to exports, for example, high taxation and unduly burdensome formalities, and not to introduce a new level of concealed or overt subsidies in the form of special incentives to exporters.

The Federation has urged the Government to press other Governments to abandon the various forms of export incentives and subsidies which they adopted after the war, and has suggested to industry that it should follow a similar policy through its international organisations.

The Association of British Chambers of Commerce and the National Union of Manufacturers have supported the F.B.I. in its opposition to the introduction of special incentives, and I understand that that is also the attitude of the Trades Union Congress.

I put this point to my hon. Friends. Since 1952 many forms of subsidy and export incentives in other countries have been ended under pressure from international organisations and also as a result of bilateral discussions. Of our main European competitors, the Germans allowed their Export Protection Law to lapse at the end of 1955, and there have been no export tax incentive schemes since then. In France, direct subsidies on exports of manufactured goods other than ships and aircraft were finally brought to an end in February, 1958, and, so far as we can ascertain, no open subsidies or incentives are given in any other European countries to help exporters of manufactured goods.

Those, and other Governments of course, give rebates on indirect taxation for export, but that is precisely what we do. Therefore, although I will listen carefully to what my hon. Friend the Member for Peterborough says when he tables the Amendment about which he warned me, and I will look at any suggestions which are within the framework of existing international agreements and conduct, my view remains that on balance it would be against our interests to give special tax incentives to exporters since other countries would be bound to do likewise and we might well be the losers in the resulting race. It would undo the work of the last few years—and great credit should be given to industry, working through its international associations, for the work it has tried to do to bring this kind of practice to an end.

But, while I do not think it wise to treat exporters in this way, we have done a great deal to help them recently by improving credit facilities and removing unnecessary obstacles in the way of export trade. In my Budget speech I referred to the complete overhaul of the facilities offered by the Export Credits Guarantee Department which the President of the Board of Trade and I have recently undertaken. We can claim that with the help of the Bank of England and the financial institutions concerned we have now available the range of credit facilities which our exporters need to help them to compete in important markets. We have done much to remove unnecessary obstacles, for example, by the simplification of export and exchange control procedures. The proposal in my Budget to abolish the ad valorem Stamp Duty on bills of exchange was a considerable help to exporters.

In general, I am determined to see that our system is sufficiently flexible to cope with any reasonable demands by exporters. The Customs are very ready to help, and I earnestly suggest to exporters that if they feel that there are any difficulties over Customs procedures they should ask at once for advice from the local Customs and Excise office, and I have given instructions that where a local office is uncertain of the advice to give there should be an immediate reference to London, so that the advice can be given quickly. This is a very important aspect of the export business and I am determined to see that the machine runs smoothly.

So much for exports; now I turn to the regulators. The case that I put for the two new economic regulators can be summarised very shortly. Their purpose is to enable us to take action to stimulate or restrain the forces working within the economy, as and when it is necessary so to do, without having to concentrate action at the time of the Budget, in April, when much of the significance of what may happen later in the year cannot necessarily be foreseen. Moreover, it will enable us to reduce our reliance upon monetary measures—on hire-purchase controls and the like—which we know from experience can be rather harsh and unfair in their operation, because they hit at a restricted band of industry.

The Radcliffe Committee urged the importance of finding new means which could be at once flexible and more pervasive in influencing the economy, and my proposals will meet that end. We want to have available means of stimulating or restraining purchasing power which can be used at any time in the financial year, as I have said, which will be operated over a wide field, will not be concentrated on particular industries or trades and will not involve the creation of new or elaborate administrative machines, but which will enable the necessary stimulus or restraints to be brought to bear by relatively small changes in the rate of payment to be prescribed.

Hon. Members on both sides of the Committee have referred particularly to the second regulator and have stressed its disadvantages. They have spoken about its effect in areas of local unemployment. One hon. Member spoke of the damage it will do in a time of recession. There can be no question of using this regulator at a time of recession. If it were used at all it would be used at a time of high boom in Britain, when there was such a pressure of demand at home that imports were being sucked in and resources taken away from exports. I want these weapons to deal with that sort of situation.

At present we have certain weapons. We have the Bank Rate, we have the hire-purchase restrictions and the special deposit scheme. All have their disadvantages. There is no secret about the fact that they have their disadvantages. Physical controls have their disadvantages—in all the rationing schemes that follow. Any weapon of this sort has its disadvantages. Mine both have, and I do not shirk that fact. I admit at once that there are certain aspects of them which I do not like.

The point was made that I intend to use the second regulator whatever happens. That is not true. Had that been my intention I should have imposed it now. I sincerely hope that I have—and my present judgment is that I have—provided by a surplus of £500 million for all circumstances. But one cannot be certain. There is an old Chinese proverb that to be uncertain is uncomfortable; to be certain is ridiculous. Therefore, I want these powers, not exactly emergency powers, but powers to avert any trouble, and that is how they should be looked at.

I ask for this second regulator to be used this year only attached to the National Insurance stamp. Of course, we shall have power to vary the levy and we shall be prepared to do so if it seems right as between various classes of employees, women and children, boys and girls, who pay separate rates of contribution under the National Insurance Scheme. We shall have the power to do that in the event of there being cause for the use of this regulator.

Obviously, if we examine the possibility of a permanent payroll tax designed to make the best use of our scarce labour resources, we shall want to give a great deal of thought to its purpose and its content and to such questions as whether it could be selective between industries, where it could be selective between geographical areas and whether it could be associated with some other changes in other forms of taxation upon companies. I have not tried to judge those issues this year. I repeat that I am well aware of the possible defects of this and any other regulator, and that is why in my Budget speech I said: I will, however, continue to examine other methods of levying such a surcharge. Should Parliament be asked to grant this power again next year, I would put forward fresh proposals."—'[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 809.] But, in the circumstances in which I find myself, I consider that we must have and must be seen to have a variety of instruments on which to draw for the purpose of regulating the economy in such a way as to leave capacity available for increased exports and to maintain our financial stability.

Questions have been raised today about the use of these regulators when the House is not sitting. Of course, they would have to be confirmed by the House. But so far as the second regulator is concerned, where there is a certain administrative delay, I do not think there would be difficulty, because it would take some weeks to bring it into effect. The first regulator would be announced ahead of confirmation just as other Government revenue duties always are. They are announced and fixed ahead of confirmation. What would happen if the House was not sitting would depend on the situation. Were the House to meet again within three or four days of the announcement of such action I do not think it would be too early. But if, for example, one had to announce the intention of the use of this power when the House would not meet for three months or so, I can hardly conceive of the House not being recalled in order to deal with the matter

I have no desire to take from the House of Commons the right to control the use of this kind of instrument. I am certain that we shall take care of the matter in that way.

May I say a word about Surtax? There has been a great deal of attack on my Surtax proposals—

Mr. James Callaghan (Cardiff, South-East)

Where from?

Mr. Lloyd

I am not quite certain how genuine it was from any side.

Some hon. Members have said that my Budget will make those already rich richer still. I think that they are out of touch and out of date. A man who is earning £5,000 gross today is not rich unless he has large private means as well. No doubt forty or fifty years ago, on that sort of income, one could have had a house in London, a house in the country, a large domestic staff and still have been able to save. But today a man earning £5,000 gross, unless he has private means, has the greatest difficulty in providing out of his income—[Hon. Members: "No."]—has the greatest difficulty indeed in providing out of his income for the education of his family and for saving. That is a fact of life, and Surtax for him, as I say, unless he has private means is at present penal. Therefore, I support what my right hon. Friend the President of the Board of Trade has said about these proposals being an act of social justice.

Quite apart from that, I believe that Surtax remissions on earned income are the most effective way of giving a real impulse to our industrial and commercial enterprise. It may be true of a few people with no family responsibilities, with very simple tastes and with large private means, but the average person, on whatever level, is interested in how much he keeps of what he earns.

The right hon. Member for Huyton spoke as if our main purpose in this was to encourage exporters and as if it was almost a disadvantage that others would be encouraged. That is a complete misunderstanding of what we need. On the one hand, there are the total claims on our resources, and, on the other, the resources available to meet them. Whatever has the effect of increasing our enterprise and efficiency will, therefore, make its contribution and add to our output, about which the right hon.

Member showed himself so anxious in another part of his speech. We also need more exports and more home production to leave more available for exports. The right hon. Member made a point about importers. If importers are more efficient, good luck to them. Our economic life depends on imports of food and raw materials. We want them to be bought more skilfully and more cheaply.

There have been many attempts to make out that these remissions will be paid for out of the health stamp and health charges. I think that those speeches were all made up before my Budget speech was delivered, because hon. and right hon. Members opposite know quite well that in fact these remissions will be paid for almost entirely out of Profits Tax. I think that is equitable. On the whole it means that those who own, the equity shareholders, will get less but those who are earning will get more. I think that particular arrangement of transferring the burden a little from those who own to those who earn is a good thing to do, although I am fully aware of the necessity to have an incentive to saving.

I think that the proposals I have put forward will strengthen our economy, encourage our exporters and gain confidence in sterling at home and abroad, and I ask the Committee to accept them.

Question put:—

The Committee divided: Ayes 325, Noes 206.

Division No. 140.]	AYES	[9.58 p.m.
Agnew, Sir Peter	Bourne-Arton, A.	Clarke, Brig. Terence (Portsmth, W.)
Aitken, W. T.	Box, Donald	Cleaver, Leonard
Allan, Robert (Paddington, S.)	Boyd-Carpenter, Rt. Hon. John	Cole, Norman
Allason, James	Boyle, Sir Edward	Cooke, Robert
Amery, Rt. Hn. Julian (Preston, N.)	Brewis, John	Cooper, A. E.
Arbuthnot, John	Bromley-Davenport. Lt.-Col. Sir Walter	Cooper-Key, Sir Neill
Ashton, Sir Hubert	Brooke, Rt. Hon. Henry	Cordeaux, Lt.-Col. J. K.
Balniel, Lord	Brooman-White, R.	Cordle, John
Barber, Anthony	Brown, Alan (Tottenham)	Corfield, F. V.
Barlow, Sir John	Browne, Percy (Torrington)	Costain, A. P.
Barter, John	Bryan, Paul	Coulson, J. M.
Batsford, Brian	Buck, Antony	Courtney, Cdr. Anthony
Baxter, Sir Beverley (Southgate)	Bullard, Denys	Craddock, Sir Beresford
Beamish, Col. Sir Tufton	Bullus, Wing Commander Eric	Critchley, Julian
Bell, Ronald	Burden, F. A.	Crosthwaite-Eyre, Col. O. E.
Bennett, F. M. (Torquay)	Butcher, Sir Herbert	Crowder, F. P.
Bennett, Dr. Reginald (Glos & Fhm)	Butler, Rt. Hn. R. A. (Saffron Walden)	Cunningham, Knox
Berkeley, Humphry	Campbell, Sir David (Belfast, S.)	Curran, Charles
Bevins, Rt. Hon. Reginald (Toxteth)	Campbell, Gordon (Moray & Nairn)	Dalkeith, Earl of
Bidgood, John C.	Carr, Compton (Barons Court)	Dance, James
Biggs-Davison, John	Carr, Robert (Mitcham)	d'Avigdor-Goldsmid, Sir Henry
Bingham, R. M.	Channon, H. P. G.	Deedes, W. F.
Birch, Rt. Hon. Nigel	Chataway, Christopher	de Ferranti, Basil
Bishop, F. P.	Chichester-Clarke, R.	Digby, Simon Wingfield
Black, Sir Cyril	Clark, Henry (Antrim, N.)	Donaldson, Cmdr. C. E. M.
Bossom, Clive	Clark, William (Nottingham, S.)	Doughty, Charles
Drayson, G. B.	Kerby, Capt. Henry	Profumo, Rt. Hon. John
du Cann, Edward	Kerr, Sir Hamilton	Proudfoot, Wilfred
Duncan, Sir James	Kershaw, Anthony	Pym, Francis
Duthie, Sir William	Kimball, Marcus	Quennell, Miss J. M.
Eccles, Rt. Hon. Sir David	Kirk, Peter	Ramsden, James
Eden, John	Kitson, Timothy	Rawlinson, Peter
Elliot, Capt. Walter (Carshalton)	Lagden, Godfrey	Redmayne, Rt. Hon. Martin
Elliott, R. W. (Nwcstle-upon-Tyne, N.)	Langford-Holt, J.	Rees, Hugh
Emery, Peter	Leather, E. H. C.	Renton, David
Emmet, Hon. Mrs. Evelyn	Leavey, J. A.	Ridley, Hon. Nicholas
Errington, Sir Eric	Leburn, Gilmour	Ridsdale, Julian
Erroll, Rt. Hon. F. J.	Lewis, Kenneth (Rutland)	Rippon, Geoffrey
Farey-Jones, F. W.	Lilley, F. J. P.	Roberts, Sir Peter (Heeley)
Farr, John	Lindsay, Martin	Robinson, Sir Roland (Blackpool, S.)
Fell, Anthony	Linstead, Sir Hugh	Rodgers, John (Sevenoaks)
Finlay, Graeme	Litchfield, Capt. John	Roots, William
Fisher, Nigel	Lloyd, Rt. Hn. Geoffrey(Sut'nC'dfield)	Ropner, Col. Sir Leonard
Fletcher-Cooke, Charles	Lloyd, Rt. Hon. Selwyn (Wirral)	Royle, Anthony (Richmond, Surrey)
Forrest, George	Longden, Gilbert	Scott-Hopkins, James
Foster, John	Loveys, Walter H.	Sharples, Richard
Fraser, Hn. Hugh (Stafford & Stone)	Lucas, Sir Jocelyn	Shaw, M.
Fraser, Ian (Plymouth, Sutton)	Lucas-Tooth, Sir Hugh	Shepherd, William
Freeth, Denzil	McAdden, Stephen	Simon, Rt. Hon. Sir Jocelyn
Gammans, Lady	MacArthur, Ian	Skeet, T. H. H.
Gardner, Edward	McLaren, Martin	Smith, Dudley (Br'ntf'rd & Chiswick)
Gibson-Watt, David	McLaughlin, Mrs. Patricia	Smyth, Brig. Sir John (Norwood)
Glover, Sir Douglas	Maclay, Rt. Hon. John	Soames, Rt. Hon. Christopher
Glyn, Dr. Alan (Clapham)	Maclean, Sir Fitzroy(Bute & N. Ayrs.)	Spearman, Sir Alexander
Glyn, Sir Richard (Dorset, N.)	McLean, Neil (Inverness)	Speir, Rupert
Goodhart, Philip	Macleod, Rt. Hn. Iain (Enfield, W.)	Stanley, Hon. Richard
Goodhew, Victor	MacLeod, John (Ross & Cromarty)	Stevens, Geoffrey
Gough, Frederick	McMaster, Stanley R.	Steward, Harold (Stockport, S.)
Gower, Raymond	Macmillan, Rt. Hn. Harold(Bromley)	Stodart, J. A.
Grant, Rt. Hon. William	Macmillan, Maurice (Halifax)	Stoddart-Scott, Col. Sir Malcolm
Grant-Ferris, Wg Cdr. R,	Macpherson, Niall (Dumfries)	Storey, Sir Samuel
Green, Alan	Maddan, Martin	Studholme, Sir Henry
Gresham Cooke, R.	Maginnis, John E.	Summers, Sir Spencer (Aylesbury)
Grimston, Sir Robert	Maitland, Sir John	Sumner, Donald (Orpington)
Gurden, Harold	Manningham-Butler, Rt. Hn. Sir R.	Tapsell, Peter
Hall, John (Wycombe)	Markham, Major Sir Frank	Taylor, Sir Charles (Eastbourne)
Hamilton, Michael (Wellingborough)	Marlowe, Anthony	Taylor, Edwin (Bolton, E.)
Hare, Rt. Hon. John	Marples, Rt. Hon. Ernest	Taylor, W. J. (Bradford, N.)
Harris, Frederic (Croydon, N. W.)	Marshall, Douglas	Teeling, William
Harris, Reader (Heston)	Marten, Neil	Temple, John M.
Harrison, Brian (Maldon)	Matthews, Gordon (Meriden)	Thatcher, Mrs. Margaret
Harvey, Sir Arthur Vere (Macclesf'd)	Maudling, Rt. Hon. Reginald	Thomas, Leslie (Canterbury)
Harvey, John (Walthamstow, E.)	Mawby, Ray	Thomas, Peter (Conway)
Harvie Anderson, Miss	Maxwell-Hyslop, R. J.	Thompson, Richard (Croydon, S.)
Hastings, Stephen	Maydon, Lt.-Cmdr. S. L. C.	Thorneycroft, Rt. Hon. Peter
Hay, John	Mills, Stratton	Thornton-Kemsley, Sir Colin
Heald, Rt. Hon. Sir Lionel	Montgomery, Fergus	Tilney, John (Wavertree)
Henderson, John (Cathcart)	More, Jasper (Ludow)	Turner, Colin
Henderson-Stewart, Sir James	Morgan, William	Turton, Rt. Hon. R. H.
Hendry, Forbes	Morrison, John	Tweedsmuir, Lady
Hicks Beach, Maj. W.	Mott-Radclyffe, Sir Charles	van Straubenzee, W. R.
Hiley, Joseph	Nabarro, Gerald	Vane, W. M. F.
Hill, Dr. Rt. Hon. Charles (Luton)	Neave, Airey	Vaughan-Morgan, Sir John
Hill, J. E. B. (S. Norfolk)	Nicholls, Sir Harmar	Vickers, Miss Joan
Hinchingbrooke, Viscount	Nicholson, Sir Godfrey	Vosper, Rt. Hon. Dennis
Hirst, Geoffrey	Noble, Michael	Wakefield, Sir Wavell (St. M'lebone)
Hobson, John	Nugent, Sir Richard	Walder, David
Hocking, Philip N.	Oakshott, Sir Hendrie	Walker, Peter
Holland, Philip	Orr, Capt. L. P. S.	Walker-Smith, Rt. Hon. Sir Derek
Hollingworth, John	Orr-Ewing, C. Ian	Watkinson, Rt. Hon. Harold
Hopkins, Alan	Osborn, John (Hallam)	Watts, James
Hornby, R. P.	Page, John (Harrow, West)	Webster, David
Howard, Hon. G. R. (St. Ives)	Page, Graham (Crosby)	Wells, John (Maidstone)
Howard, John (Southampton, Test)	Pannell, Norman (Kirkdale)	Whitelaw, William
Hughes Hallett, Vice-Admiral John	Partridge, E.	Williams, Dudley (Exeter)
Hughes-Young, Michael	Pearson, Frank (Clitheroe)	Williams, Paul (Sunderland, S.)
Hulbert, Sir Norman	Peel, John	Wills, Sir Gerald (Bridgwater)
Hurd, Sir Anthony	Percival, Ian	Wilson, Geoffrey (Truro)
Hutchison, Michael Clark	Peyton, John	Wise, A. R.
Iremonger, T. L.	Pickthorn, Sir Kenneth	Wolrige-Gordon, Patrick
Irvine, Bryant Godman (Rye)	Pike, Miss Mervyn	Woodhouse, C. M.
Jackson, John	Pilkington, Sir Richard	Woodnutt, Mark
James, David	Pitman, I. J.	Woollam, John
Jenkins, Robert (Dulwich)	Pitt, Miss Edith	Worsley, Marcus
Johnson, Dr. Donald (Carlisle)	Pott, Percivall	Yates, William (The Wrekin)
Johnson, Eric (Blackley)	Powell, Rt. Hon. J. Enoch
Johnson Smith, Geoffrey	Price, David (Eastleigh)	TELLERS FOR THE AYES:
Jones, Rt. Hn. Aubrey (Hall Green)	Price, H. A. (Lewisham, W.)	Mr. Wakefield and
Joseph, Sir Keith	Prior, J. M. L.	Colonel J. H. Harrison.
Kerans, Cdr. J. S.	Prior-Palmer, Brig. Sir Otho

NOES
Abse, Leo	Hill, J. (Midlothian)	Pentland, Norman
Ainsley, William	Hilton, A. V.	Plummer, Sir Leslie
Allaun, Frank (Salford, E.)	Holman, Percy	Popplewell, Ernest
Allen, Scholefield (Crewe)	Holt, Arthur	Prentice, R. E.
Awbery, Stan	Houghton, Douglas	Price, J. T. (Westhoughton)
Bacon, Miss Alice	Howell, Charles A. (B'ham, Perry Bar)	Probert, Arthur
Baird, John	Howell, Denis (B'ham, Small Heath)	Proctor, W. T.
Baxter, William (Stirlingshire, W.)	Hoy, James H.	Pursey, Cmdr. Harry
Benson, Sir George	Hughes, Cledwyn (Anglesey)	Randall, Harry
Blackburn, F.	Hughes, Emrys (S. Ayrshire)	Rankin, John
Blyton, William	Hughes, Hector (Aberdeen, N.)	Redhead, E. C.
Boardman, H.	Hunter, A. E.	Reld, William
Bowden, Herbert W. (Leics, S. W.)	Hynd, John (AtterCliffe)	Reynolds, G. W.
Bowles, Frank	Irvine, A. J. (Edge Hill)	Roberts, Albert (Normanton)
Boyden, James	Irving, Sydney (Dartford)	Roberts, Goronwy (Caernarvon)
Brockway, A. Fenner	Janner, Sir Barnett	Robinson, Kenneth (St. Pancras, N.)
Broughton, Dr. A. D. D.	Jay, Rt. Hon. Douglas	Ross, William
Brown, Rt. Hon. George (Belper)	Jeger, George	Royle, Charles (Salford, West)
Butler, Herbert (Hackney, C.)	Jenkins, Roy (Stechford)	Shinwell, Rt. Hon. E.
Butler, Mrs. Joyce (Wood Green)	Johnson, Carol (Lewisham, S.)	Silverman, Julius (Aston)
Callaghan, James	Jones, Rt. Hn. A. Creech(Wakefield)	Skeffington, Arthur
Castle, Mrs. Barbara	Jones, Elwyn (West Ham, S.)	Slater, Joseph (Sedgefield)
Chapman, Donald	Jones, J. Idwal (Wrexham)	Small, William
Chetwynd, George	Kelley, Richard	Smith, Ellis (Stoke, S.)
Collick, Percy	Key, Rt. Hon. C. W.	Snow, Julian
Corbet, Mrs. Freda	King, Dr. Horace	Sorensen, R. W.
Craddock, George (Bradford, S.)	Lawson, George	Soskice, Rt. Hon. Sir Frank
Crossman, R. H. S.	Ledger, Ron	Spriggs, Leslie
Cullen, Mrs. Alice	Lee, Frederick (Newton)	Steele, Thomas
Darling, George	Lever, Harold (Cheetham)	Stewart, Michael (Fulham)
Davies, G. Elfed (Rhondda, E.)	Lever, L. M. (Ardwick)	Stonehouse, John
Davies, Harold (Leek)	Lewis, Arthur (West Ham, N.)	Stones, William
Davies, Ifor (Gower)	Lipton, Marcus	Strauss, Rt. Hn. G. R. (Vauxhalf)
Davies, S. O. (Merthyr)	Loughlin, Charles	Stross, Dr. Barnett(Stoke-on-Trent, C.)
Deer, George	Mabon, Dr. J. Dickson	Swain, Thomas
de Freitas, Geoffrey	McCann, John	Swingler, Stephen
Delargy, Hugh	MacColl, James	Sylvester, George
Dempsey, James	McInnes, James	Taylor, Bernard (Mansfield)
Diamond, John	McKay, John (Wallsend)	Thomas, Iorwerth (Rhondda, W.)
Dodds, Norman	McLeavy, Frank	Thompson, Dr. Alan (Dunfermline)
Driberg, Tom	MacMillan, Malcolm (Western Isles)	Thomson, G. M. (Dundee, E.)
Dugdale, Rt. Hon. John	MacPherson, Malcolm (Stirling)	Thornton, Ernest
Ede, Rt. Hon. C.	Mallalieu, E. L. (Brigg)	Timmons, John
Edelman, Maurice	Mallalieu, J. P. W.(Huddersfield, E.)	Tomney, Frank
Edwards, Rt. Hon. Ness (Caerphilly)	Manuel, A. C.	Ungoed-Thomas, Sir Lynn
Edwards, Robert (Bilston)	Mapp, Charles	Wade, Donald
Edwards, Walter (Stepney)	Marquand, Rt. Hon. H. A.	Wainwright, Edwin
Evans, Albert	Marsh, Richard	Warbey, William
Fernyhough, E.	Mason, Roy	Ward, Dame Irene
Finch, Harold	Mayhew, Christopher	Weitzman, David
Fletcher, Eric	Mellish, R. J.	Wells, Percy (Faversham)
Foot, Michael (Ebbw Vale)	Mendelson, J. J.	Wells, William (Walsall, N.)
Forman, J. C.	Millan, Bruce	White, Mrs. Eirene
Gaitskell, Rt. Hon. Hugh	Milne, Edward J.	Whitlock, William
Ginsburg, David	Mitchison, G. R.	Wigg, George
Gooch, E. G.	Monslow, Walter	Wilcock, Group Capt. C A. B.
Gordon Walker, Rt. Hon. P. C.	Moody, A. S.	Wilkins, W. A
Gourlay, Harry	Morris, John	Willey, Frederick
Greenwood, Anthony	Moyle, Arthur	Williams, Ll. (Abertillery)
Gray, Charles	Mulley, Frederick	Williams, W. R. (Openshaw)
Gunter, Ray	Neal, Harold	Willis, E. G. (Edinburgh, E.)
Hale, Leslie (Oldham, W.)	Oliver, G. H.	Wilson, Rt. Hon. Harold (Huyton)
Hall, Rt. Hn. Glenvil (Colne Valley)	Oswald, Thomas	Woodburn, Rt. Hon. A.
Hamilton, William (West Fife)	Pannell, Charles (Leeds, W.)	Woof, Robert
Hannan, William	Pargiter, G. A.	Wyatt, Woodrow
Hart, Mrs. Judith	Parker, John	Yates, Victor (Ladywood)
Hayman, F. H.	Parkin, B. T.
Henderson, Rt. Hn. Arthur(RwlyRegis)	Pavitt, Laurence	TELLERS FOR THE NOES:
Herbison, Miss Margaret	Pearson, Arthur (Pontypridd)	Mr. G. H. R. Rogers and
Hewitson, Capt. M.	Peart, Frederick	Mr. J. Taylor.

Mr. Harold Wilson (Huyton)

On a point of order. I beg to give notice to the Chancellor that in view of the moving statement that he made about people on £5,000 a year—

The Deputy-Chairman (Major Sir William Anstruther-Gray)

Order. The right hon. Gentleman can rise only to a point of order if that point of order concerns the Chair. Has the right hon. Gentleman a point of order?

Mr. Wilson

I was giving notice of a question I intend to ask the Chancellor, namely, what proposals he will now make about Members' salaries?

The Deputy-Chairman

Any question on a point of order must be put to the occupant of the Chair.

Resolution to be reported.

Report to be received Tomorrow; Committee to sit again Tomorrow.