HC Deb 04 July 1961 vol 643 cc1296-319
Mr. Douglas Houghton (Sowerby)

I beg to move, in page 8, line 24, after "individual", to insert: whichever is the less of the following amounts, that is to say four thousand and five pounds and".

The Financial Secretary to the Treasury (Sir Edward Boyle)

On a point of order, Sir William. I wonder whether I might make a suggestion which would be of help to the House. I do not think that this Amendment makes sense in the place where it is. Might I suggest that instead of debating this Amendment we go back to the earlier Amendment in page 8, line 25, after "to", insert whichever is the less of the two following sums, that is to say eight hundred and ninety pounds and". I think that that would make better sense.

Mr. Deputy-Speaker (Major Sir William Anstruther-Gray)

I am in some difficulty. I do not think that it is possible to go back to an earlier Amendment. My understanding is that Mr. Speaker selected this Amendment for debate.

Mr. Mitchison

This is entirely my fault. The right figure is £890, which is the tax on £4,005. That is what I intended, as I am sure the House knows. I am sure that the hon. Gentleman knows that what I endeavoured to do by the Amendment was to confine the concession to people who get the two-ninths relief for earned income. I can see a number of kind hon. Gentlemen opposite nodding in understanding of what I meant. I am not sure that there need be a technical Amendment. If we were allowed to discuss the Amendment which has been moved on the principle of what was intended, I think that that would meet the case. I gather that hon. Gentlemen opposite would agree to that course.

The Deputy-Speaker

I feel that it will be all right to proceed as we are.

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

Hon. Members on this side of the House would also agree to that course.

Mr. Mitchison

I am obliged to my hon. Friend. I have not got eyes in the back of my head.

Mr. Ellis Smith

It takes a big man to admit a mistake of that kind, and to that extent my hon. and learned Friend has my support.

Mr. Mitchison

The object of the Amendment and the Amendment to leave out lines 29 to 35 is to reduce considerably the amount of the Surtax concession. The object of the second Amendment is to omit paragraph (b) which amounts to not quite half the total amount—the exact figures are over £46, in one case, and over £37 in the other—and to confine the first concession to what I will call the two-ninths belt, that is to say, to confine it to cases where earned income relief is given to the extent of two-ninths, that is, up to the limit of £4,005, and of course the cases where more earned income relief is given but then only to limit it to that extent. I hope that I have made the meaning and the intention clear.

5.45 p.m.

This raises the general point about the Surtax concession. It raises it, perhaps, not in the same acute form but we on this side of the House object to the Surtax concession as a whole, and this is merely an attempt to reduce it since at this stage we cannot hope to eliminate it. We think that, in principle, it is wrong that a concession, even if it is not to come into operation immediately, should be given at a time when other taxes are being levied, taxes in the Finance Bill itself, and taxes in the form of National Insurance contributions and other matters about which I obviously cannot talk now but which I am sure are present in the minds of all hon. Members.

The Government's defence, as I understand it, has not been to minimise the difficulties of the present position. Indeed recently, and even in the course of the debate we had a few moments ago, they have shown an acute sense of how urgent and serious those difficulties are or may be. They do not defend it by attempting to do that. What they say is that the Surtax concession is not to come in yet. It is something which will operate to some extent in 1962–63 and only fully in the following year, the point in those two cases being the difference between the way in which Surtax is levied on Schedule D earnings, and the way in which it is levied on Schedule E payments.

That is the position, but surely the answer is the simple one which has been given more than once already, that the prudent man—and we have to assume the prudent man for these purposes—sets aside his taxation liability when his earnings come to him. I see an hon. Member opposite shaking his head. I have a great deal of sympathy with him. I hate doing it myself, but I hope he will agree that if one has fluctuating earnings there is a need to be prudent. Therefore, when we are considering the balance which is to be achieved in this Budget we must consider the amount which is to be saved at the end of it and left in the Chancellor's hands. We must consider this Surtax concession even if it does not come into operation now as something which in its effect on the national economy will take place as soon as the law is passed and the earnings in question come to be considered.

Some of them, as we saw in an earlier debate, will already have been earned, but, one way or the other, there is no question that when one is considering the effect desired in the Budget as a whole and the effect of the Budget on the economy it is a false argument to say that the Surtax concession should be treated differently because from the point of view of the Revenue it does not come into effect this year or, indeed, into full effect for one or two years as the case may be.

What is happening is clear. I do not know whether it would be considered just or equitable if the people paying Surtax lived in a community by themselves, but in the community as we know it they are getting a concession on the ground that it is said to be just to them, or an incentive to them—both grounds have been put forward—at the same time as taxes in other respects are being heavily increased; taxes in the form of payments by poor people and people who are sick; taxes in the form of a considerable burden on industry by the payment of the oil tax; and taxes in the form of an increase in Profits Tax on companies. That, too, is a tax on industry.

That is all for the benefit of a limited group of people, some 350,000 of them, who are getting the best of it at present, who are in a position to pay Surtax and as to whom all we ask in the Amendment is that the wealthiest of them should at least not get any more and that if, contrary to our view, an incentive is to be given, at least it should be confined to those who are in the group of the major executives or the minor executives—the important executives, or however one likes to describe them—the people who are earning their money, not at the rate which fortunate people such as Dr. Beeching manage to merit, or are supposed to merit, but who are in the position in which a highly intelligent person aged 30 or 40, with good connections and a lot of luck, might possibly find himself. That is the sort of person we are supposed to encourage.

If that is to be done, clearly the two-ninths belt—that is, up to an income of £4,000 or a little more—is as far as we ought to go. What this tax does is to open very large possibilities to people who are in receipt of very large incomes. They will get not only the two-ninths concession by way of earned income up to £4,000 but the additional one-ninth up to nearly £10,000 and, if the Clause is left as it is, the additional £2,000 which is to come off under subsection (1, b). On any view of what incentive ought to be given, we can only say that that is hopelessly excessive.

Objecting as we do to the Surtax concession as a whole, we might reasonably say that nothing should be given. We have said so already. We cannot enforce that view. We can at least insist that the concession is confined to the extent of, I was about to say, a reasonable income of a wealthy man. I do not want to put it quite like that, but it could be confined to the extent of the reasonable earnings of a competent, pushing, intelligent executive.

We do not admit the Government's case. It is a case which we would not concede when the economy as a whole is in difficulties and when the taxes which I have indicated are being levied on people far less well able to pay them than those concerned with paying Surtax. If we are to have the Government's proposition at all, let us have it confined to the very moderate, rather generous limits that would be left as a result of our Amendments.

Mr. Diamond

I strongly support the words of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) in relation to the two Amendments. I hope that nobody will suggest that it is inopportune or inappropriate in any way for us to discuss this matter at this point of time.

It will be observed that the Government have so framed this legislation that this is the last opportunity we shall have of dealing with Surtax payable on 1st January, 1963. The Government have so framed their legislation that in this very Finance Bill, which we are discussing in July, 1961, we are today having our last opportunity of making any amendment whatever in Surtax which people will be called upon to pay in 1963.

The Government realise that the position by then may have changed and they want to protect their Surtax payers. They want to protect them against any possible reduction which should be made in the light of financial and economic circumstances obtaining in the future. Therefore, the Bill contains provision which, having come in unusually and extraordinarily this year, will not, as in the normal case, come in next year and be available for consideration then. The Opposition are being prevented from any opportunity of putting down Amendments next year to deal with this problem because of the way it is framed this year.

When I say "framed", I mean framed. The Opposition are being "framed" because they cannot exercise their democratic rights in dealing with Surtax next year as they normally could do and, indeed, as they would be doing in the preceding Clause this year. I have no need to do more than to refer to the preceding Clause to show which is the normality and then to come to the Amendment, which relates to the abnormality.

My hon. and learned Friend was, as usual, courtesy in the extreme in dealing with an argument which nobody would attempt to bring against us, namely, that it was, perhaps, not entirely appropriate at this point of time to deal with Surtax which, admittedly, is not payable for some time ahead but the inflationary effect of which is felt now and as to which we can only now make our complaint if we are so minded.

On an earlier occasion, I said that there was no limit to the greed of hon. Members opposite. I retract not one syllable from that statement. Unless the Government are prepared to accept the Amendment, or something like it, they will have demonstrated how right and justifiable that statement was. We have just had an important debate relating to the economy of the country in which the Chancellor of the Exchequer has been unwilling to say whether he would put a most unusual tax, or two most unusual taxes, on the backs of the ordinary people within weeks of this date.

Everybody knows that there is a considerable likelihood of the Chancellor doing so and a considerable likelihood that the ordinary worker, the ordinary taxpayer and citizen, will be called upon shortly to pay more for all his necessities, all the things which he consumes in the ordinary way of life. Now, five minutes later, we are discussing the possibility of the Government having second thoughts and making a contribution to the healthy state of mind of the country and affecting relations between employer and employee and between rich and poor.

We want to see a happy community. We want to see workers and employers working together for the benefit of all of us. We are conscious that unhappy and unharmonious labour relations would do enormous damage to our vitally-needed export trade unless that disharmony is, as far as possible, removed.

One of the things which is at the root of that disharmony is the feeling that there is one law for the rich and one for the poor. We have just dealt with the law of the poor in the previous Amendment, on which the Chancellor said that he would not deny himself the right, within days of the passing of the Bill, to bring forward legislation to put a tax upon the backs of every factory and every office worker.

Mr. John Hall (Wycombe)

Everyone.

6.0 p.m.

Mr. Diamond

The hon. Member, quite properly, said "everyone". He knows that, of course, it bears more heavily on the poorer than on the richer. The hon. Member is a good deal taller than I am. If the same weight is put on his shoulders as that put on mine, assuming that our strength is in relation to our height it would be easier for him to carry that weight than for me. When everyone has the same weight put on their shoulders it is much harder for the poorer employee to bear it than for the Surtax payer.

Mr. John Hall

The hon. Member is so much nearer the ground. He has not so far to fall and would not hurt himself so much.

Mr. Gordon Walker (Smethwick)

That is a typical attitude for the hon. Member for Wycombe (Mr. John Hall) to adopt.

Mr. Diamond

I am sorry, but I did not follow what the hon. Member for Wycombe said.

Mrs. Harriet Slater (Stoke-on-Trent, North)

Is not the logic of what the hon. Member for Wycombe (Mr. John Hall) said that the poorer a person is, the harder one may hit him and the harder he will fall?

Mr. John Hall

I find it extremely difficult to discover how my remarks could possibly be interpreted in that way.

Mr. Diamond

My hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater) thought the hon. Member meant something and I thought he meant nothing. I do not know who is right, but I will certainly repeat what I was saying, that the hon. Member rightly drew attention to the fact that the taxes and imposts which the Chancellor is proposing and which he is refusing to deny himself the right to use immediately after the Finance Bill becomes law, are of equal size and will have to be borne by all persons, tall or short, rich or poor.

Secondly, this affects the relationship between employer and employee and bears directly on the likelihood of our being able to pull ourselves out from our position at the bottom of the league compared with every other exporting country, where we have been under this Government now for two years. What is likely to pull us out of that position is an improvement in the relationship between the worker and the employer, a mutual feeling that each has a fair crack of the whip and fair shares in tax reliefs.

This Amendment deals with fairer shares, not completely fair, in tax reliefs. In the light of what the Chancellor said this afternoon, and of the recent debate, in the light of a number of unauthorised strikes taking place, the difficulties we experience in increasing production and increasing exports and in the light of falling invisible exports, the Amendment proposes that Surtax payers should make a contribution to the common welfare.

That contribution to the common welfare should at least say that under the proposals of the Chancellor by which the richer section of the community is to have in one fell swoop one half of its Surtax burden taken away notwithstanding that year after year as ordinary taxpayers it has benefited very considerably under this Government by having the burden of taxation reduced—I hope the hon. Member opposite is nodding in a sleepy way and not in a negative way.

Mr. Peter Walker (Worcester)

The hon. Member has spoken about a league. He has made a comparison with other countries, but will he remember the league in which this country, in relation to incidence of taxation, is taxed at a higher level on incomes? Even with the rebates which are to he made, that taxation is higher than in some of those countries.

Mr. Diamond

I wish that the hon. Member would be more specific. By the time the Surtax reliefs will have had their effect we shall be nothing like in the same position comparing high rates of taxation as we were. We shall be far behind our American friends, for example. They bear much higher rates.

This Amendment invites the richer section of the community, as represented by many hon. Members opposite, to say, "We recognise the need to make a con- tribution to the common welfare. We have been offered in one fell swoop a cut of one half of Surtax liability, a total of £83 million spread over about a quarter of a million people. We feel that in the present state of the country and the anxiety expressed by the Chancellor, repeated here 20 minutes ago, we ought to make a contribution to the common welfare and to reduce our proposed savings on Surtax in the way outlined in these two Amendments."

I hope that when the Government reply is made we shall be told what amount would be involved. It is obvious that there would still be a very considerable saving to the Surtax payers and still a considerable cost to the Exchequer compared with the position before Budget day. These two Amendments would make a small contribution in money and would mean no hardship whatsoever on any individual. Every Surtax payer year after year since 1951, when this Government came into power, has continued to benefit. He knows for certain that, no matter what happens between now and 1963, he will get the benefit because the Government have circumvented the powers of the House to prevent him getting the benefit. The Surtax payer, therefore, should make a small contribution for the country and towards better relations between employer and employee, which could be improved.

Sir E. Boyle

So far as I could follow the speech of the hon. Member for Gloucester (Mr. Diamond), it seemed that his whole line of argument was directed to showing that the present Government, throughout their term of office, had been removing progressive taxation from those better off to those who are worse off. The only thing wrong with that argument is that it does not happen to be true.

As I have said on a number of occasions, and repeat for the benefit of the hon. Member, since 1951 the proportion of our total taxation taken up by progressive direct taxation has, in fact, risen and will rise further during the coming financial year. Perhaps he will recall that in the Budget estimates progressive direct taxation is estimated to yield very nearly £400 million mom during the next year than during the past year.

I shall return later in my remarks to the question of social harmony to which the hon. Member referred. Whatever criticism can be made of this Government, in my view it is absolutely ridiculous and extremely unfair to say that they have not allowed direct taxation to play its full part in our tax system. My hon. and right hon. Friends are perhaps more given to telling me that we have weighted the scales too high on the side of direct taxation. I certainly do not accept the contention that direct taxation has not played its proper part in our tax system in the last ten years.

I suggested an alternative form for these Amendments. I wish to take the opportunity of saying that the hon. and learned Member for Kettering (Mr. Mitchison) may have slipped up once, but I think that the whole House ought to remember how much we owe in these debates to his skill at drafting Amendments, because that is not the easiest thing to do and he has been responsible of a number of good and pointed debates.

These two Amendments fall into two parts. First, I will deal with the question of the two-ninths. As the House will remember, the present Minister of Aviation, in 1957, allowed an earned income allowance to apply right up into the Surtax scale for Income Tax purposes. I make no apology for the fact that under this Budget, from 1963 onwards, the earned income allowance will apply for two ninths up to £4,005 and then one ninth up to nearly £10,000 in respect of Surtax as well as Income Tax. That is a perfectly right and just provision.

Now I come to the second of the proposals, which is the more important. It is the proposal that we should not have the special earnings allowance. I was interested to hear what the hon. and learned Member for Kettering said about wealthy taxpayers. The House ought to recall that if the second Amendment were accepted a single man would begin to pay Surtax on his earning as soon as they exceeded £2,572. Furthermore, a married man with two young children both under 11 years of age would start to pay Surtax as soon as his earned income reached £2,957.

I refuse to believe that a man who has two children under 11, and who is earn- ing less than £3,000 a year, can properly be regarded as a wealthy Surtax payer. I put to hon. Members opposite the point which I have made many times in these debates—that that man, before the war, would have been earning approximately £1,000 a year. Would anybody consider that, before the war, a man who was earning £1,000 a year, and who had two children under 11, could be called a wealthy man and regarded as somebody who ought to be paying Surtax? By exactly the same token, it would be quite wrong for someone earning less than £3,000 a year, and with two young children, to go on paying Surtax today.

Rather than apologise for these proposals, if anything, my right hon. and hon. Friends are to be criticised for not having introduced these proposals earlier in the post-war world. One has to look at this Budget in the context not of only one year, but of twenty years.

I want now to refer to the controversy between the hon. Member for Gloucester (Mr. Diamond) and my hon. Friend the Member for Worcester (Mr. Walker). I quoted a certain number of comparative figures when I spoke in the Budget debate. I pointed out that if a man who was earning £3,000 a year, and who had two young children, gained an extra £1,000 a year, in West Germany he would keep £673 of the extra £1,000 and in the United States he would keep £793. If the Amendment were accepted, in this country he would keep only £613 of the extra £1,000.

I have no wish to see England at the bottom of that particular league table. It is absolutely wrong that we should be so. I cannot believe that it is right that our tax treatment of a family man earning a salary in the region of £3,000 to £4,000 a year should be clearly and substantially less generous than that given by our two principal trade competitors.

Under the Government's plan, a man with two small children who is earning £3,000 a year would keep £699 of that extra £1,000. That is to say, we shall be slightly more generous that West Germany, but considerably less generous than the United States.

Mr. Nabarro

And France.

Sir E. Boyle

I think that my hon. Friend is right. It is a more satisfactory situation than that which would prevail under the Amendment.

I absolutely agree with the hon. Member for Gloucester about the importance of preserving social harmony. I said in my Budget speech—I am not sure if the hon. Member for Edinburgh, East (Mr. Willis) was here—

Mr. E. G. Willis (Edinburgh, East)

I have heard the hon. Gentleman say this so often.

Sir E Boyle

I am not sorry to say it again.

Social justice and social harmony consist of treating everybody fairly and giving everybody his due. I cannot see why it should be supposed that only one section of the community can suffer a feeling of social injustice. Since the war, the tax on incomes which no one before the war would have pretended should be in the Surtax range, but which have been in since the war, has been high; this has created a feeling of injustice and must have blunted the competitive edge of British industry.

For that reason, I have no hesitation in advising the House to reject the Amendment and in saying that the Government intend to stand firm on the scheme which they have announced.

6.15 p.m.

Mr. Diamond

I am sure that the hon. Gentleman will give us the figures and will say to what extent there would be a reduction in the £83 million if the Amendments were accepted.

Sir E. Boyle

I will give the figures with pleasure. The cost of the first Amendment would not be very great. In a full year it would be about £4½ million out of the £83 million.

The second Amendment is considerably the more important, which is one of the reasons why I laid stress on it. If there were not a special earnings allowance, the two Amendments would claw back £29½ million in 1962–63 and £42 million in a full year. That is the cost of both Amendments together.

I again remind the House of the provisions about Profits Tax which my right hon. and learned Friend has made this year and that which Lord Amory made last year. Against the reductions in Surtax which my right hon. and learned Friend has announced, we have to con- sider two increases in Profits Tax, bringing up the rate from 10 per cent. to 15 per cent. I cannot see any grounds for saying that the economic and social policies of the Government have been in the interests of one section of the community. The Government have no hesitation in standing firm on their own proposals.

Mr. Houghton

It is only by permission of the House that I can speak again. It was in the very temporary and unavoidable absence of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) that I actually moved the first of the two Amendments, although I did not speak to either. May I have that permission, Mr. Speaker?

Mr. Speaker

The hon. Member must ask the House. I dare say that he will have permission.

Mr. Houghton

We have heard from the Financial Secretary, in his usual gracious way, the two main points about our proposals which we have gone over so much during these debates on the Surtax concessions. They have been, firstly, the purpose of these very drastic reductions in Surtax and, secondly, how the concessions are to be paid for in the present financial and economic situation.

The purpose, and the only justifiable purpose, of the concessions in this Bill this year is that put forward from the outset by the Chancellor, that these concessions were desirable if not absolutely necessary to give a boost to the economy. He seemed to rest his expectations on the conclusions of a book published by the National Union of Manufacturers. It said: Any Government with courage to revise Surtax on these lines will find it has touched a spring that will instantly release the flood of energy and enterprise essential for the great advance to prosperity the nation so desires to see. But throughout the whole of the debate, we have not had any evidence to show that that hope will be fulfilled.

Earlier in the book there was an undeserved slur on the initiative and ambition of executives and businessmen generally within the Surtax range. I quote from page 10: When the most promising technicians and executives hold back from accepting higher posts with greater responsibilities because the extra reward is disproportionate to the strain of office, the nation is the loser. Throughout these debates only one hon. Member, the hon. Member for Spelthorne (Sir B. Craddock), has given any actual case in his own experience where art executive or technician has held back from assuming duties, carrying higher responsibility and higher remuneration, because of the inroad of Surtax upon the extra pay.

Mr. John Hall

The hon. Gentleman is mistaken, because I myself gave an example.

Mr. Houghton

I beg the hon. Gentleman's pardon. So there are two hon. Members and not one. If there were any more, they certainly escape me, and I have been closely attending the debates throughout.

Surely the point is that there is no evidence behind these assertions—none. Responsible researchers have discovered no evidence. It is regrettable that there has been such a lack of evidence of the impressions, expectations and assertions voiced in support of these drastic reductions in Surtax throughout these debates. Let us go back to the beginning and recall what the Chancellor said on 17th July. This was the foundation stone of the proposals costing the Exchequer £83 million in the first operative year. The Chancellor said: I have received many representations about the need to reduce the levels of direct taxation, particularly Surtax. Surtax begins at £2,000. This figure was fixed in 1920. I learn from many quarters, sometimes unexpected quarters, that the present scope and level of Surtax is a substantial disincentive to effort and initiativc."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 819.] But surely if these drastic reductions in taxation are to rest upon a statement of that kind we should have had more tangible evidence in support of it in the course of the long debates on Surtax.

Mr. Nabarro

The Chancellor's words alluded to "many quarters". There are at least three right hon. and hon. Gentlemen opposite who are on record in print as advocating drastic reductions in direct taxation—

Mr. Ellis Smith

Give us the names.

Mr. Nabarro

—to give additional incentive for export production. The three I name are the right hon. Gentleman the Leader of the Opposition, the hon. Member for Sowerby (Mr. Houghton) writing in Yorkshire newspapers, and none other than that authority on fiscal matters and thorough-going Socialist, the leader of the Leicestershire miners, the hon. Member for Bosworth (Mr. Wyatt). Where is the hon. Member for Bosworth?

Mr. Houghton

The hon. Gentleman should not mislead the House by giving general references to comments which have been made in different contexts by different right hon. and hon. Gentlemen. No one that he has mentioned, as far as I can recall, has proposed a reduction of Surtax in this year's Finance Bill or this year's economic situation for the reasons given by the Chancellor of the Exchequer. As for the hon. Member for Kidderminster (Mr. Nabarro) himself, we missed him greatly in the discussions on this matter during the Committee stage of the Bill.

Mr. Nabarro

I was absent, sadly incommoded.

Mr. Houghton

I beg the hon. Gentleman's pardon if he could not be here, but it is worth while recalling that the only two comments that we heard from him throughout the whole of the discussions on the matter were on Budget day when the Chancellor announced these drastic reductions in Surtax. The hon. Gentleman was so flabbergasted at their generosity that he intervened to say: Say that again. Apparently, the hon. Gentleman could not believe his own ears. The Chancellor replied that the hon. Member for Kidderminster could read it. After the Chancellor had spoken for another minute, it had sunk in, and then the hon. Member for Kidderminster said: Jolly good."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 820.]

Mr. Nabarro

Perhaps I might just give a word of explanation. I said "Say it again" on Budget day because the Chancellor's explanation was extremely technical and difficult to follow. Later, after the Chancellor had said that I could read it in print and had continued for another sentence, I then expressed my note of strong approval and approbation of what he had done by interpolating "Jolly good".

Mr. Ellis Smith

The hon. Gentleman touched his hat.

Mr. Houghton

I fully accept what the hon. Gentleman says, obviously, but I leave the matter on this footing, that we have had no real tangible evidence throughout the whole of the debates on these Clauses in support of the premises upon which these drastic reductions were put forward. That is beyond any denial whatsoever.

During the Committee stage of the Bill, we on these benches did not seek to modify or mutilate the Surtax proposals. We thought it better at that stage to oppose them altogether. There were, however, two respects in which we thought some mistake should be put right.

We tried to exclude from the benefit of the Surtax reductions income already earned by the Schedule D taxpayers. Having regard to the Chancellor's intention to provide a stimulus for the future, we saw no reason to extend benefits to the past. Secondly, we thought it was wrong to allow substantial business expenses to be deducted from Surtax assessments which were to be so heavily reduced. However, both proposals were rejected. Our opposition to the Clauses as a whole was overridden by the majority on the Government benches. That is why, putting forward our Amendments at the present moment, we felt free to suggest cuts in the reductions which the Chancellor has proposed.

The other point that has been raised is about paying for these Surtax reductions. This is a disinflationary Budget; this is a counter-inflationary Bill. We are all agreed on that. We realise that. We understand the seriousness of the economic situation. Therefore, reductions in direct taxation of this magnitude at this time clearly had to be met by additions to taxation elsewhere. The Chancellor has increased taxation in this Bill. There is a net increase in taxation this year of £60 or £70 million. Therefore, the Chancellor proposed that there should be an increase in Profits Tax in order to pay for the Surtax reductions.

I do not think that the House can accept that simple equation. If the Profits Tax can be increased to pay for Surtax reductions, the Purchase Tax could have been increased to pay for other reductions more justifiable in our view. It can be argued, of course, that there is some direct relationship between the Surtax reductions and the increased prosperity of the companies for which the people concerned work. I strongly question any such theory. I do not believe that the cuts in Surtax will of themselves put companies in a better financial position to pay the additional Profits Tax. I think that the House will agree that other measures were taken by the Chancellor of the Exchequer, some in this Bill, and some before this Bill, to accommodate these reductions in Surtax this year.

6.30 p.m.

They will be paid for in part by the people on £1,000 a year and on £500 a year—who are poorer than the poor man on £5,000 a year. They will be paid for in part by larger insurance contributions —larger than needed to pay the graduated benefits under the new scheme. They will be paid for in part by Health Service charges in excess of the estimate of the additional expenditure on the Health Service. They will be paid for in part by rates of interest on mortgages that are far higher than are necessary to pay the additional Profits Tax on the lending bodies.

It is quite a mistaken theory that these reductions are being paid for by increases in Profits Tax, and, in those circumstances, I think that the House, even at this late hour, has to re-examine the basis upon which it is asked to sanction these very important reductions in direct taxation.

We are inclined to talk of Surtax as if it were some additional overload of taxation resting expressly and specifically on a certain class or group of people, but it is, of course, an extension of our system of graduated taxation. That is all it really is, although it is given a different name and is administered separately from Income Tax beyond that point.

There are ways of reducing the burden of graduated tax other than lifting the starting point of that tax. The Chancellor had the alternative of reducing the rates of Surtax. After all, the lowest rate above the Surtax limit of £2,000 is only 2s. in the £. It then goes up by sixpences and shillings to the admittedly very high rate of 10s. in the £ for incomes of £15,000 a year and upwards; but not, of course, on the whole of the £15,000.

A lot of people seem to think that when a person enters that range, Surtax is imposed on all the income, but it is, in fact, a marginal rate of taxation. I do not minimise its importance to those who pay it—

Mr. Nabarro

The hon. Gentleman ought to know.

Mr. Houghton

Of course I ought to know, because I pay it—

Mr. Nabarro

Hear, hear.

Mr. Houghton

—but I cannot understand why the hon. Member for Kidderminster should think it unbecoming in a Surtax payer to oppose Surtax reductions. I should have thought that there was greater virtue in a Surtax payer opposing such a reduction than in one who does not pay it. For my part, I sincerely and strongly dissent from Surtax relief when other people are having to assume additional burdens in order to make room for these reductions in the financial provisions for this year—

Mr. Nabarro rose—

Mr. Houghton

No, I will not give way. I therefore hope that I have heard the last of that taunt. If I may say so, I do not think that it reflects on me but on the hon. Member for Kidderminster who, apparently, cannot understand anyone in the Surtax range holding such an opinion as I hold, and such as my hon. and right hon. Friends hold about these proposed reductions.

The House will realise that the Chancellor had other means of alleviating the burden—we will use that word if the House likes it—of Surtax. In present circumstances, these reductions go far beyond anything that we could possibly contemplate. As I said before, I think that the Chancellor has chosen the midyear in the present Parliament to undertake a step that would be very unpopular nearer election time, which has not received the approval of the country as a whole and which it is misleading the public to suggest is of some benefit to the country.

That is why we have sought to reduce the excessive relaxations of Surtax that the Chancellor has proposed. Something more modest, as a token of things to come in better times, would surely have been more prudent in present circumstances, but the right hon. and learned Gentleman has gone the whole hog. That, I submit, with great respect to him, is reckless if, indeed, it is not absolutely irresponsible.

Mrs. Slater

I did not intend to speak on this Amendment, but I have a very great respect for the Financial Secretary, especially for the work he did at the Ministry of Education, and I did not enjoy hearing him say that these reliefs in Surtax were on the lines of creating harmony among the people, and particularly among our workers. It is not the sort of thing that he has said on other occasions. I do not believe that these reliefs do anything at all to create harmony and to encourage the ordinary workers.

The hon. Gentleman said that if the first Amendment were accepted it would claw back—that was the phrase he used —£4½ million out of the Surtax relief. During our debates on the National Health Service Contributions Bill, hon. Members on this side, by Amendments relating to welfare foods, relief of old people and of the handicapped, attempted to claw back out of the amount which the Chancellor collected —because it is the Chancellor and not the Minister of Health who really collects the extra money that started to be paid yesterday, and many workers will not realise the extra charge until they receive their pay packets on Friday —£½ million, £1¼ million, £3 million, £4 million. In every case we were resisted by the Government, by these people who are most concerned tonight that not £½ million, or £1 million or £4½ million shall be taken from these poor folk to whom the Chancellor referred—the Surtax payers.

We feel that tax relief on this scale creates disharmony at a time when we have just started to collect an extra £65 million in National Health contributions from the workers, though the Minister of Health said that he would spend only £5 million more on what he said he needed the money for: the provision of hospitals. The added burdens imposed during the last year by taxation, by increased contributions in one form or another, do not lead us to believe that these Surtax reliefs are warranted.

There are those who feel that this step does not create harmony at all. I have had a letter from a war widow who has gone on working until she is now 64 years of age. She has paid all her different pension contributions and so gets a little extra as a war widow and as an old-age pensioner. Out of what she gets she has to pay 10s. in tax. People like that feel that there is injustice, and not justice at the present time—

Viscount Hinchingbrooke (Dorset, South)

I am very interested in that, but the evidence that we want from the other side of the House is just those people writing to the hon. Lady complaining about the operation of this Clause.

Mrs. Slater

I can send the noble Lord the letter if he likes, and he can then learn how this woman feels about Surtax relief.

Hon. Gentlemen opposite do not seem to think that anyone has the courage to object to this kind of thing. They said exactly the same about the 2s. prescription charge—that people were not worried and were not protesting about it. But I can assure hon. Gentlemen opposite that they are protesting, although hon. Gentlemen opposite do not understand that the people who are suffering know that it is just of no use writing to Conservative hon. Members. Obviously, people such as the woman I have described are bound to feel that no harmony or justice is being meted out to them.

If we are in difficult economic circumstances—and we are being repeatedly told that we are—the Government should at least do justice to the workers and the labour force who are so necessary, and even the most influential business directors—

Mr. Ellis Smith

Now listen to this!

Mrs. Slater

—are of no value if they have not got the good will of the men and women at the work benches. In the final analysis these are the people on whom the Government must rely, and for that reason the Amendment seeks to at least bring about some measure of justice for the workers, who represent the majority of people in this country.

The action of the Government, an does the speech of the Financial Secretary, makes it clear beyond doubt that the Government are interested only with those in the higher income brackets and not with the majority who are receiving lower incomes, such as the widows, old-age pensioners and those who are having to pay increased contributions and higher prescription charges. While those in this category are reacting and protesting, pressure is brought to bear upon the Government by those who have the power who are in circles suitable for bringing their power to bear on the Government.

Mr. Nabarro rose—

Mrs. Slater

I shall not give way. The hon. Gentleman must wait for his turn to speak.

I was saying that these influential people have brought pressure to bear on the Treasury during the last twelve months and many of the actions of this Government have in many ways proved that they are paying back in full measure those people who supported the Conservative Party at the last election.

Mr. H. Wilson

I do not intend to make a speech, but it should be made clear to the House what procedure we intend to follow with regard to voting on these Amendments. There is a drafting defect in the first Amendment, for which my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has taken responsibility—and I must say that not only the Opposition but the House generally owes a debt to my hon. and learned Friend for the drafting advice that he has rendered. But since this drafting defect, which is accidental and is so refined a point that hardly anyone spotted it until late, and since the second Amendment raises a question that is far more substantial both in terms of principle and in terms of the sums involved, we would propose, Mr. Speaker, if you call both Amendments, to let the first one be negatived and to vote on the second.

Amendment negatived.

Amendment proposed, in page 8.

Leave out lines 29 to 35.—[Mr. Mitchison.]

Question put, That the words proposed to be left out stand part of the Bill:—

The House divided: Ayes 237, Noes 188.

Division No. 240.] AYES [6.44 p.m.
Agnew, Sir Peter Goodhart, Philip Montgomery, Fergus
Aitken, W. T. Gower, Raymond More, Jasper (Ludlow)
Allason, James Grant, Rt. Hon. William Morgan, William
Arbuthnot, John Green, Alan Nabarro, Gerald
Ashton, Sir Hubert Grimston, Sir Robert Nicholls, Sir Harmar
Atkins, Humphrey Grosvenor, Lt.-Col. R. G. Nicholson, Sir Godfrey
Barber, Anthony Gurden, Harold Noble, Michael
Barlow, Sir John Hall, John (Wycombe) Nugent, Sir Richard
Barter, John Hamilton, Michael (Wellingborough) Oakshott, Sir Hendrie
Bell, Ronald Harris, Frederic (Croydon, N.W.) Osborn, John (Hallam)
Bennett, F. M. (Torquay) Harris, Reader (Heston) Osborne, Sir Cyril (Louth)
Berkeley, Humphry Harrison, Col. Sir Harwood (Eye) Page, John (Harrow, West)
Bidgood, John C. Harvey, John (Walthamstow, E.) Page, Graham (Crosby)
Bingham, R. M. Harvie Anderson, Miss Partridge, E.
Birch, Rt. Hon. Nigel Heald Rt. Hon. sir Lionel Pearson, Frank (Clitheroe)
Bishop, F. P. Henderson, John (Cathcart) Peel, John
Black, Sir Cyril Henderson-Stewart, Sir James Peyton, John
Bourne-Arton, A. Hicks Beach, Maj. W. Pickthorn, Sir Kenneth
Box, Donald Hiley, Joseph Pilkington, Sir Richard
Boyd-Carpenter, Rt. Hon. John Hill, Dr. Rt. Hon. Charles (Luton) Pitman, Sir James
Boyle, Sir Edward Hill, Mrs. Eveline (Wythenshawe) Pitt, Miss Edith
Brewis, John Hill, J. E. B. (S. Norfolk) Pott, Percivall
Brooke, Rt. Hon. Henry Hinchingbrooke, Viscount Price, David (Eastleigh)
Brooman-White, R. Hirst, Geoffrey Proudfoot, Wilfred
Bryan, Paul Hobson, John Quennell, Miss J. M.
Buck, Antony Hocking, Philip N. Redmayne, Rt. Hon. Martin
Bullard, Denys Holland, Philip Rees, Hugh
Burden, F. A. Hollingworth, John Rees-Davies, W. R.
Butler, Rt.Hn.R.A.(Saffron Walden) Hopkins, Alan Renton, David
Campbell, Sir David (Belfast, S.) Hornsby-Smith, Rt. Hon. Patricia Ridley, Hon. Nicholas
Campbell, Gordon (Moray & Nairn) Howard, John (Southampton, Test) Ridsdale, Julian
Cary, Sir Robert Hughes-Young, Michael Robson Brown, Sir William
Channon, H. P. G. Hulbert, Sir Norman Roots, William
Chataway, Christopher Hutchison, Michael Clark Ropner, Col. Sir Leonard
Clark, Henry (Antrim, N.) Iremonger, T. L. Royle, Anthony (Richmond, Surrey)
Clark, William (Nottingham, s.) Jackson, John Russell, Ronald
Clarke, Brig. Terence (Portsmth, W.) James, David Scott-Hopkins, James
Cleaver, Leonard Jenkins, Robert (Dulwich) Seymour, Leslie
Cole, Norman Jennings, J. C. Shaw, M,
Cooper-Key, Sir Neill Johnson, Dr. Donald (Carlisle) Skeet, T. H. H.
Cordeaux, Lt.-Col. J. K. Johnson, Eric (Blackley) Smith, Dudley (Br'ntf'rd & Chiswick)
Corfield, F. V. Johnson Smith, Geoffrey Smithers, Peter
Costain, A. P. Kaberry, Sir Donald Spearman, Sir Alexander
Courtney, Cdr. Anthony Kershaw, Anthony Speir, Rupert
Craddock, Sir Beresford Lagden, Godfrey Stevens, Geoffrey
Critchley, Julian Leather, E. H. C. Stoddart-Scott, Col. Sir Malcolm
Cunningham, Knox Leavey, J. A. Storey, Sir Samuel
Curran, Charles Leburn, Gilmour Studholme, Sir Henry
Currie, G. B. H. Lewis, Kenneth (Rutland) Summers, Sir Spencer (Aylesbury)
Dalkeith, Earl of Lindsay, Martin Talbot, John E.
d'Avigdor-Goldsmld, Sir Henry Litchfield, Capt. John Tapsell, Peter
Deedes, W. F. Lloyd, Rt. Hon. Selwyn (Wirral) Taylor, Edwin (Bolton, E.)
Donaldson, Cmdr. C. E. M. Longden, Gilbert Teeling, William
Doughty, Charles Loveys, Walter H. Temple, John M.
du Cann, Edward Low, Rt. Hon. Sir Toby Thatcher, Mrs. Margaret
Duncan, Sir James Lucas, Sir Jocelyn Thomas, Leslie (Canterbury)
Eden, John Lucas-Tooth, Sir Hugh Thomas, Peter (Conway)
Elliot, Capt. Walter (Carshaiton) McAdden, Stephen Thompson, Kenneth (Walton)
Elliott, R.W.(Nwcstle-upon-Tyne,N.) MacArthur, Ian Thornton-Kemsley, Sir Colin
Emery, Peter McLaughlin, Mrs. Patricla Tiley, Arthur (Bradford, W.)
Erroll, Rt. Hon. F. J. Maclay, Rt. Hon. John Turner, Colin
Farey-Jones, F. W. Maclean,SirFitzroy(Bute&N.Ayra.) Turton, Rt. Hon. R. H.
Farr, John Macleod, Rt. Hon. Iain(Enfield, W.) Tweedsmuir, Lady
Finlay, Graeme MacLeod, John (Ross & Cromarty) van Straubenzee, W. R.
Fisher, Nigel McMaster, Stanley R. Vaughan-Morgan, Rt. Hon. Sir John
Fletcher-Cooke, Charles Maddan, Martin Vosper, Rt. Hon. Dennis
Forrest, George Maginnis, John E. Wakefield, Edward (Derbyshire, W.)
Foster, John Maitland, Sir John Wakefield, Sir Wavel (St. M'lebone)
Fraser, Ian (Plymouth, Sutton) Markham, Major Sir Frank Walder, David
Freeth, Denzil Marshall, Douglas Walker, Peter
Galbraith, Hon. T. G. D. Marten, Neil Walker-Smith, Rt. Hon. Sir Derek
Gammans, Lady Mathew, Robert (Honiton) Wall, Patrick
Gardner, Edward Matthews, Gordon (Meriden) Ward, Dame Irene
Glover, Sir Douglas Mawby, Ray Webster, David
Glyn, Dr. Alan (Clapham) Maxwell-Hyslop, R. J. Wells, John (Maidstone)
Glyn, Sir Richard (Dorset, N.) Maydon, Lt.-Cmdr. S. L. C. Williams, Dudley (Exeter)
Godber, J. B. Mills, Stratton Williams, Paul (Sunderland, S.)
Wills, Sir Gerald (Bridgwater) Woodnutt, Mark TELLERS FOR THE AYES:
Wilson, Geoffrey (Truro) Woollam, John Mr. Chichester-Clark and
Woodhouse, C. M. Worsley, Marcus Mr. Whitelaw.
NOES
Ainsley, William Howell, Denis (Small Heath) Price, J. T. (Westhoughton)
Albu, Austen Hoy, James H. Probert, Arthur
Allen, Scholefield (Crewe) Hughes, Cledwyn (Anglesey) Randall, Harry
Awbery, Stan Hughes, Emrys (S. Ayrshire) Rankin, John
Bacon, Miss Alice Hunter, A. E. Reynolds, G. W.
Baxter, William (Stirlingshire, W.) Hynd, H. (Accrington) Roberts, Albert (Normanton)
Bence, Cyril Hynd, John (Attercliffe) Roberts, Goronwy (Caernarvon)
Benson, Sir George Irvine, A. J. (Edge Hill) Robertson, John (Paisley)
Blyton, William Irving, Sydney (Dartford) Robinson, Kenneth (St. Pancras, N.)
Boardman, H. Jay, Rt. Hon. Douglas Rogers, G. H. R. (Kensington, N.)
Bowden, Herbert W. (Leics, S.W.) Jenkins, Roy (Stechrord) Ross, William
Bowles, Frank Johnson, Carol (Lewisham, S.) Royle, Charles (Saiford, West)
Boyden, James Jones, Rt. Hn.A. Creech (Wakefield) Shinwell, Rt. Hon. E.
Braddock, Mrs. E. M. Jones, Dan (Burnley) Short, Edward
Brockway, A. Fenner Jones, Jack (Rotherham) Silverman, Julius (Aston)
Brown, Alan (Tottenham) Jones, J. Idwal (Wrexham) Silverman, Sydney (Nelson)
Brown, Rt. Hon. George (Belper) Jones, T. W. (Merioneth) Skeffington, Arthur
Butler, Herbert (Hackney, C.) Kelley, Richard Slater, Mrs. Harriet (Stoke, N.)
Butler, Mrs. Joyce (Wood Green)
Callaghan, James Kenyon, Clifford Slater, Joseph (Sodgefield)
Castile, Mrs. Barbara Key, Rt. Hon. C. W. Small, William
Chetwynd, George King, Dr. Horace Smith, Ellis (Stoke, S.)
Lawson, George Sorensen, R. W.
Cronin, John
Crosland, Anthony Ledger, Ron Spriggs, Leslie
Crossman, R. H. S. Lee, Frederick (Newton) Steele, Thomas
Cullen, Mrs. Alice Leo, Miss Jennie (Cannock) Stewart, Michael (Fulham)
Davies, G. Elfed (Rhondda, E.) Lewis, Arthur (West Ham, N.) Stones, William
Davies, Harold (Leek) Lipton, Marcus Strachey, Rt. Hon. John
Davies, S. O. (Merthyr) Loughlin, Charles Strauss, Rt. Hn. G. R. (Vauxhall)
de Freitas, Geoffrey Mabon, Dr. J. Dickson Stross,Dr.Barnett(Stoke-on-Trent,C.)
Delargy, Hugh McCann, John Swain, Thomas
Diamond, John MacColl, James Swingler, Stephen
Dodds, Norman Mclnnes, James Symonds, J. B.
Dugdale, Rt. Hon. John McKay, John (Wallsend) Taylor, Bernard (Mansfield)
Ede, Rt. Hon. C. Mackie, John (Enfield, East) Taylor, John (West Lothian)
Edwards, Rt. Hon. Ness (Caerphilly) McLeavy, Frank Thomas, Iorwerth (Rhondda, W.)
Edwards, Walter (Stepney) MacPherson, Malcolm (Stirling) Thompson, Dr. Alan (Dunfermline)
Evans, Albert Mallalieu, E. L. (Brigg) Thomson, C. M. (Dundee, E.)
Fitch, Alan Mallalieu, J.P.W.(Huddersfield,E.) Thornton, Ernest
Fletcher, Eric Manuel, A. C. Timmons, John
Fraser, Thomas (Hamilton) Mapp, Charles Tomney, Frank
Gaitskell, Rt. Hon. Hugh Marsh, Richard Ungoed-Thomas, Sir Lynn
Galpern, Sir Myer Mendelson, J. J. Wade, Donald
George, Lady MeganLloyd(Crmrthn) Milne, Edward J. Wainwright, Edwin
Ginsburg, David Mitchison, G. R. Warbey, William
Gordon Walker, Rt. Hon. P. C. Monslow, Walter Watkins, Tudor
Gourlay, Harry Moody, A. S. Weitzman, David
Greenwood, Anthony Mort, D. L. Wells, William (Walsall, N.)
Grey, Charles Moyle, Arthur White, Mrs. Eirene
Griffiths, Rt. Hon. James (Llanelly) Mulley, Frederick Whitlock, William
Griffiths, W. (Exchange) Neat, Harold Wilkins, W. A.
Grimond, J. Noel-Baker, Francis (Swindon). Willey, Frederick
Hale, Leslie (Oldham, W.) Oliver, G. H Williams, D. J. (Neath)
Hall, Rt. Hn. Glenvil (Colne Valley) Oram, A. E. Williams, Ll. (Abertillery)
Hamilton, William (West Fife) Owen, Will Williams, W. R. (Openshaw)
Hannan, William Padley, W. E. Williams, W. T. (Warrington)
Hart, Mrs. Judith Pannell, Charles (Leeds, W.) Willis, E. C. (Edinburgh, E.)
Hayman, F. H. Parker, John Wilson, Rt. Hon. Harold (Huyton)
Healey, Denis Parkin, B. T. Winterbottom, R. E.
Hilton, A. V. Pavitt, Laurence Woodburn, Rt. Hon. A.
Holman, Percy Pearson, Arthur (Pontypridd) Woof, Robert
Holt, Arthur Pentland, Norman Zilliacus, K.
Houghton, Douglas Popplewell, Ernest
Howell, Charles A. (Perry Barr) Prentice, R. E. TELLERS FOR THE NOES:
Mr. Redhead and Dr. Broughton.