§ Mr. Jay
I beg to move, in page 6, line 5, after "Kingdom" to insert:and having regard to the need to maintain full employment in all parts of the United Kingdom".We now come to one of the economic regulators which the Chancellor is proposing to impose on us. They are not very popular—they have frightened a great number of people—so I think it is incumbent on us to examine them fairly carefully.
The Clause that we now seek to amend bestows the power to raise or 512 reduce a group of Customs and Excise duties by an amount up to 10 per cent. Incidentally, I am not quite sure for how often during the course of the year the Chancellor is taking power to do this. At some stage I hope we shall get it clear whether, if he receives the power as now envisaged in the Bill, he will be able to raise all these duties by 10 per cent. one week and a month later raise or reduce them again. However, we shall doubtless come to that later.
In general, we on this side are not opposed to using taxation as a planning instrument which, I gather from the Chancellor's pronouncements up to date, is the purpose of this and the other economic regulator. Indeed, in the 1948 Finance Act the Labour Government took a similar power. I suspect that the Chancellor opposed it at that time, but we took the power to vary Purchase Tax from time to time by Order, in the fashion now suggested.
I was rather surprised to hear in an Answer at Question Time today—given, I think, by the Economic Secretary—that this power to vary Purchase Tax by Order had hardly ever been used in those thirteen years, except for minor correction of anomalies. My recollection is that the Home Secretary, when he was Chancellor, once made a considerable change in Purchase Tax by Order in January of one year. If the present Government had never used the existing powers for this purpose, it would be a little odd that they should now think it necessary to ask for new powers.
However, they are asking for them, and since the twin regulator—the payroll tax, which we are not discussing now—has proved singularly unpopular, it seems that if ever either is used at all it will probably be this one. Indeed, the Economic Secretary seemed to propound a new law. We have had "Boyle's Law" and what was called "Lloyd's Law" during the Budget debate, in which all taxes are passed on to someone else. The Economic Secretary propounded the theory today that if one can find any tax that has not been raised for 30 years one should raise it immediately. If he is approaching this regulator in this spirit, we may find a rather bolder use made of it than had been expected.
513 We ask the Committee to examine the form of words in Clause 8 (1) by which the Treasury is given power to make use of this instrument. The subsection says that it may be usedIf it appears to the Treasury that it is expedient, with a view to regulating the balance between demand and resources in the United Kingdom…We should like to know what the Government really mean by the words…regulating the balance between demand and resources…These are new words. They did not appear in the 1948 Finance Act, still less did they appear in the 1944 White Paper on Employment Policy, which was very much more explicit. Since, obviously, this power will be used as a major weapon of economic policy, do the words…the balance between demand and resources…mean the full employment of resources, including, of course, manpower?
Whatever may be his knowledge of economics, I know that the Chancellor is a very considerable legal expert, and, therefore is well placed to advise us on the meaning of those words. Would it be consistent with what he conceives to be…the balance between demand and resources…if, perhaps, 10 per cent., 20 per cent. or 30 per cent. of our labour force was unemployed?
I suppose that one could argue—I do not know, but perhaps it might be argued—that that was, in a sense, a balance. I remember that Lord Keynes once said, "Of course, you could balance the Budget at zero". Indeed, one could balance the balance of payments at zero. That would not be a particularly sensible procedure but, as far as the meaning of the word "balance" goes, it could be done.
We should therefore like an assurance from the Government that the words…with a view to regulating the balance between demand and resources…mean with a view to maintaining full employment and full production in the economy. I must say that I thought it better put in the 1944 White Paper on Employment Policy, which said quite frankly: 514The Government accept as one of their primary aims and responsibilities the maintenance of a high and stable level of employment…I do not know why some similar expression could not have been used in introducing this new economic regulator. The Local Employment Act itself was very much clearer and more explicit than this.
The failure of the Government to use some such form of words, their failure to insert in the Clause the phrase "full employment" or the phrase "a high and stable level of employment", rather suggests that, as the Treasury is now looking at this, it may use these powers to seek some balance other than one which would be consistent with full employment all over the country. We want to know whether that is in the Chancellor of the Exchequer's mind. Would he think, for instance—this is not altogether irrelevant or unreal in the present year—that he was entitled, if he were faced with a balance of payments deficit or an excess of imports, to raise taxation by this instrument in order to mop up purchasing power, reduce people's expenditure on imports, and so on, even though it meant substantially decreasing the level of employment? The Clause should be much more tightly drawn so that it is quite clear that the Government cannot use an instrument of this kind for that purpose.
The very looseness of the expression and the vagueness of the explanations given us as to how the Government propose to use this and in what circumstances they would use it show what a very timid conception they have of economic policy at present. I do not believe that this country is at the moment fully employed. When there are large areas in Northern Ireland, Scotland and other parts of the country with considerable unemployment, it cannot be said that the whole of the United Kingdom is fully employed, fully in production, and making as great an effort as it can. In these circumstances it would be quite wrong if the Chancellor of the Exchequer had it in mind, because he was faced with balance of payments difficulties, to impose a general indiscriminate deflation over the whole country when in certain areas, such as Scotland, people were already unemployed. It would merely throw more people out of work and 515 make unemployment in those areas worse than it is already.
The Government should be trying to get more work into those areas and to restrain over-full employment, if they think it exists, in the more congested areas where we know there is a boom in the building of offices and other activities of that kind causing an extreme shortage of labour. If it is the intention to use this weapon as a general indiscriminate deflationary instrument, it is the wrong way to tackle the problem.
It is rather odd that the right hon. and learned Gentleman, in giving himself these two instruments for the apparent purpose of either restraining or stepping up demands and doing it quickly, has entirely left out of account the ordinary forms of direct taxation. Why does he think that he should have the power of rapidly altering Customs duties in this fashion when he has not applied the same power either to Income Tax or Profits Tax? Why only indirect taxes? After all, if it is in his mind to use, through the Clause, a rise in Customs and Excise duties to restrain inflationary tendencies, he will always be faced with the dilemma that, though people's spending may be cut by that means, prices will also be raised. By this instrument, in which the right hon. and learned Gentleman compels himself to raise all the duties at once if he raises any of them, he will inevitably raise not merely the prices of some luxury items but also the prices of a number of ordinary necessities of life which enter into the cost of living. He may end by achieving a rise in prices and a rise in wage rates, which would defeat his object.
That will be the difficulty whenever this instrument is applied. It would not confront the Government if it were applied to Income Tax or Profits Tax. Therefore, it is slightly odd that it is confined in the Clause to Customs and Excise.
We believe that these powers ought not to be entrusted to the Government in the form in which the Clause is now drafted. We want to know whether the Chancellor endorses again the objective of full employment as set out in the 1944 White Paper. If he endorses that and if this instrument is to be used within 516 that context, why cannot we have these words included in the Clause and why cannot he accept our Amendment?
§ Mr. Gower
I want to make one or two brief remarks on some points raised by the right hon. Member for Battersea, North (Mr. Jay). In his reasonable statement in support of the Amendment he referred to the applicability of these instruments to Income Tax and Profits Tax. That has obvious difficulties, which he will recognise. Those forms of taxation involve the preparation of P.A.Y.E. returns, the changing of codes, and so on.
§ The Temporary Chairman (Sir Samuel Storey)
Order. The hon. Member is going very wide of the Amendment.
§ Mr. Gower
Sir Samuel, I was merely commenting on a point raised by the right hon. Gentleman, but I will not pursue it. I wanted to reflect on it en passant because I thought that the right hon. Gentleman would recognise the difficuties.
On his main point about full employment, it is fairly obvious that the Government's policy in recent years has been at all times to maintain the highest possible level of employment, consistent with the strength of sterling and our general trading position. The record of successive Conservative Governments has shown that we are fully seized of the importance of this issue. On the other hand, I doubt whether including it in this Clause would be practicable or desirable. These changes, by means of the regulator as the wording of the Clause indicates, are designed to meet particular circumstances of demand and resources. The steps to be taken are purely inter-budgetary, and to that extent will be temporary to meet a temporary difficulty.
The maintenance of full employment is a much longer term problem. It is a problem of general policy extending usually over a much longer period. The words of the Amendment are somewhat inconsistent with the aims of the Clause as it stands.
§ Mr. Ross
The hon. Member for Barry (Mr. Gower) seemed to think that our criticisms have little or no substance. He seemed to suggest that this was merely an inter-budgetary matter and we should not worry very much about 517 it. The taking of the action will be inter-budgetary, but it is provided by the Clause that the power can carry on until 31st August, 1962, which would take it well beyond any Budget, although during a Budget discussion there would be consideration as to whether it should be continued. How long it would continue would depend on the Order brought before the House of Commons.
§ The Temporary Chairman
Order. This has nothing to do with the Amendment, which relates to the need to maintain full employment.
§ The Temporary Chairman
Order. I asked the hon. Member for Barry (Mr. Gower) to keep to the Amendment, and I must ask the hon. Member for Kilmarnock (Mr Ross) to do the same.
§ Mr. Ross
I am sure, Sir Samuel, that you will not be surprised when I say that I fully intend to devote myself to the Amendment, because it relates to what might well happen in areas such as the one I represent, where we do not always have the proclaimed benefits and blessings which have come to the country from Conservative Governments during the few years of which the hon. Member for Barry spoke.
The hon. Member for Barry began his speech by saying that the Government had maintained full employment, subject to this that or the other. Actually, of course, there are areas in Britain which have not had full employment. One reason why the Prime Minister was unsuccessful when he came to Scotland during the last General Election is that his "Never had it so good" theory does not apply there. There are still 60,000 unemployed in Scotland and, in various areas, the rate of unemployment is not just double that of other parts of Britain, but is four, five and even six times greater. That is what we have suffered in the past. We fear now that as a result of consumer booms and shortages of labour in the London area and in the Midlands the Government will race in with more taxes. I admit that the Government have not taken this kind of action hitherto, but I must point out that when they take action 518 it should not apply indiscriminately to all parts of the country.
We fear that their remedy will be applied to areas that have not been offending and that have not been benefiting from consumer booms. We fear that, as a result, the unemployment situation that had already exsited in those areas will be aggravated. That is the fear behind the Amendment. That is the reason for the Amendment.
What, actually, is proposed by the Clause? The Government are committed, if they decide to take action, to implement the Clause not merely on one form of tax, but on the lot; Customs and Excise duties, Purchase Tax, the lot. They must all be increased by 10 per cent. as the result of circumstances created by various parts of the country.
My hon. Friends and I fear—particularly if labour is the concern—that the new regulators will apply not merely because of circumstances in Scotland, the North-East, or in Wales—
§ Mr. Ross
Yes, and Northern Ireland—but that they will be brought about solely as a result of conditions applicable in the already booming areas of the South or the Midlands. It is, of course, because of such conditions that may be caused in certain parts of the country that the Government intend to take this action and to arm themselves with these new weapons. Our complaint is that these weapons are not intended solely for the areas which are contributing to the trouble, but to every area.
What will be the result? It will mean an increase in Purchase Tax on all goods. Some of those goods are made in my constituency. We make a considerable amount of woollen products both for the home and for export markets. We also make a very fine brand of whisky, "Johnnie Walker". This whisky is still made in Kilmarnock, but, I must admit, is not always consumed there. But, if this particular weapon is used, that product will have to go up in price to save the country from the ill-planned industrial efforts of the Government in relation to the overcrowding of the London area and the Midlands. How this will contribute to a proper regulation of the economy I just do not know.
519 Such action on the part of the Government will result in increases in the cost of living. The Government cannot increase Purchase Tax and all the other forms of taxation without increasing the cost of living. The point is that that increase takes place in areas that have not had the benefit of increased earnings, in relation to the original lack of balance between demand and resources which has been caused in some other part of the country.
Scotland has been suffering from this sort of thing for the past eight years, with the imposition of remedies of the financial variety; limits on credit, credit squeezes and increased interest rates. I have no doubt that they will still be applied. We thus have every right to be concerned that the Government should, before applying these new measures, take into account the provisions of the Amendment. They must keep in mind the need to maintain full employment in all parts of the United Kingdom. Unfortunately, there has been this lack of balance between demand and resources.
There was a time in Scotland when 100,000 people were unemployed. It was a mockery to talk of full employment. Why do hon. Members think that Scotland returned its Labour candidates? Wherever the Prime Minister spoke during the General Election the Government lost a seat. I would like to invite the Prime Minister to come back to Scotland whenever he likes. He is the best propagandist we have for the Labour Party.
I have been trying to press home our fear that the Government seem unable to see beyond London and a few other areas, such as those producing motor cars. There are other areas—in Scotland, Wales and the North-East—which are not offending, and the Government's proposed remedies to regulate the balance between demand and resources are rather rough on those areas.
§ Mr. Gower
Does the hon. Gentleman realise that in most parts of Wales the unemployment figures have fallen considerably, as they have in Scotland, where, I believe, the figure is somewhat lower than that mentioned by the hon. Gentleman. I believe that the unemployment figure is about 3 per cent., while it is over 1 per cent. for the country generally.
§ Mr. Ross
Therefore, we are still three times worse off than anywhere else. It was nearly double that eighteen months ago and the regulatory action taken by the showmen opposite is not something to inspire me with confidence that the present position will continue. I am frightened that some of the new powers they are taking will be enforced without due regard to the maintenance of full employment in every part of the country, and not merely in some parts.
It is the indiscriminate and wholesale nature of their remedies, and the application of them, on unoffending parts of the country that is to be feared. It may help the troubles in London or the Midlands, but it will only make things worse in Scotland. The hon. Member for Renfrew, East (Miss Harvie Anderson), who represents, of course, a Scottish constituency, entirely agrees with this.
Part of the trouble is that we do not know very much about how the proposed regulators will operate. We do not know whether the Government really appreciate all the circumstances, and whether they will apply their newfound remedies after taking these facts into consideration. We are, therefore, anxious to include in the Bill the provisions contained in the Amendment, so that full consideration will be given to all parts of the country while the Government are weighing up the extent of the imposition of their new powers. I hope that we shall get some enlightenment from the Government about how they expect them to work.
§ Mr. Barber
There are two points on which practically all hon. Members in the Committee will be agreed. I think that the Committee approves the general purpose which lies behind this economic regulator, namely, to provide a means of stimulating or discouraging consumption according to the general state of the economy. While, as my right hon. and learned Friend has said, its purpose is not to replace the use of the Bank Rate, hire purchase or other monetary methods, it is recognised that in certain circumstances these particular so-called fiscal weapons may have disadvantages.
I do not think that there is a great deal of difference between the objective which the right hon. Member for Battersea, North (Mr. Jay) has in mind 521 and that which the Government are following. The right hon. Member referred to the White Paper on Employment, 1944. I can say without any hesitation that it is certainly a primary objective of the Government's economic policy to maintain a high and stable level of employment. There is no difference between the two sides of the Committee on this. Indeed, in the Economic Survey this year we stated the Government's policy of encouraging economic growth and pointed out that the commitment to maintain full employment was an important contribution to this end.
I quote from paragraph 23 of this year's Economic Survey:It gives an assurance both to capital and to labour that periods of industrial recession and heavy unemployment, such as discouraged capital development in many industries before the war will not be allowed to recur.Because demand is liable to fluctuate, any Government is, of course, obliged to intervene from time to time to influence the level of demand either upward or downward.
The Government's record in this matter of full employment is there for all to see. While I have not particular details of particular areas, I say in all sincerity that if any proof were required that the Government are in earnest about this matter one has only to consider the latest figures. The unemployment of 299,000, or 1.3 per cent. of the labour force, was the lowest level for the time of year since 1956 and in the same month the number of unfilled vacancies was 353,000, 54,000 more than the number unemployed. The right hon. Member—and, I hope I may say also his hon. Friends—have no wish to suggest that this Government are any less desirous of maintaining full employment than they are. Indeed, if any such contention were made, it would be belied by the facts.
What we have to do is to steer a way between too much demand, on the one hand, and too little demand, on the other. It is generally recognised that excess demand damages the balance of payments and undermines the value of money. To guard against that is perhaps the primary task of the Government at this particular time. Hon. Members will have seen that Clause 8 does not give the Treasury carte blanche. The purpose of this regulator is, as the 522 right hon. Member pointed out, written into the Clause itself. It is to regulatethe balance between demand and resources in the United Kingdom.Clearly, this is one of the fundamental ways of maintaining a high and stable level of employment. If demand is too low in relation to available resources, the consequence may be unemployment, but it is also true that if demand is excessive in relation to resources the consequence will almost certainly be inflation and an adverse balance of payments. The ultimate effect of that would almost certainly be a threat to full employment. So I can say without equivocation that the use of this regulator, either to increase demand or to decrease it, will make a significant contribution to the maintenance of a high and stable level of employment, which is the universal objective of this Committee.
I now turn for a few moments to then Amendment itself to look at it more closely, bearing in mind that what we are considering are words to be inserted not in a general statement of policy, but in an Act of Parliament which must be interpreted strictly. The Amendment refers tofull employment in all parts of the United Kingdom.I do not suppose that the right hon. Member would deny that it might be conducive to the general maintenance of full employment to take action which would necessarily affect some industries more than others.
Again, all of us are only too well aware that in times of general prosperity and high pressure of demand, when over the country as a whole there is a very high level of employment, in some places to which the hon. Member for Kilmarnock (Mr. Ross) referred there is unemployment higher than the national average—so-called pockets of unemployment. This, I think the Committee will agree, is quite a different phenomenon from the general unemployment which is associated with too little demand or the general tightness of labour conditions which we associate with excessive demand.
This is something which no one would dream of trying to deal with by means of a general economic regulator such as 523 the one we are now discussing. Local unemployment is something which calls for special measures directed to the special circumstances of the localities concerned, measures which can be and are being taken by the Government under the Local Employment Act. If we are to take this part of the Amendment literally—and in an Act of Parliament I do not see how else we could take it—it would apparently mean that so long as there were anywhere in the United Kingdom pockets of unemployment of this kind there would be reason for us to use this regulator so as to increase demand by giving a rebate on Customs and Excise duties, notwithstanding that in so doing we might be creating a considerable excess of demand and aggravating the labour situation over the country as a whole.
Even if we did not go so far as that, it appears clear that if we take this part of the Amendment literally we would be stopped from using this regulator to deal with excessive demand in the country as a whole so long as there were pockets of unemployment in any one part of the United Kingdom. It might be said that I have overlooked the logic of the words at the beginning of the Amendment—"having regard to". All I say on that is that I suppose it could be said that in one sense these words go far to nullify the whole of the rest of the Amendment. They would make it possible for us if we were sufficiently cynical to accept the Amendment because it could be said that we could have regard to anything. It might be said that we were not required to satisfy any precise criteria, or to achieve any standard, but simply "to have regard to", but I do not believe the right hon. Member for Huyton (Mr. H. Wilson), in whose name the Amendment stands, or the right hon. Member for Battersea, North, who moved it, put it forward in that spirit.
Of course, when we are considering the use of this regulator we shall have regard to its effect on the employment position of the United Kingdom as a whole and to our general objective of maintaining a high and stable level of employment in this country. We shall have regard to a great many other things besides, including the purchasing power of our currency, the state of our balance of payments, and the competitiveness of 524 our industry in world markets. All these things obviously will be taken into account and in any discussion of any action we might take as a result of this Clause they will be appropriate subjects for inquiry and debate. But it does not follow that they are all proper subjects to be mentioned specifically in this Clause, because they are all summed up in the words in the Clause:with a view to regulating the balance between demand and resources in the United Kingdom.I say this with great respect, because the right hon. Member for Battersea moved the Amendment with his customary courtesy. I believe that the Amendment is misconceived because the maintenance of a high and stable level of employment is one of the objects of regulating the balance between demand and resources, the very words which have been deliberately written into the Clause and which restrict the purpose for which the Clause can be used.
To sum up, the maintenance of a high and stable level of employment depends on the maintenance of a balance between demand and resources. That is the very purpose of this Customs and Excise regulator. The use of this regulator will, therefore, make a real contribution to the maintenance of full employment, which is the objective of the right hon. Gentleman and the Government alike. In fact, I give the right hon. Gentleman the assurance for which he asked, namely, that it is one of the primary objectives of the Government's economic policy to maintain a high and stable level of employment. But an economic regulator of this kind must of necessity operate on the economy generally, and it must be used in the interests of the economy generally.
The Amendment would not, I believe, be to the advantage of the entire population of the United Kingdom as a whole, and I must, therefore, ask the Committee to reject it.
§ Mr. W, Hamilton
The hon. Gentleman worries those hon. Members who represent Scottish divisions, and I think that his speech must also worry hon. Members representing Northern Ireland divisions, although I do not see any of those hon. Members here, because he continually asserts that the policy of the Government is to maintain full employment. We accept that, but the point is 525 that despite what the Government have done, despite these assertions and despite the Local Employment Act, the position in Scotland compared with the rest of England is the same as it was before the introduction of that Act.
There might have been a reduction in unemployment in both Scotland and England, partly as a result of the Local Employment Act, but the gulf between them still exists. I do not think that any hon. Member on this side of the Committee would object to the use of economic regulators. Indeed, our complaint is that there are not enough of them. We would probably go further in the use of economic regulators of one kind or another, but what we are concerned about is that apparently there is no recognition of the fact that the problem in Scotland is different from that in England. This, it seems to us, should cause the Government to look round for some regulator which would discriminate between England and Scotland and take into account the difference in the problems which exist in one part of the United Kingdom compared with another.
I cannot see why the hon. Gentleman is not prepared to accept the Amendment. At the worst, it would be superfluous. It cannot do any damage, and I should have thought that on that score alone the hon. Gentleman would have accepted it.
§ Mr. Ede (South Shields)
I listened with attention to what the Economic Secretary said, but I do not think that he got near the point which troubles those of us who represent those parts of the country which are vulnerable to the effect of a boom in another part of the country which is not reflected in our areas.
I speak for the North-East Coast. At a time when my neighbours in Surrey are exalting everything that is being done—the level of employment in the Home Counties, the influx of population and the demands which are shown in the rising land values which seem to be inevitable when these periods of limited prosperity occur—my constituents live lives of continual anxiety in mining, in shipbuilding, in ship repairing, and in engineering. They take it all the more acutely because, as their circumstances descend, other people's circumstances seem to rise. Nothing which the hon. 526 Gentleman said recognised that point because he continually got back to the general position.
It has always been my experience that poor people in a rich area find life more tolerable than poor people in an area where everybody is poor. It is particularly ironical that when people boast that the country as a whole has "never had it so good" there should all the time be the carping fear in the minds of industrially skilled people that the difficulties they are now facing are likely to be aggravated, and nothing which the hon. Gentleman said showed that in the application of these regulators, as they are called, the Government would have power to lighten any burden in one part of the country as long as over the country as a whole they could produce a mass result which they could say justified the action that they had taken.
§ Mr. Barber
I think that the right hon. Gentleman must have misunderstood what I said. I was making the point that this economic regulator which operates through indirect taxation can only apply to the country as a whole. Because of its very nature, there could not possibly be any exception in respect of a particular area. I hope that the right hon. Gentleman will do me justice in this regard. I went on to say that in the areas about which he is talking we are trying to do what we can under the Local Employment Act. Even if he thinks that that is not enough, it would not be by means of this regulator that we could deal with those areas, because we can have regard only to the country as a whole.
§ Mr. Ede
The hon. Gentleman should not appeal to me to do him justice. If anybody should appeal for mercy rather than cry out for justice, it is the people who have been managing our economic affairs during the last few years and leaving some of the places in the deplorable plight that those of us who are in touch with them know exists.
Part of the complaint against this proposal is that it does not take account of the harm that may be inflicted or the difficulties that may be presented in certain limited areas. That is the whole point of the Amendment, and I am glad of the confession by the Economic Secretary, in his touching appeal for justice, 527 that that is one of the fates that will overtake some parts of the country if the Clause remains unamended.
§ 8.30 p.m.
§ Mr. Ross
The Economic Secretary spoke of the fears which have been expressed from areas of unemployment—the hon. Gentleman calls them pockets of unemployment—and said that the Government already have other legislation and powers under it which they can use when applying themselves to remedying the position in those areas.
What is the chance of getting action taken under that legislation at a time when we are applying this regulator? When we are damping down demand, are we likely to get people moving into those areas to increase production at a time when throughout the Kingdom the Government are reducing demand? It is this wholesale attitude to the question and the harming of these areas unjustifiably at a time when it may be justifiable to take action in other areas that causes us concern.
We have in those areas, and we shall have for a long time, additional resources when no additional resources are available in other parts of the country. If the Government take action to deal with those parts of the country in such away as affects the whole country, they will worsen and exaggerate the position of places like North-East Scotland and Northern Ireland.
I hope that the Government will think again about this. I cannot think of anything that will lead to the growth of nationalism more than the continued behaviour of the Government in the way they have acted in the past eight or nine years. If the Economic Secretary makes his appeal under the Local Employment Act, let him follow it through and see how that Act can be applied at a time when he is introducing this regulator. I tell him that it cannot. I hope that he will think again about this. We have been concerned about this kind of application in the past and we certainly are more concerned at the present time.
The hon. Gentleman spoke about the fall in unemployment figures. I do not know whether he listened the other day to the Secretary of State for Scotland telling us about the number of people 528 who had left Scotland over the last year. I assure the hon. Gentleman that the unemployment figures in Scotland would have been much worse if people had been content to stay there in unemployment. He will find those people have been employed in the Midlands and the London area. That does not satisfy us that that is the right way of regulating the balance between demand and resources.
If the hon. Gentleman really means what he says, let him apply himself to the fact that there are presently resources unused in Scotland. The application of the Clause simply would not lead to a redress of that balance. In the way that it is being put forward to us, I doubt whether this regulator can measure up to its purpose at all. I am certainly concerned about how it will affect Scotland and industry in Scotland and the employment position.
§ Mr. Jay
The Economic Secretary's answer was extremely disappointing and showed a complete lack of comprehension of the degree of anxiety felt in large areas of the country about the employment prospects. We are not arguing that it would be right or possible to apply these changes in taxation in certain areas only. That might be argued about the payroll tax later, but it would be impracticable to argue it about this proposal. What we are arguing is that changes should not be applied generally in such a way as to produce undesirable effects in these particular areas.
My hon. Friend the Member for Kilmarnock (Mr. Ross) is quite right. The whole experience of 1958 and 1959 proves over and over again that we cannot get expansion schemes going, whether under the Local Employment Act or any other Act, in the underemployed areas if the Government are causing general deflation over the country as a whole. That is the point which we are trying to get into the heads of the Government.
I cannot take very seriously the rather extreme interpretation which the Economic Secretary applied to the Amendment. He says that, if these words were added, the Government would be precluded from ever doing anything which might lead to anybody losing his job anywhere. He has omitted to notice that we have very 529 moderately not proposed that the Government's wordsregulating the balance between demand and resourcesshould be omitted in favour of our words, but we propose that our words should be added to those which the Government have already put in the Clause. The hon. Gentleman's interpretation was really somewhat perverse. If, as he so earnestly protests, he is entirely at one with us in wishing to see a high and stable level of employment, he should accept the Amendment.
The hon. Gentleman did not explain what this phrasethe balance between demand and resourcesmeans. He repeated it several times in his speech, but he did not say what it means. Either it means the full employment of resources all over the country, in which case there is every reason for saying so clearly in the Bill, or it means something quite different, something consistent with a good deal of unemployment, in which case our anxieties are aroused again. I think it would be much better if this form of words were altered.
We have it from the Economic Secretary, and from the hon. Member for Barry (Mr. Gower) who has left us now, that the Government's intentions are obviously pure because we have such a high level of employment at the moment. It is not just at this moment that the Government have been in power. In the early months of 1959, unemployment rose to over 600,000. It was 2.8 per cent. in the country as a whole, and in many areas it was 5, 6 or 7 per cent. Although the Economic Secretary said rather casually, almost contemptuously, that he had not with him the figures for individual areas, he must know that unemployment is now close on 7 per cent. in Northern Ireland.
When the Economic Secretary spoke of local pockets of unemployment, as if there were just a few people here and there unemployed and it was a minor problem, he did not seem to realise that
§ there are great areas of the country, those concerned with shipbuilding, to take one example, which are acutely anxious about employment prospects. The whole of Tyneside, about which my right hon. Friend the Member for South Shields (Mr. Ede) was speaking, Clydeside, Merseyside to some extent, and the Jarrow and Belfast areas, places with large populations, are acutely anxious about employment prospects today. One cannot dismiss them casually as mere pockets of unemployment.
§ Mr. Jay
The hon. Gentleman did not use the word "mere". I give him that. He spoke of pockets of unemployment as though it was a small local difficulty, as the phrase is.
I do not doubt that the Economic Secretary's intentions are pure. Even if Ministers' intentions are pure, Ministers change. The Bill matters more than the intentions of individual Ministers. Ministers are very mobile in the present Government. The present Chancellor of the Exchequer was Foreign Secretary for a remarkably long time and the present Minister of Pensions is almost as stagnant in his office as the British economy is under Tory rule; but, apart from those two, there is a high degree of mobility, and we do not know who will be here in a few years.
In view of all the uncertain prospects and the anxieties which exist today, it would be far better to have the words we propose or something like them written clearly into the Bill. If Ministers really mean what they say, I fail to see why they should be unable to accept the Amendment. In order to encourage them to think again and to make clear how strongly we feel on the matter, my hon. Friends will, I hope, press the Amendment to a Division.
§ Question put, That those words be there inserted:—
§ The Committee divided: Ayes 108, Noes 172.531
|Division No. 186.]
|Bowen, Roderic (Cardigan)
|Allaun, Frank (Salford, E.)
|Brockway, A. Fenner
|Corbet, Mrs. Freda
|Allen, Scholefield (Crewe)
|Brown, Rt. Hon. George (Belper)
|Craddock, George (Bradford, S.)
|Benson, Sir George
|Butler, Herbert (Hackney, C.)
|Castle, Mrs. Barbara
|Cullen, Mrs. Alice
|Bowden, Herbert W. (Leics, S.W.)
|Davies, S. O. (Merthyr)
|Johnson, Carol (Lewisham, S.)
|Roberts, Albert (Normanton)
|de Freitas, Geoffrey
|Jones, Rt. Hn. A. Creech (Wakefield)
|Robertson, John (Paisley)
|Jones, Dan (Burnley)
|Jones, Elwyn (West Ham, S.)
|Key, Rt. Hon. C. W.
|Slater, Mrs. Harriet (Stoke, N.)
|Dugdale, Rt. Hon. John
|Lee, Frederick (Newton)
|Slater, Joseph (Sedgefield)
|Ede, Rt. Hon. C.
|Lee, Miss Jennie (Cannock)
|Edwards, Robert (Bilston)
|Lever, L. M. (Ardwick)
|Edwards, Walter (Stepney)
|Mabon, Dr. J. Dickson
|Soskice, Rt. Hon. Sir Frank
|Foot, Dingle (Ipswich)
|Mckay, John (Wallsend)
|Strachey, Rt. Hon. John
|Foot, Michael (Ebbw Vale)
|Stross, Dr.Barnett (Stoke-on-Trent, C.)
|Fraser, Thomas (Hamilton)
|MacPherson, Malcolm (Stirling)
|Galpern, Sir Myer
|Mallalieu, E. L. (Brigg)
|Symonds, J. B.
|Manuel, A. C.
|Taylor, John (West Lothian)
|Gordon Walker, Rt. Hon. P. C.
|Mitchison, G. R.
|Thompson, Dr. Alan (Dunfermline)
|Griffiths, David (Rother Valley)
|Thomson, G. M. (Dundee, E.)
|Griffiths, Rt. Hon. James (Llanelly)
|Hall, Rt. Hn. Glenvil (Colne Valley)
|Oliver, G. H.
|Hamilton, William (West Fife)
|Hayman, F. H.
|White, Mrs. Eirene
|Herbison, Miss Margaret
|Paget, R. T.
|Wilkins, W. A.
|Hilton, A. V.
|Williams, W. T. (Warrington)
|Prentice, R. E.
|Willis, E. G. (Edinburgh, E.)
|Hunter, A. E.
|Price, J. T. (Westhoughton)
|Wilson, Rt. Hon. Harold (Huyton)
|Hynd, H. (Accrington)
|Janner, Sir Barnett
|TELLERS FOR THE AYES:
|Jay, Rt. Hon. Douglas
|Redhead, E. C.
|Mr. Lawson and Mr. Cronin.
|Agnew, Sir Peter
|Matthews, Gordon (Meriden)
|Glover, Sir Douglas
|Maxwell-Hyslop, R. J.
|Baxter, Sir Beverley (Southgate)
|Glyn, Dr. Alan (Clapham)
|Glyn, Sir Richard (Dorset, N.)
|More, Jasper (Ludlow)
|Bennett, Dr. Reginald (Gos & Fhm)
|Nugent, Sir Richard
|Bingham, R. M.
|Grant, Rt. Hon. William
|Oakshott, Sir Hendrie
|Bishop, F. P.
|Grant-Ferris, Wg Cdr. R.
|Osborn, John (Hallam)
|Page, John (Harrow, West)
|Grimston, Sir Robert
|Page, Graham (Crosby)
|Boyd-Carpenter, Rt. Hon. John
|Grosvenor, Lt.-Col. R. G.
|Pannell, Norman (Kirkdale)
|Boyle, Sir Edward
|Pearson, Frank (Clitheroe)
|Hamilton, Michael (Wellingborough)
|Brown, Alan (Tottenham)
|Harris, Frederic (Croydon, N.W.)
|Pike, Miss Mervyn
|Browne, Percy (Torrington)
|Harris, Reader (Heston)
|Pitman, I. J.
|Harrison, Brian (Maldon)
|Pitt, Miss Edith
|Harrison, Col. J. H. (Eye)
|Price, David (Eastleigh)
|Bullus, Wing Commander Eric
|Harvey, Sir Arthur Vere (Macclesf'd)
|Burden, F. A.
|Harvie Anderson, Miss
|Quennell, Miss J. M.
|Butler, Rt. Hn. R. A. (Saffron Walden)
|Campbell, Sir David (Belfast, S.)
|Heald, Rt. Hon. Sir Lionel
|Carr, Compton (Barons Court)
|Redmayne, Rt. Hon. Martin
|Channon, H. P. G.
|Hill, J. E. B. (S. Norfolk)
|Ridley, Hon. Nicholas
|Hornby, R. P.
|Cordeaux, Lt.-Col. J. K.
|Hornsby-Smith, Rt. Hon. Patricia
|Corfield, F. V.
|Hughes Hallett, Vice-Admiral John
|Costain, A. P.
|Simon, Rt. Hon. Sir Jocelyn
|Coulson, J. M.
|Hutchison, Michael Clark
|Skeet, T. H. H.
|Craddock, Sir Beresford
|Iremonger, T. L.
|Smith, Dudley (Br'ntf'd & Chiswick)
|Smyth, Brig. Sir John (Norwood)
|Johnson Smith, Geoffrey
|Spearman, Sir Alexander
|Dalkeith, Earl of
|Kerans, Cdr. J. S.
|d'Avigdor-Goldsmid, Sir Henry
|Stoddart-Scott, Col. Sir Malcolm
|Deedes, W. F.
|Litchfield, Capt. John
|Studholme, Sir Henry
|de Ferranti, Basil
|Lloyd, Rt. Hon. Selwyn (Wirral)
|Talbot, John E.
|Digby, Simon Wingfield
|du Cann, Edward
|Loveys, Walter H.
|Temple, John M.
|Duncan, Sir James
|Lucas, Sir Jocelyn
|Thomas, Leslie (Canterbury)
|Elliot, Capt. Walter (Carshalton)
|Thompson, Kenneth (Walton)
|Elliott, R. W. (Nwcstle-upon-Tyne, N.)
|Thompson, Richard (Croydon, S.)
|Emmet, Hon. Mrs. Evelyn
|Errington, Sir Eric
|McLaughlin, Mrs. Patricia
|van Straubenzee, W. R.
|Vaughan-Morgan, Sir John
|Vickers, Miss Joan
|Vosper, Rt. Hon. Dennis
|Wells, John (Maidstone)
|Wakefield, Edward (Derbyshire, W.)
|Woodhouse, C. M.
|Williams, Dudley (Exeter)
|Williams, Paul (Sunderland, S.)
|Wills, Sir Gerald (Bridgwater)
|Yates, William (The Wrekin)
|Ward, Dame Irene
|Wilson, Geoffrey (Truro)
|Wise, A. R.
|TELLERS FOR THE NOES:
|Mr. Finlay and Mr. G. Campbell.
§ Wing Commander Eric Bullus (Wembley, North)
I beg to move, in page 6, line 28, to leave out from "excise" to "but" in line 29.
I understand that it will be convenient for the Committee also to discuss the Amendment in page 6, line 30, leave out "other", and the Amendment to Schedule 4, page 34, line 10, leave out paragraph 1.
It will be appreciated that it is the Chancellor's intention to apply this regulation to all indirect taxation but I submit that the duty on dog-race betting ought not to be treated in the same manner. This duty is in a special position because it is discriminatory. There is no duty on horse-race betting. It follows that a surcharge would increase this unfair discrimination.
Along with other hon. Members, I have tabled a new Clause to deal with the question of the 10 per cent. tax discrimination and we can pursue the matter at length when we come to debate that Clause. Meanwhile, I hope that the Economic Secretary will realise that these Amendments give the opportunity to call attention to the existing discrimination again dog racing. I am the Member for a Wembley constituency and I am chairman of an all-party group who object to this discriminatory approach by the Treasury. Successive Chancellors of the Exchequer have been interviewed by all party deputations. Regularly those Chancellors have admitted the justice of our case but nothing has been done.
It seems that because greyhound racing and its administration are run so efficiently it is penalised in this way. These Amendments give opportunity to protest against this surcharge on a duty which is discriminatory in itself.
§ Mr. Barber
My hon. and gallant Friend the Member for Wembley, North (Wing Commander Bullus) is, I know, a persistent campaigner against the 10 per cent. pool betting duty with which the bookmakers' licence duty is linked. Both he and I are in some difficulty on 534 this occasion, because I understand, Sir Gordon, that although we are considering these three Amendments together, the Amendment in page 6, line 30, at end insert:and pool betting duty in respect of bets made by way of a totalisator set up on a dog racecourseis out of order and, therefore, it would be out of order for me to consider excluding the pool betting duty on stakes made on totalisators at greyhound race courses from the ambit of this Customs and Excise regulator. Consequently, I can consider only the case of the bookmakers' licence duty.
I think it will be agreed that we have adopted the right course for this regulator in maintaining that all Customs and Excise duties should be within its scope unless there are positive and compelling reasons for leaving them out. As the Committee knows, protective duties and anti-dumping duties, for obvious reasons, have been excluded. Television licence duty and vehicle licence duty have been left out, because they are collected by the Post Office, and also because frequent temporary changes would cause confusion at post office counters. We have also left out most of the other excise licence duties because they are, in effect, only annual registration fees.
There is, I would suggest, with great respect to the arguments put forward by my hon. and gallant Friend, no cogent reason for excluding either the pool betting duty, the merits of which I cannot go into on this occasion because of the rules of order, or any part of it. The inclusion of the bookmakers' licence duty, which we are permitted to discuss on this Amendment, is purely consequential on the inclusion of the pool betting duty which it countervails.
To sum up, it would not be in order to exclude from the regulator the pool betting duty in respect of bets made on the greyhound totalisator. While I am not permitted to enlarge on this, I should like to state that I believe there are sound reasons for retaining the duty. 535 But the bookmakers' licence duty which the Committee is considering in these Amendments exists only in order to countervail the pool betting duty. I think that my hon. and gallant Friend would agree therefore that it would be quite wrong to exclude it.
Quite apart from that, the great advantage of the regulator is that it will be widely based. It covers practically all the Customs and Excise duties and, consequently, I believe that it would not be right to exclude this particular duty. Whatever the merits may be regarding the pool betting duty, which, of course, may be discussed on some other occasion for all I know, I think that my hon. and gallant Friend will agree, in view of the way in which the Amendments have to be considered, that it would be quite out of the question to exclude a countervailing duty like the bookmakers' licence duty. As this duty countervails one part of the pool betting duty which cannot be excluded from the regulator, it seems to me that there are overwhelming reasons for asking the Committee not to accept the Amendments.
I hope that with that explanation, and without prejudging whatever views my hon. and gallant Friend may have on the merits of the pool betting duty, which we cannot consider on this occasion, he will not feel it necessary to press the Amendments.
§ Wing Commander Bullus
I am not entirely satisfied with the reply of the Economic Secretary. I have made my case on behalf of two hon. Members opposite who put down these Amendments to which I merely put my name and then I found myself landed with them. I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Motion made and Question proposed, That the Clause stand part of the Bill.
§ Mr. William Warbey (Ashfield)
I hope that the Committee will oppose this Clause, the more so after hearing the reply of the Economic Secretary to an Amendment moved earlier by my hon. Friend. Unfortunately, we have had previous experience, under an Administration composed from the party opposite if not the present Administration, of the 536 use of measures to restrain demand in order to permit not merely disinflation but, along with it, an increase in unemployment. That has actually happened. It was perhaps dignified by the name of increasing the flexibility and mobility of labour, but, in fact, that is what happened.
The Economic Secretary may not like to accept that it was the malicious intention of the then Administration to bring about the effects which proceeded from the causes, but, nevertheless, they did follow and in doing so supported the theory pronounced by a good many Government supporters in the economic Press. I fear, therefore—this is my first objection to the Clause—that if this regulator is used at all during the period with which we are concerned in this Clause, namely, the period up to 31st August next year, it will be used only in an up direction. I mean the general 10 per cent. increase in Excise Duty and Purchase Tax.
The Chancellor of the Exchequer has delivered various homilies about the danger of wage increases and of increasing consumer demand. We read in the economic Press and in the city editors' columns how there is a growing danger of inflation and that, sooner or later, it will be necessary to apply one of these economic regulators. Since the payroll tax is not much in favour, this is the one which is singled out for use. Therefore, I think that we are likely to see the use of this regulator in an upward direction during the coming year.
What the Committee is being asked to consider now is whether it will agree to an increase of something like £225 million in indirect taxation. That is what we are being asked to approve. It is true that at a later stage we shall be asked, in the course of an hour and a half of debate, to pass an Order. But the real business is being done now. It is now that we are being asked to give the Chancellor of the Exchequer power to increase taxation by £225 million during the coming year.
That is not all, because this is only one of a series of measures which represent a combined operation against the standard of living of the masses of the people and in the interests of the wealthier section of the community. 537 Clause 26 of the Bill contains another economic regulator which also gives power to increase indirect taxation, which will be passed straight to the consumer.
§ Mr. Warbey
With great respect, Sir Gordon, I was merely trying to produce arguments against Clause 8 by showing that it is part of a series of steps being taken by the Chancellor of the Exchequer. I hope that I may be allowed to refer to these other measures in order to put the thing in its context.
§ Mr. Warbey
One step at a time may be enough for the Chancellor. It is exactly my complaint against him that he has been proceeding one step at a time, very cautiously and very timidly, because he realises the howl of rage which would have greeted him if, when putting forward his Budget, he had incorporated in it, at one fell swoop, all the measures which will add to the cost of living by means of increasing indirect taxation and the poll tax.
Although in this Clause we are only concerned with a sum of up to about £225 million, nevertheless the total effect of all the measures and the various steps which the Chancellor is taking—of which this is only one—will be to increase indirect taxation and the poll tax by something over £800 million in the current year, which is about ten times the amount which the Chancellor is giving, in the form of tax concessions, to the Surtax payers. I wonder what would have happened in the House, and still more in the country, if the Chancellor had had the courage to say that and do it in the Budget.
§ The Chairman
I am sorry to interrupt the hon. Gentleman again but we are now concerned with the Question, "That the Clause stand part of the Bill". We are concerned only with Clause 8.
§ Mr. Warbey
I understand that, Sir Gordon, but I thought that I would be permitted to adduce arguments to show that this proposal forms part of a series of proposals designed substantially to in- 538 crease indirect taxation while, at the same time, direct taxation is being reduced. I will only add to what I have already said on this point by saying that this is one of such a series of stages and, as such, should be opposed, because it represents part of the general process of decreasing progressive taxation and increasing regressive taxation.
That is what the Government are aiming at in accordance with their general policy, announced by the President of the Board of Trade, of providing two kinds of social justice—one for the rich and another for the poor, which is, as The Times put it, restoring the pre-war standard of such incomes. The Government are engaged in the general process of redistributing incomes in favour of the wealthier section of the community, and this Clause is part of the process. That is one of my objections to it.
§ Sir E. Boyle
I should like to clear this matter up. Direct taxation yields a higher percentage of the total revenue now than in 1951, and next year it will yield £398 million more for the coming financial year than it did in the previous financial year. Whatever views of the theory of Government policy the hon. Gentleman may hold, his criticisms do not apply to Government economy policy at this moment.
Mr. H. Wilson
Would my hon. Friend the Member for Ashfield (Mr. Warbey) elucidate from the Financial Secretary whether, under the heading of direct taxation, he does or does not include the poll tax?
§ Sir E. Boyle
I am talking about direct taxation—Income Tax and Profits Tax. With respect to the hon. Member for Ashfield, who spoke of the buoyancy of the revenue, that does not tell the whole story, because marginal taxation next year on many incomes will be a good deal higher. I am not meaning to argue the fundamentals with the hon. Gentleman. I am merely pointing out that his criticisms simply cannot be sustained at the present time in view of the prospective yield of taxation.
§ Mr. Warbey
Yes, but, unfortunately, I am not permitted by the rules of order to develop this point as fully as I should like to do. I had certainly included in the general phrase "indirect taxation" 539 a poll tax such as the National Insurance contribution and the National Health Service charge. When all these are taken into account, we have a very different picture indeed. Also, to put the record straight, we have to take into account changes made in the sphere of direct taxes themselves, which, although they do not affect the total amount raised, have during the course of several Tory Budgets over the past ten years, again favoured the higher income groups.
I want to give two more reasons why I object to this Clause. One is that it is a heaven-sent means of manipulating the economy for political purposes.
§ Mr. Warbey
I do not know where the Chancellor got his inspiration in this case, but, certainly, from the point of view of the Conservative Party, the inspiration is of a high, and could be of an unfortunately successful, character. We have had experience of the manipulation of the economy for political purposes. It was done before the 1955 General Election; it was done before the 1959 General Election, and I have no doubt that the Conservatives will endeavour to do it again next time.
If we pass this Clause, we are presenting them with an additional very effective and very easy means of manipulating the economy to their advantage. Having raised indirect taxes and the cost of living during the period between elections, they can then very conveniently reverse the process in the few months before a General Election, and they can do so if, in the meantime, they have raised this tax by 10 per cent., and if they have taken advantage of Clause 26 as well, because they would then be in a position to reduce indirect taxation by a total amount approaching £700 million, which would be a very convenient and useful hand-out on the eve of a General Election.
Therefore, I suggest that those hon. Members—and I am sure that they are not confined to one party—who are interested in the incorruptibility of our fiscal system will regard this Clause as putting a dangerous weapon into the hands of those who may use it.
540 I agree that there is an argument for economic regulators. There are many which I and my hon. Friends would favour, but this is not one of them. Moreover, it is not one of them mainly for the reasons which I have given but also because if the economy is overturned by an economic crisis due to international speculation with the £ or the pressure of interests who are worried because we are not following a sufficiently orthodox financial policy in this country, then the Chancellor ought to introduce an interim Budget and a second Finance Bill so that his proposals may be properly debated, with opportunity for amendment and opportunity to consider a number of different methods.
In this way we should have a means of dealing with such an economic difficulty by a co-ordinated series of financial, economic and monetary measures which would enable us to deal with the problem equitably, so that any burden would fall on the shoulders of those best able to bear it. That is a better method rather than, as is now proposed, putting into the Chancellor's hands a power to take, whenever he likes and almost at a stroke of the pen, a blind swipe at the standard of living of the masses of the people.
§ Mr. F. A. Burden (Gillingham)
I am sure that the hon. Member for Ashfield (Mr. Warbey) does not expect the regulator to have a great effect on the next election for I am sure that even he does not expect an election within the next year and this regulator will operate only until 31st August, 1962.
§ Mr. Warbey
What I had in mind was that the Chancellor would use the regulator to increase the tax during the current year and then reduce it in the pre-election year.
§ Mr. Burden
Again, the hon. Member is quite wrong. The Chancellor could just as easily increase taxation next year and reduce it before an election, if he so wished, whether there was a regulator or not.
The great virtue of the regulator is in its flexibility and the fact that it enables the Chancellor to correct before it arises any difficulty which he or his financial experts foresee. If it were necessary for him first to come to Parliament, through budgetary action, to increase or reduce taxation to meet the situation, then the 541 greatest virtue of this regulator and the whole basis of this idea would be lost. The difficulty would be upon us and probably insurmountable before any appropriate action could be taken.
If the hon. Member casts his mind back he will agree that a great difficulty in the retail trade over many years was created by the fact that at the time of the Budget each year there was an expectation that Purchase Tax would be either increased or lowered, and, as a consequence, there was a hiatus in trading. This meant that retail firms would not buy, because of the uncertainty. I assure the hon. Member that a considerable amount of unemployment was created as a result in certain industries.
I know that many hon. Members opposite probably do not agree with some of the details, but it has been clear from what has been said that in principle they agree that there should be an economic regulator—
§ 9.15 p.m.
§ Mr. J. T. Price (Westhoughton)
The hon. Gentleman is obviously speaking from personal knowledge of trade and industry, with which he is identified, but those who have to lay up stocks of goods and put them in the shops for sale are not at all disturbed by any prospect of an increase in Purchase Tax. They are concerned when the tax comes down and lands them with a lot of stock for which they have paid high prices. Therefore, the danger that he fears does not occur in practice.
§ Mr. Burden
I shall deal with that point, which is a perfectly legitimate one. I have always expressed myself in this House as being opposed, in principle, to Purchase Tax, but if we are honest with ourselves we have to accept that whether the party opposite is in power, or we are, this is a proper way of raising taxation presently needed, and that a similar form of tax will be with us for probably as long as the hon. Gentleman or I will be interested, or in this House.
The fact that the regulator is flexible and can be imposed at any point does not, in fact, mean that stores will run down their stocks as much as possible at a given period. They must maintain a sufficiency of stock with which to trade 542 freely. The conditions are not the same as when the tax can be imposed at any time. I hope, however, that my right hon. and learned Friend will not find it necessary to increase Purchase Tax.
In some quarters there is doubt about the precise scope of this Clause. If the power to vary under the regulator is exercised, must the prescribed variation apply to all the duties specified in subsection (3), or is it permissible within the terms of the subsection to vary, for instance, only Purchase Tax, or one of the other taxes indicated in paragraphs (a) and (b)? I hope that what is contemplated will be made clear.
§ Mr. Anthony Crosland (Grimsby)
This is clearly one of the most important Clauses of the Bill, and though I take a view rather different from that taken by my hon. Friend the Member for Ashfield (Mr. Warbey), I am also sorry that in this debate we have not yet managed to discuss the basic purpose of the Clause and whether it provides a proper weapon to achieve that purpose. I welcome the Clause in principle, despite its dangers, partly because it is an additional regulator, and I think that we badly need one, and partly because we need one that can be operated between Budgets.
If we consider what we all now agree to be the rather deplorably slow rate of growth in this country, we can also agree that one of the causes has been the unsteadiness of our growth over the last ten years. If we could steady the rate of growth from year to year we should certainly get a more rapid rate of growth over the average of years, and I take it to be our common purpose to try to get away from this movement by fits and starts—go slow, go fast—and get something steadier.
That is a common objective. The difficulty is to decide what precisely can be steadied—what element in total demand can be steadied, and how. Clearly, there is little that we in this country can do in this direction about exports. We cannot control the amount that we should like to export, because that depends on factors completely outside our control. We certainly cannot control investment in stocks. It has also proved a great deal more difficult problem than many assumed after the war to control fixed investment. The measures which we have to control it have operated very slowly, 543 and it has been found extremely difficult to get a steady rate of growth in fixed investment.
It is becoming clearer, as I assume that it became clear to the Chancellor of the Exchequer when he was preparing the Budget, that we in this country must make our main aim of policy, if we want steady growth, the securing of a steady rate of increased consumption. The right policy for the Government to adopt is to say in principle that we in this country are aiming at, let us say, a 4 per cent. rate of increased growth per year and that the first way of achieving this is also to aim at a 4 per cent. rate of increased consumption per year. That is the thing we try to study.
§ Mr. Burden
We all agree that we should like to raise this country's consumption by 4 per cent. per annum, but that is tied to our power to increase our exports to compensate for that increase.
§ Mr. Crosland
Yes, of course, it is tied to that. It goes without saying that unless we can achieve a healthy balance of payments we cannot do anything. I am assuming that other aspects of Government policy are directed to achieving a healthy balance of payments. We then come back to the rate of growth.
My point is that, if we are to have steady growth as a whole, we must go for a steady rate of increase in consumption. We have singularly failed to achieve this over the last few years. I am certain—in this I agree with what I take to be the intention of the Chancellor of the Exchequer—that if we are to get this we must have more efficient regulators over consumption. The difficulty is to know what are the right regulators to use. It is becoming more and more clear that monetary policy—with its influence on consumption, investment, stocks and practically everything—is an all but useless regulator.
I agree very strongly with the conclusions of the Radcliffe Committee about very much writing down the whole rôle of monetary policy. One of the reasons why I like the Clause is that it marks a very definite step by the Government away from monetary policy towards fiscal policy, which I am sure that we on this side welcome. If we are to reject 544 monetary policy as our main regulator, we come down to fiscal policy in some form or other. Before coming down to fiscal policy, we could go on with what, despite the Government's lip-service to monetary policy, has in fact been their main policy over the last few years. This is to try to exercise control through hire-purchase restrictions. Nobody can say that these are not effective. In a sense they are effective. They operate too effectively in a comparatively small part of the country. If there is too much demand in the country and the Chancellor of the Exchequer wants to damp it down, almost the entire effect of his damping down is felt in a very small number of places—in the motor and consumer durable industries.
Most of us now take the view that to rely primarily on hire-purchase control concentrates the whole thing on too few places. It concentrates it on Coventry, for instance, and a limited number of other places. It does so very painfully. Therefore, I welcome this regulator as a method of controlling consumption less violently and painfully and in a less concentrated form than that achieved by hire-purchase restrictions.
I disagree with my hon. Friend the Member for Ashfield, who looked at this from the point of view of the distribution of income. He rather asked why this was done by indirect taxation at all, implying that the Government could have as a regulator something which operated on direct taxation. I do not think that changes in direct taxation could possibly be used as a sufficient short-term planning regulator, because they operate much too slowly. They do not take effect for months and months. The whole purpose of having such a regulator is to have something which will bite very quickly.
I am clear that the regulator, whatever it is, must be mainly couched in terms of indirect taxation. This certainly leads to the danger which my hon. Friend had in mind, that over a period of years indirect taxation might be higher in consequence of having this regulator, but there is no particular reason in logic why that should be so. If it is used primarily as a regulator, there is no reason why the taxes which will be changed under the Clause should be any higher on balance in five years' time than they are now. It may be, as my hon. Friend fears, that 545 they will be higher due to the sinister machinations of the Tory Party. I share much of his cynicism in this respect, but I have far too much confidence in the ability of the Government with their existing weapons to do something sinister before an election. The fact that they have this additional regulator will not make their evil intentions any more effective in practice than they have already been.
It is clear that there are dangers in this. I know that my right hon. Friend the Member for Huyton (Mr. H. Wilson) wants to draw attention to the dangers of abuse of Parliamentary procedure, of this regulator being used in too arbitrary a fashion. I will leave him to make that point. I can see possibilities of abuse in this, but, in principle, I welcome it as a definite move, so far as one can judge, away from the excessive reliance on monetary policy which we have had in the past few year in the direction of greater control and greater planning of the economy in the interests of steady growth.
§ Mr. Gower
I am entirely in agreement with the hon. Gentleman the Member for Grimsby (Mr. Crosland). I hope that his views are those of the Opposition at large. The hon. Member for Ash-field (Mr. Warbey) obviously does not want this regulator in the Bill. He wants the Clause left out, but I would be disappointed if that were to happen.
This can be described as one of the most imaginative parts of the Bill and among the most imaginative concepts of the Chancellor in his attempt to introduce something more flexible than the means at present at his disposal. The hon. Member for Ashfield suggested that this was designed largely for election purposes. I thought that there was a complete answer to that, since the Chancellor has limited its operation until August of next year. If my right hon. Friend then wishes to take powers to permit him to continue it, he must come to the House again when, no doubt, the matter will be fully debated, just as it is at present being scrutinised.
Apart from that, I like to feel that the Chancellor recognises that this is in the form of an experiment. The Chancellor and the hon. Member for Grimsby have realised that there is a genuine need for something to supplement the 546 measures which have been available in the past to enable Chancellors to deal with sudden changes in the economy. Having decided on this particular type of regulator, the Chancellor is to give it a trial for perhaps just over a year.
Surely hon. Gentlemen opposite will agree that that is a reasonable proposal to make. The hon. Member for Ashfield seemed to ignore the fact that in the past, apart from budgetary policy, when there have been sudden difficulties the Chancellor and his predecessors have been largely bound to resort to changes in the Bank Rate and to sudden restrictions on hire purchase. This matter was referred to by my hon. Friend the Member for Gillingham (Mr. Burden). Although the Chancellor has been able to use those forms of restrictions and can, perhaps, curtail bank credit, he has very few other resources at his disposal to deal with sudden difficulties.
But now we have a reasonable proposal for something which will supplement those other steps and which will enable the Chancellor to take that instant step, when necessary, to prevent the development of a more serious situation. At the first sign of danger he will be able to come to the House and present hon. Members with an Order—which will be subject to debate—and that Order will have effect fairly quickly.
I agree with the hon. Member for Grimsby, who is at variance with the right hon. Member for Battersea, North (Mr. Jay), a former Financial Secretary to the Treasury, who considers that this should be applied to Income Tax and Surtax. I cannot see how he can suggest that, since so much Income Tax and Surtax is paid at the end of the financial year. Thus, the effect could only be limited to those on P.A.Y.E. and they would have to bear the whole brunt of the regulator proposed by the hon. Member for Battersea, North.
§ Mr. Gower
Then perhaps the right hon. Gentleman was suggesting or implying that it could be applied to Income Tax. However, I believe that this is a significant, interesting and imaginative 547 proposal and I hope that hon. Members will approve this experimental period of control because I believe that it will prove to be a valuable addition to the existing means of controlling the economy.
§ 9.30 p.m.
§ Mr. J. T. Price
I do not often allow myself the pleasure of striking a discordant note on this side of the Committee, but I am afraid that I must do so briefly on this occasion. I listened with great respect, as I always do, to the fertile speech of my hon. Friend the Member for Grimsby (Mr. Crosland).
§ Mr. Price
I did not say that it was a bad speech. It was a a good speech. He stated in almost classical terms the academic professional view of economists on these matters. It is no part of my purpose this evening to argue the merits of these things, except to say that this completely avoids facing what I might call the constitutional issue. That issue is that the Executive, Her Majesty's Treasury, having been granted the powers in Clause 8 to impose this regulator of 10 per cent. either on Purchase Tax or duties according to their will and pleasure and according to the circumstances of the time, are not made accountable to give reasons why that step has been taken. That is why I take issue on the constitutional side as distinct from the economic side of the arguments which may be brought forward eloquently and persuasively by people such as my hon. Friend the Member for Grimsby.
I am in the rather rare position of sharing some of the views of my hon. Friend the Member for Ashfield (Mr Warbey), with whom I so often disagree on other issues. I certainly share with him disquiet—I put it no higher and shall not use the ugly word "suspicion"—about placing in the hands of this Executive such powers as these to take arbitrary action without giving an account of why they are taking it at the time they are taking it. That is something which I would not consider a prudent course because of my view of the Government's policy. This situation might arise if we accept the Chancellor's argument, used when he presented the 548 Budget so eloquently a few months ago, giving the reasons why he wanted these regulators, which we followed with interest and not without some sympathy in certain directions.
I shall not give him full praise, but I shall be honest and objective and give him modified praise. We understood his reasons and his reasoning. What we do not understand is that if the whole policy of the Government leads to a situation in which the country is faced with inflation, the Government, by the exercise of the powers asked for in the Clause, can wipe out the consequences of their evil policy or their faulty policy and put a 10 per cent. increase on duties or Purchase Tax. They can put it on the lot. If I read the Clause aright and understand the Queen's English correctly, with all the limitations which Parliamentary draftsmanship impose upon me, there is nothing to stop the Chancellor, if he thinks that an inflationary situation calls for the exercise of the regulators, imposing the 10 per cent. either on Purchase Tax or on duties, or on both as he chooses.
If a discrimination is open to them and if Purchase Tax were so manipulated to tide us over a difficult period, it could be argued that it would be the wrong course to increase indirect taxation and leave duties and other things as they were. If I am wrong in this I may be corrected, and I shall acknowledge that I have been wrong about it. At the moment, although I pay due respect to all the arguments for the granting of these powers, I cannot bring myself to trust any Executive—here I am quite impartial—with these powers because any Executive would to some extent abuse these powers if they were not answerable to Parliament for their actions.
I am opposed, to the limited extent of my knowledge, to the granting of these powers which would be exercised without the proper supervision of Parliament and without giving an account of the reasons which require the Chancellor to impose this 10 per cent. in a situation which he may wish to bring to an end.
Mr. H. Wilson
I am not rising with any idea that we should end the debate on the Question, "That the Clause stand part of the Bill", because this is one of the biggest powers ever given to a 549 Chancellor in time of peace. I shall be surprised if some of my hon. Friends do not wish to carry on the debate. I thought that it was right to rise and draw together some of the lines which have emerged in the debate, and to draw the attention of the Committee to some of the points which we consider of fundamental importance.
First, we are faced with this problem of regulators. We welcome the fact that the present Chancellor, the fifth of his line in my time at this Box, shows a little more awareness than any of his predecessors of the shortcomings of the monetary weapon as an economic regulator. He has not specifically said this. He has not disavowed this, but I think it is clear that the Chancellor, with the line he is taking on the regulator, is, at any rate by implication, admitting that the Radcliffe Committee was much nearer the bone than his predecessor was willing to recognise.
This is on the record, and the Committee can look up the various Motions which we have moved on the economic situation at various times. For years, right back to the days when the present Home Secretary was Chancellor, even before the 1955 election, we have moved Amendments to various economic Motions saying that the Government were placing excessive reliance on the monetary weapon. For many years that has been one of the main burdens of our criticism of Government policy.
This was particularly our view during the short reign of the present Minister of Aviation, whose reliance on the monetary weapon was pursued to almost lunatic proportions. I will not weary the Committee with the quotations I have given from the speeches he made and the Press statements he made at the time of the crisis of September, 1957, when he gave the impression that if only he could control the volume of money all would be well; prices would immediately respond to his system of controls; that he was going to make available only a certain amount of money in circulation, and that if wages took more of it there would be less for other things and that would cause unemployment. He said that with almost blatant crudity, but one thing he did was to set up the Radcliffe Committee.
When the Radcliffe Committee reported we had a full debate. I hope 550 that the present Chancellor will find time to read that debate. He will find it in HANSARD for 25th November, 1959. It was a valuable debate. Some of the bright new ideas which the President of the Board of Trade takes credit for announcing were put forward from this side of the House in that debate, particularly with regard to the encouragement of exports. It was a valuable debate, and we moved an Amendment to the Government's rather arid Motion to take note of the Radcliffe Report, saying that we welcomed it, and in particular certain sections of the Report with which I will not deal tonight because I would be out of order if I took that too far.
Our general attack on the Government has been that they have felt that with interest rate policy, with all the lurchings that this has caused, and with all the hardships and problems it has caused for local authorities, for mortgage holders and owner-occupiers, and in other ways, with some kind of control over the volume of credit by one means or another, they are able to rescue and stabilise our economy to enable us to continue to expand while yet enjoying reasonably stable prices.
In the event, of course, for most of the period when the monetary policy was at its height we did not have stable prices and we did not have growth. We had the worst of both worlds. Production was held down and in consequence costs rose. A further result was that for one reason or another prices kept going up and there was inflation, and so on.
When the Radcliffe Committee reported—I shall not weary the Committee with long quotations at this time of night, although I would be thoroughly justified in doing so in this debate—it made quite plain that that policy had failed. Its findings were contrary to all the speeches we had had from Conservative Chancellors, especially the Minister of Aviation, not to mention our old friend the Financial Secretary to the Treasury, whom I once called Rasputin because of his ability to influence successive Chancellors on these lines. At various times, he has advocated monetary policy. I never thought that his heart was in the job, but he did it with considerable elegance, even with an appearance of conviction.
§ Sir E. Boyle
Looking back at our happy debates together at the end at 1955, the right hon. Gentleman cannot accuse me of having neglected fiscal policy in some of our debates.
No, but I recall a large number of economic debates when the hon. Gentleman put forward the case for over-reliance on monetary policy with all the vehement conviction of somebody who does not really believe in it. It was enough to convince many of his hon. Friends, although it did not convince us.
The judgment of the Radcliffe Committee was that, contrary to everything we had ever heard, financial policy was not the fine hand on the steering wheel or the gentle control of the stability of the economy, that all that it led to was lurchings and shudderings, and that if we have to use the motor car analogy that successive Chancellors have made tiresome, all that it leads to is a screeching of brakes at the corner, the burning of rubber and all the rest. We welcome the fact that the Chancellor has decided not to rely principally upon the monetary weapon.
One of the features to come from the Radcliffe Committee was the growing awareness of the efficacy of the hire-purchase weapon. Hon. and right hon. Members opposite won the last election by suddenly removing the credit squeeze, by a tremendous tax hand-out in the Budget that preceded the election and by their removal of the hire-purchase restrictions. They pulled out every stop in the organ to get a booming economy just before the election. Then, it got out of hand and immediately they imposed controls. After the election they put on the hire-purchase control with more vigour and confidence than they had used, for example, after 1955.
After 1955, when the poor old Home Secretary had overplayed his hand before the election, he had to come down and go through all the difficulties and the long, late-night sittings of an autumn Budget. That is why he is not Prime Minister. However, after the last election, the then Chancellor came along and in most gentlemanly fashion he reimposed the credit squeeze, he reimposed the hire-purchase controls and he raised Bank Rate. He did all those things. He 552 reversed practically every instrument that won the party opposite the election. As my hon. Friend the Member for Grimsby (Mr. Crosland) has pointed out, however, hire purchase created a great deal of lurchings of its own. Hire purchase is not a sensitive instrument. While we have complained that monetary policy was not sufficiently selective, the hire-purchase control is too selective, particularly in the geographical effects to which my hon. Friend has drawn attention.
So the Chancellor has decided that over-reliance on monetary policy and on hire purchase is wrong. Therefore, we are to have additional regulators which will not have to wait for the annual Budget timetable to be introduced. Thus we get the payroll tax, or powers to impose it, and we get this indirect taxation regulator.
Obviously, we cannot say anything tonight about the payroll tax, because we have not yet reached the appropriate Clause. While our speeches must remain in order, however, our minds can go far beyond your Rulings, Sir William, so that we can take into account the fact that in the Bill we are giving the Chancellor two important powers. We are glad, as I say, that the Chancellor has moved a little way from financial controls, although we should like him to have really faced the implications of the present economic situation. We wish that he had realised the necessity of expanding essential investment by the necessary physical controls. I shall not develop that now, Sir William. That debate is for another occasion.
Having welcomed what the Chancellor has done in throwing over the arguments of some of his predecessors, I want now to express the concern which we on this side of the Committee feel at the way in which he is doing it. We do not intend to vote against the Clause standing part of the Bill, but that does not prevent us from expressing very great concern about it. Lest there be any doubt, I say now that we shall certainly oppose by every means open to us the payroll tax. That will come later.
On this Clause, we are deeply concerned, first, about the matter of Parliamentary control referred to by my hon. 553 Friend the Member for Ashfield (Mr. Warbey) and my hon. Friend the Member for Westhoughton (Mr. J. T. Price). We are giving the Chancellor powers which would make Gladstone turn in his grave. The total powers which the right hon. and learned Gentleman is to have to raise taxation without legislation under the two relevant Clauses amount to a revenue-raising power equal to an entire pre-war Budget. The Chancellor will have power to raise an amount of that size. Therefore, putting the matter now in terms not of either side of this Committee, the House of Commons must not concede such a power lightly. It is a very important power to be given to any Chancellor.
For one thing, one would imagine that the Chancellor would be likely to use this power in respect of indirect taxation when things get a little out of hand, when he has miscalculated in the Budget, when things turn a little awkward, perhaps, in the autumn, or when, for reasons quite outside his control or his power to forecast, things tend to speed up in one direction or another and an additional regulator is required.
Many of us feel that should that sort of thing happen a Chancellor of the Exchequer ought to come to the House of Commons with an autumn Budget. The right hon. Gentleman the Home Secretary was not averse to doing that. Let us consider for a moment what the Home Secretary did in the autumn of 1955. He had won an election on a false prospectus and a Budget which could not be sustained for more than a few weeks. At that time, the right hon. Gentleman had the honesty at any rate to come to the House and ask for fiscal powers in an autumn Budget. I think it is right, if that happens, particularly after an election, that the Chancellor should come and require legislation of that kind. Nevertheless, let us take into account the possibility that it might not be the result of a pre-election hand-out.
Let us consider a situation, for example, in which, for one reason or another, a foreign exchange crisis blows up. Such things are never very far away, as the Chancellor will agree. Sterling is going through a very difficult time just now. I can envisage the likelihood of the Chancellor using the power he ask for, and that it would be most 554 likely to occur, perhaps, in the autumn of any year when sterling came under pressure, for good or bad reasons. Sometimes, sterling comes under pressure for bad reasons and not for reasons which could be justified on economic grounds. That was so, I think, in 1957.
Under this Clause, we are to give the Chancellor power suddenly to cream off a great deal of revenue and to do it without Parliament even being called. The right hon. and learned Gentleman has given us certain assurances. He said, of course, that he could not imagine a situation in which Parliament would not be recalled. But Chancellor's assurances are not good enough in a matter like this. It would be possible for the present Chancellor of the Exchequer this year, or in any other year if the power is renewed, to introduce an additional £200 million of indirect taxation in, say, the first week of August. We have known sterling to go through a difficult time in August. In the ordinary course of events, Parliament would not be recalled until the end of October or early November. Under the provisions of the Bill, it would not be necessary to get Parliamentary ratification of the Chancellor's action for a further 28 days.
Obviously, we on this side, as guardians of Parliamentary control of the revenue-raising power, cannot accept that situation. I hope that hon. Members opposite, some of whom have made powerful speeches on this subject in the past few years, will be with us in this matter. I hope that the Chancellor himself will see the strength of our argument. We intend to move an Amendment at the appropriate place in the Bill to provide that, if this power is used, it requires Parliamentary ratification within seven days—not within seven Parliamentary days, but within seven days, meaning that Parliament must be recalled if it is not sitting.
There is also the possible abuse of this power by an unscrupulous Prime Minister. We never know. We might get an unscrupulous Prime Minister before this Parliament is out. I do not propose to give any tips on this. It would be an unrewarding pastime. What is more, it would be out of order. However, on the Second Reading of the Bill, I made one or two points about this. I said that we all know the Prime 555 Minister to be a man of high moral principles concerning elections, but that we have noticed that when elections came along there was a struggle for mastery in his mental make-up between the high principles which we have come to know so well and perhaps rather more earthy principles concerned with election winning, and that we in this Committee have a duty to protect his higher and more noble self against those earthy principles, supported, as they often are, by the blandishments of the Conservative Central Office and some of his less scrupulous colleagues.
That was on Second Reading. I said that we would consider what we could do to help the Prime Minister against these pressures and to keep him on that noble path which he always likes to follow when the law of the land stops him from doing anything else. That is why we propose to move an Amendment to exclude from the period during which this power can be used the period of the dissolution of Parliament, so that there will be no question of suddenly cutting taxes after Parliament has been dissolved.
So much for political temptation. I wish to raise one other general matter. I have said that it is possible that the Chancellor of the Exchequer might wish to use this power, shall we say, during a period of temporary foreign exchange crisis. One of the tragedies of foreign exchange crises in the past few years has been that they occur in such a way and for such reasons that a Chancellor's only apparent power to deal with them is under internal economic policy designed, if not to reduce purchasing power, at any rate to give the little gnomes of Zurich the impression that we are reducing purchasing power. Many policies, not least those of September, 1957, very damaging as they were to this country, were carried out not for their direct effect, but for their announcement effect overseas.
If there were a run on sterling this year or any other year for any reason—perhaps because of developments in South Africa or in other parts of the world—there is a very real possibility that the Chancellor will come along and say, "I had better take this action." What worries some of us is the essentially unjust way in which this would have to be done. What he would be doing would 556 be to increase the volume of indirect taxation, a point made by my hon. Friends the Members for Ashfield and Westhoughton. If the Chancellor decides that he must hold down purchasing power by fiscal measures, why should that be confined to indirect taxation which, by definition, is the most regressive form of taxation known to any Chancellor? If he is to do it, why should not he apply it to direct taxation as well?
I do not entirely agree with my hon. Friend the Member for Grimsby. I have checked up with those who know more than I do about the physical possibilities here. If the Chancellor decided in September this year, or in any other year, to use this power it could be applied to P.A.Y.E. in a matter of a few weeks. Admittedly, it could not be applied to Surtax. It could not be applied to Schedule D Income Tax, though the Chancellor will find that we shall propose certain measures for bringing Schedule D up-to-date in this matter of taxation. There is no reason why the Chancellor should not apply it to P.A.Y.E., and on the day he announces it say that he will at the end of the year catch up with Schedule D taxation or the Surtax appropriate for the same period. If he did, say on 5th October, halfway through the year, he could at the end of the year apply a rate of Income Tax for either Schedule D or the Surtax to the extent of half a year increase. I am not suggesting that he should be given power over Income Tax without reference to Parliament, but it seems unfair that he can do it with indirect taxation and could not do it with direct taxation.
Year after year we have been debating tax avoidance. It has taken up far too much of the time of the House of Commons simply because of the refusal of previous Chancellors to face the problem adequately. When we have debated it some of my hon. Friends and I have put forward the proposal that the Chancellor should have power, between Budgets, to stamp on any method of tax avoidance subject to review in the next Budget. This has been refused on the ground that it would be unfair, dictatorial and undemocratic. But the present Chancellor is taken the same power not against the dividend-strippers or the bond washers and all the crooks who have been defrauding the Revenue for years but against the housewives, and against the 557 beer drinkers who voted Tory because of a tax cut before the last election [Laughter.] Did they not? What was the purpose of it?
This power is taken against every family in the country who pays Purchase Tax. Why does the Chancellor refuse, and why has every other Chancellor refused, to use this inter-budgetary method of controlling tax avoidance and dealing with people who are enemies of the State—and let us make no mistake that they are enemies—and yet will use it for the first time now for this purpose?
I pass over the problems of uncertainty of trade, though many traders are concerned that this will lead to considerable uncertainty. I should like the Chancellor to deal with the question of how often he could use this power within one year. We are a little dubious, on reading the Measure, whether he could not use it one week and repeat it the next week. We think that probably he could not, but we should like to have the point clarified and I hope that he will deal with it.
To sum up, this is a very important power that we are handing to the Chancellor and I hope that no hon. Member, however anxious he is to get home, will relinquish his duty as far as this subject is concerned. We welcome the fact that the Chancellor has accepted the need for regulators other than monetary regulators. We are greatly concerned about Parliamentary control and we hope to put it right. If not, our attitude to this power may be very much changed during the later stages of the Bill.
We think that measures should be introduced to safeguard the present and future Prime Ministers from any temptations to which they might be subject by virtue of their official office. We think it extremely one-sided to apply this power to indirect taxation and not to direct taxation. We are a little concerned about its effect on uncertainty of trade, but because we welcome the fact that the present Chancellor is moving away from over-reliance on monetary policies to more effective regulators we do not propose to vote against the Clause standing part of the Bill. We may have a different attitude if we do not have acceptance of the view that we have put forward about Parliamentary control.
§ 10.0 p.m.
§ The Chancellor of the Exchequer (Mr. Selwyn Lloyd)
It may be for the convenience of the Committee if I intervene at this stage. I fully agree with the right hon. Member for Huyton (Mr. H. Wilson) and other hon. Members opposite about the importance of this Clause. I have never sought to pretend that it is a small thing to be slipped through as quickly as possible. I have always said that it is a Clause of very great importance and that the power given under it is a very great power for the Chancellor of the day to have. I have never tried to burke that issue.
So far as the purposes are concerned, I do not think that, after what has been said, it is really possible for any right hon. or hon. Member opposite to object to this Clause in principle because of the arguments put forward about the Bank Rate, the use of hire-purchase restrictions and all the rest of it and the criticism of monetary means.
I think that what the right hon. Gentleman said about his not asking his right hon. and hon. Friends to divide against this Clause was consistent with what he said, because I do not see how he could have asked them to divide after what he said about monetary means. I am not going to criticise the use of monetary means in managing the economy. I said in my Budget speech that I did not think that in the present circumstances they are adequate. They can be very useful and I think that the time may come when they will have to be used again, but I do not think that they are adequate by themselves.
There have been certain criticisms of this regulator. The first, I think, was that it could be used for political manipulation. Hon. Members opposite should not judge others by themselves. There is wishful thinking about it all. I do not think that the electorate are as easily fooled as the hon. Member for Ashfield (Mr. Warbey) thinks or, perhaps, hopes. They can see through things as easily as most people. Therefore, the idea that this regulator has been put into my Finance Bill to give the Government an additional means of fooling the electorate is not worthy of the right hon. Gentleman or other members of the Opposition.
559 The next point made—I am not sure that I understood it quite fully—was that it would be used if the country was threatened with a crisis. The whole point is to try to avoid a crisis, to use it to avoid a crisis occurring. The purpose of it is to ensure effective and corrective action by the Government in time.
The right hon. Gentleman talked about what, I think, is a very important point—the constitutional point about parliamentary control, the relative merits of an autumn Budget, and so on. I have tried to make it clear, at each stage, that I do not want to take control out of the hands of the House of Commons. Nevertheless, I think that we have to face the fact that the Executive of the day needs additional weapons for acting quickly. All the business of an autumn Budget, and so on, takes a great deal of time and there is no power for the Executive to act quickly.
I fully admit that it is a novel and a new power for which to ask. But I think it important that Parliament should be willing to give the Chancellor power to take speedy action in this way on these matters. When we come to debate the Third Schedule we can go into these matters in some considerable detail and I prefer not to anticipate the debate which I know that we are to have later on the Schedule. All I wish to say is that I recognise the importance of the constitutional point, and when we debate the Schedule I shall listen carefully to what the right hon. Gentleman and his hon. Friends have to say.
Mr. H. Wilson
To encourage the Chancellor in his thinking and preparation for that important debate, may I put this point to him? He has said that the Government are going to act quickly and that there is no time for an autumn Budget, and that sort of thing. Is it not a fact that if the Government had an autumn Budget they could act with as much speed as is provided for in the Bill?
Under the Provisional Collection of Taxes Act, if the Chancellor, under a Ways and Means Resolution, moved a Motion, it would take effect immediately. Is it not a fact that on the occasion of the autumn Budget, in 1955, the then 560 Chancellor announced six or seven days before that he was to have a Budget which gave long enough time to get the Revenue on the move?
Would not the right hon. and learned Gentleman be able to do that and is not the difference between an autumn Budget and what is proposed in the present Measure simply a question of the amount of trouble the Chancellor has to take to justify the use of the action he is taking?
§ Mr. Lloyd
I do not think that that is worthy of the right hon. Gentleman. I do not accept what he has said, nor do I accept that this is put forward to save the Chancellor trouble. It is necessary to have this power but I am quite prepared, when the time comes, to debate the constitutional aspects and the degree of control which Parliament exercises.
In answer to the point put to me by the hon. Member for Westhoughton (Mr. J. T. Price), there is no intention that there should be power to discriminate between the various duties affected. This is meant to be a flat rate fixed for all duties. There will be no power to discriminate, which was what, I think, was worrying the hon. Gentleman. This is meant to be a very simple and, in that sense, not a flexible instrument. Of course, there exists the power which has already been given to vary Purchase Tax. But this regulator is meant to operate as a flat rate affecting all duties.
The point has been raised whether I am asking for power to have more than one 10 per cent. variation in a year—
§ Mr. J. T. Price
I do not think that the right hon. and learned Gentleman can dispose of the first point as easily as that. As Clause 8 reads it is left open to the Chancellor, if he is so minded, to select—to impose a 10 per cent. on Purchase Tax and not on the other duties. If that is not his intention, I do not think that it is clearly expressed in the terminology of the Clause.
§ Mr. Lloyd
I am glad that the hon. Gentleman has put that point to me, because it is the intention that this shall be clear. I will look at the wording of the Clause to make absolutely certain that the purpose—that it should be a 10 per cent. or a 5 per cent. or a 2½ per cent. rate all round—is clear. There is 561 no attempt to discriminate between the duties.
The point I was about to make is that I am asking for power in this financial year to move to a maximum of 10 per cent. There could be two or three moves, say of 2½ per cent., with another 2½ per cent. and then 5 per cent. But the maximum is 10 per cent. There is no question of one move of 10 per cent. followed by another and then another. The bracket within which I am asking for power to move is £230 million minus or £230 million plus. It is a bracket of about £460 million—10 per cent. on or off; any movement would be within that bracket, not necessarily by the maximum each time but by some percentage—2½ per cent., 5 per cent., 7½ per cent.—whatever it may be, to a limit of 10 per cent. either way.
§ Mr. Jay
The Chancellor will still retain in force the power under the 1948 Act to raise or lower Purchase Tax. Therefore, my hon. Friend the Member for Westhoughton (Mr. J. T. Price) is correct to this extent, that it is still open to the Chancellor to use that power, and not the power which he is introducing in this Bill. He can still, without a Budget, alter Purchase Tax on its own. I do not think that the right hon. and learned Gentleman will disagree with that.
§ Mr. Lloyd
That is absolutely true, but that is a power which has already been given by Parliament: I think that it was given under a previous Administration. That power is not affected by this, I agree. But this regulator is meant within itself to be a flat rate for everything, with a maximum of 10 per cent. one way or the other.
I can quite see the disadvantage that this is new, that it gives great power to the Executive and does not give as much parliamentary control as anything put forward within the framework of the Budget does. But I think the advantage is that new regulators are required to deal with and control consumption at short notice. It might be due to the incompetence of the Government, of course, but even the right hon. Member for Huyton admitted that other circumstances might supervene which would mean that the Government would have to take action affecting consumption at short notice. We are coming to think more and more 562 that the solution to many of our economic problems is control of consumption. Unless we control consumption, it is very difficult to see that resources are available for investment and export.
§ Mr. Burden
One point about this that worries me is the power that already exists for raising Purchase Tax—and there is no ceiling on that power—plus the additional power which this Clause will give to raise a further 10 per cent. by means of this regulator. If it is a question of reducing consumption, the power given under the present Purchase Tax law would be very wide in itself without the use of the regulator.
§ Mr. Lloyd
There are certain powers at the moment. I do not accept that there is no ceiling. My recollection is that there is a ceiling—that one can only lift by a maximum of 50 per cent. However, I shall certainly examine that point.
The trouble about Purchase Tax is the same as the trouble about hire-purchase restrictions—it only strikes at a certain sector of the economy. My purpose now is to strike at a much broader field of consumption. The other advantage of the regulator is that it requires no new administrative machine, at a time when we talk a lot about scarce resources.
One of my main purposes is not to create a new machine, or new tax, or to create a lot of complications for people carrying on businesses. It is fairly evenly spread. It covers about £7,500 million worth of consumption expenditure. I think that 10 per cent. is a fairly small percentage, relatively, for which to ask powers to move.
There is much less uncertainty about this method than about others. If people believe that the Bank Rate is to be moved a great deal, or that hire-purchase restrictions are to be put on in a ferocious manner, or that Purchase Tax is to be moved to a large extent there will be more uncertainty. By taking this limit of 10 per cent., widely spread, there should be more confidence rather than less in the business community.
I am willing to go into further detail on the constitutional aspect, but, in principle, on the economic side, I am certain that it is right that the Government 563 should be given this power. I am glad that the right hon. Member for Huyton says that the Opposition do not intend to divide against the Clause, and I ask my hon. Friends to support it.
§ Dr. Alan Thompson (Dunfermline Burghs)
The wide range of views expressed on this side of the Committee shows the open-mindedness and tolerance on these benches. I see nothing wrong in the fact that some contradictory views have been expressed. This is an experiment. We are prepared to see how it works, and we reserve our right to criticise it later, but we understand that it may be a regulator that can help us when we become the Government, probably after the next General Election.
I am glad that we on this side have not dismissed this regulator out of hand. It seems to meet a point, as my right hon. Friend the Member for Huyton (Mr. H. Wilson) said in his excellent speech, that we have been urging so long—that of reducing our dependence on the Bank Rate. We have seen time and again the conflict between wanting to vary the Bank Rate for domestic purposes and being inhibited for international reasons. That conflict has bedevilled our economic history.
Over thirty years ago, when we imposed an interest rate to draw gold to London, that same interest rate almost destroyed our economy. It almost wrecked the coal industry, it created widespread strikes, and it plunged us into serious economic difficulties. Similarly, this regulator will reduce our dependence on changes in hire purchase regulations which so often injure selected industries. They injure some industries more than others for no very useful purpose.
I would not go all the way in accepting that this regulator removes uncertainty. I believe that the prospects of the regulator may still unsettle manufacturers' production plans. Another disadvantage of possible and frequent changes in indirect taxation is that they can lead, as we know, to forestalling actions. If the general situation seems to be inflationary, and newspaper articles comment on it and the general feeling in the business world is such, people may rush to buy to avoid the increase and thereby stimulate infla- 564 tion. If the economic climate seems to be deflationary, people may hold off purchasing in the hope of benefiting from remission, and may thereby give a new twist to the downward spiral.
For non-durable goods, this is not important. I do not believe that people will stop smoking for a week because they think that because of the economic circumstances the price of cigarettes may go down a few pence the following week. Smoking is a habit which has defied all economic predictions. On the other hand, in the case of consumer durables, this is a serious point. After all, it is a matter of importance that a car which costs £800 may be £40 cheaper, and people may hold off buying if they expect this to happen. I think that the Chancellor might have thought about the possibility of a variation of the tax as a regulatory weapon being more effective if it was a low, flat sales tax imposed over a very wide range of goods, and perhaps even services. If so, the variations would be slight, and if he did this on a widely based range of goods and services, a much smaller increase would yield quite considerable amounts. In other words, if it were over a much wider range of goods, a worth while policy change which cut or added £100 million, would not change prices by more than say, 1 per cent.
A low general sales tax has been canvassed and discussed by economists in recent years. There are objections to it, but it is more attractive as an economic regulator. It secures the Chancellor's objectives much more efficiently and it can also be a massive revenue raiser. The problem is that, although we are using taxes as stabilisers—and the Chancellor is to be congratulated on moving adventurously into new territory—we are inheriting taxes designed to serve a whole series of different objectives. For instance, there are taxes which are higher on luxury goods than on essentials; taxes imposed because of the foreign currency situation; taxes for revenue raising—a whole rag bag of taxes imposed for all kinds of different objectives and at all kinds of rates. Now we are to have a tax as a stabiliser.
It is true that high rates of taxes on luxury goods, which is discriminatory taxation, satisfy many criteria of social 565 equality, with which we are concerned on this side of the Committee, but they do not always satisfy the employment criterion. Although an industry produces luxury goods, the workers in that industry are not all luxury goods consumers, but if their employment is hit by a tax on the goods which they are producing, because of objectives based on social equality, the employment criterion, with which we on this side are so rightly concerned, is likely to be infringed.
Considering this whole question of taxes as stabilisers, we are led to the conclusion that the best kinds of stabilisers in the taxation system are those which give a built-in flexibility. This is helped by one or two characteristics. First, the tendency for Government receipts to decline or rise more than income declines or rises. I want to make a point here which has been made by some of my hon. Friends. Where progressive Income Tax is an important source of revenue, this in itself acts as a pretty effective compensating mechanism, because as inflation automatically carries more people into the higher incomes, it also automatically increases the proportion of their taxation.
§ The Deputy-Chairman
Order. I hope the hon. Member will restrict his argument to the Question, "That the Clause stand part of the Bill."
§ Dr. Thompson
With great respect, Sir William, I am merely commenting on some of the arguments put forward by the Financial Secretary and some of my hon. Friends, but I will note that point.
In this sense, the truly effective foolproof safeguard against inflation is not this tax but a progressive Income Tax, and in that context, which was discussed at great length by my hon. Friend the Member for Ashfield (Mr. Warbey), we on this side of the Committee would feel happier about the tax proposed in this Clause if it were in the context of a really progressive taxation policy.
§ Mr. Diamond
I do not want to detain the Committee long, because I suspect that everybody wants to go home fairly early. My right hon. Friend said that he did not wish to curtail the debate, which is on a very important topic.
566 With the greatest possible deference, I want to call the Chancellor's mind back to some of the things which he said and to ask him whether he is sure about them. The first point with which I am concerned is that of flexibility. I support the Clause on the ground that it is a planning instrument, and a planning instrument is the better the more flexible it is. It is a test of the flexibility on this side of the Committee that we are prepared to support the Clause, because it is a good thing being done by the wrong Government at the wrong time and in the wrong context.
What has been argued against many other economic measures, particularly Bank Rate, is their complete inflexibility—that is to say, their effects are over such a broad front. I therefore say that if we are to have this instrument, then we should have as good an instrument as we can fashion. We intend to trust the Tory Government to use it, and there is therefore no sense in giving them a bad instrument. Let us give the Government as good an instrument as possible—and this instrument will be the better if it is the more flexible.
As the Chancellor read the Clause—and I am not sure that he is right—he is making it less flexible than I want it to be, and I therefore hope that it will be possible for him to interpret it differently. As I read it, the Clause does not eliminate the powers of 1948 and 1949 affecting Purchase Tax. There is nothing in the Schedule which withdraws those relevant Clauses. The Chancellor said that his intention is to do everything, including Purchase Tax, in one fell swoop at the same rate, but he cannot bind himself to do that if that is not the law which he is introducing.
I suggest to him that he should look at it again on the basis of what the law will be if we pass the Bill in its present form. He will be able to do three things. First, he will be able to increase everything flat; secondly, he will be able to increase or reduce Purchase Tax alone; and, thirdly, he will be able to increase or reduce Purchase Tax at one rate and change the other taxes at a different rate.
§ Mr. Diamond
My hon. Friend is right. I am stressing it particularly because I want him to be right and because I want the power to be more flexible.
I can well understand the situation in which the Chancellor might wish to make use of this planning instrument. He might wish to use a deflationary pressure, for example, but feel that if he used it in its broadest sense it would bring certain injustices with it. This is an inevitable result of a wide planning system. He might protect some of those who were suffering injustice if he had a little greater flexibility than that for which he is asking. He is asking for a little flexibility because the less flexibility he has, the less responsibility he has; and the less he has to consider whether he should work over the whole field or over part of the field if he thinks that he has power to work only on the whole field at any one time.
I suggest that he could remove some of the possible injustice if, for example, he could raise all the taxes referred to in the Clause by, say, the full 10 per cent., and then, having increased Purchase Tax by the one overall percentage, the following day reduce it on necessities by 5 per cent., 10 per cent. or 15 per cent.—whatever the figure was—up to the total figure provided. That would be a great advantage, and would make this a more flexible instrument.
If I cannot persuade the Chancellor that this would be a more flexible instrument I cannot persuade him that he would want to use it if he has said that he does not, but I ask him to consider whether he is right in what he has told the Committee. I suggest that his powers are much more flexible than he has said, and that he could use the existing Purchase Tax powers which, in themselves, as far as I can recollect, do not require all the different categories to be raised by exactly the same amount.
One cannot alter within a category, but one need not raise or reduce each category by the same amount as the last one. I see that I am getting some support for that point of view. There is, therefore, some flexibility in the present Purchase Tax powers, and the Chancellor has agreed by nodding that there is nothing in the Bill that reduces those Purchase Tax powers. He is, therefore, adding to them.
568 I should also like him to consider a little more carefully whether he was quite right in saying that he could make only a 10 per cent. increase in the year. I am sure that that is his intention, and I am sure that, having said that, as long as he is Chancellor it is all that he would do, but I would ask him to read the words in the Clause that say so. They may be there, but I cannot find them. As far as I read the Clause it says that he has power to introduce an Order and that an Order shall not exceed 10 per cent.; the variation shall not exceed 10 per cent.—
§ Mr. Diamond
Yes, one Order, and the period is presumably from the beginning of one August to the beginning of August in the next year—but one Order. He knows that he will not necessarily be limited to one Order. There is nothing to prevent him, as he has told us, from putting it up by 2½ per cent. one week, by 2½ per cent. a period later, and reducing it by 7½ per cent. a period even later.
The right hon. and learned Gentleman is asking for this flexibility. I agree that it would be troublesome and inconvenient if he did it too often, but there should be in his mind the power to introduce more than one Order—several Orders, in fact. If there are to be several Orders, either we have to say that the total cumulative effect has to be within these extreme ranges of 10 per cent. one way or the other—I am not a lawyer, and do not read that in the Bill, and I know that some of my hon. Friends have the same difficulty—or we have to express more clearly that we have the right to introduce more than one Order. I ask the Chancellor to give further consideration to those matters.
A material point is the relationship between direct and indirect taxation. Of course, all of us on this side, in particular, are very anxious about giving the Chancellor powers giving the right to increase indirect taxation, to increase regressive taxation, and to give the power to make the poor man's burden proportionately larger without doing anything at all in the other sphere of carrying burdens. My right hon. Friend the Member for Huyton (Mr. H. Wilson) discussed the possibility of compensating for this by taxing under P.A.Y.E.
569 It is a possibility, but I cannot see it. I cannot see the possibility of selecting P.A.Y.E. alone as a means of increasing direct taxation under this or a similar regulator and leaving Surtax and Schedule D unchanged. The effect of that would be to accentuate the difficulty of which I am complaining. The effect would be to increase the burden paid by the poor man and to leave the burden paid by the rich man untouched. If the Surtax payer is to be called on to pay no more at the time, it is no compensation to the man who is paying more for his cigarettes and everything else that he should be called upon to suffer more each week by deduction under P.A.Y.E.
These generalisations are a little vague and the line cannot necessarily be drawn precisely. I cannot see that this is a satisfactory solution to the problem at present. The problem is a very real one. The difficulty we are all in is that the Clause is one under which the right is being given to the Executive to increase the poor man's beer, smokes, and so on, by 10 per cent. at a time when about 50 per cent. has been knocked off Surtax in one fell swoop. We have not reached that Clause yet, but that is the background of the Bill.
I want to present this in its truest aspect, which relates to the question of Parliamentary control. My right hon. Friend said that we require full Parliamentary control, and the Chancellor of the Exchequer has agreed with that. We require full Parliamentary control, consistent with acting with the necessary speed between Budgets. I go a little further and inquire when the Chancellor thinks he is likely to make use of this regulator. A good deal of discussion is going on at present as to whether the Chancellor will use this control very shortly. The discussion centres on the fact that unemployment is at a very low rate indeed. There are various other evidences of inflationary pressure. The suggestion being made in many quarters is that the Chancellor of the Exchequer will not wait long before using this regulator.
It is one thing for a Chancellor, when presenting a Budget, to say, "I want good planning machinery in order to protect the economy". It is quite a different thing for a Chancellor to say to the House 570 of Commons, "I am presenting a Budget under which a fantastic reduction is being made in Surtax. I have not the guts in the same Budget to increase indirect taxation, because there would be a revolution if I did the two at the same time. I shall therefore postpone the increase in indirect taxation and cover it up by taking power in this Bill and introduce it a little later".
I do not know what is in the right hon. and learned Gentleman's mind. I do not attempt to read people's minds. It is a fruitless occupation. However, we shall be able to judge this by the length of time which elapses between the Chancellor taking this power and the time he acts. There will be no justification for the right hon. and learned Gentleman taking the power to do this by Statutory Instrument if he plans to do it in the near future. If that is the intention, he could without the loss of any time ask for full powers and introduce a Clause doing the very thing he wants to do in this Finance Bill. There would be no loss of time and no problem if he did that, if he is considering an increase by this method between now and the end of July. The Bill will not become law before the beginning or the middle of July. Therefore, no waste of time would be involved.
Our fears are that there is a possibility of some unsatisfactory method of increasing indirect taxation only a little later than the time at which direct taxation is being eased by this vast reduction in Surtax. We hope that the right hon. and learned Gentleman will be able to allay our fears by assuring us that he has no intention of making use of these powers so soon. If he has that intention, he could do it just as satisfactorily by including it in the Bill. This is the point which is worrying so many of us and why so many of us are anxious to find some method whereby direct taxation could be brought into the net as well as indirect taxation. I agree with my right hon. Friend that this is a planning instrument and a new idea. Socialists welcome new ideas and planning instruments.
§ Mr. David Weitzman (Stoke Newington and Hackney, North)
I desire to say only a few words on the question of flexibility and the interpretation which I understand the Chancellor is putting on the words in this Clause. As I read 571 it, the Chancellor is right in saying that he is restricted in the period in respect of which the Clause has effect and the total limit of 10 per cent., but I cannot understand why he takes up the attitude that his intention in this Clause is to apply the regulator to every duty of Customs and Excise and Purchase Tax at the same time.
I know he will look at the words of the Clause carefully, but as I read them it seems that there is provision in the Clause for flexibility. In subsection (2), after (b), the words are:the liability to duty or right to drawback, rebate or allowance shall be adjusted by the addition or deduction, as may be prescribed,It seems perfectly clear on the reading of that subsection that the Chancellor, if he wishes, can merely apply this regulator to one or the other of the duties, either to the duty of Customs or of Excise or to Purchase Tax. I respectfully suggest that if he looks at the wording he will find that that is a correct interpretation of the meaning of the subsection. 572 If so, I agree very much with what my hon. Friend the Member for Gloucester (Mr. Diamond) said, that a good case could be made for flexibility in that direction.
I have listened to the whole debate, and I was very much impressed by the constitutional danger of the great and unique right given to the Chancellor for the first time by this subsection. Something was said by my right hon. Friend the Member for Huyton (Mr. H. Wilson) about bringing in an autumn Budget, but there is another suggestion. Why cannot the right be given subject to Parliament approving the measure within seven days? That seems a way in which it could be done without any difficulty or delay. I hope that the Chancellor will consider very carefully this most important constitutional point.
§ Question put and agreed to.
§ Clause ordered to stand part of the Bill.
§ Fourth Schedule agreed to.