HC Deb 09 April 1962 vol 657 cc1014-95

Motion made, and Question proposed. That it is expedient to amend the law with respect to the national debt and the public revenue and to make further provision in connection with finance, so, however, that this Resolution shall not extend to making amendments of the enactments relating to purchase tax so as to give relief from tax, other than amendments making the same provision for chargeable goods of whatever description or for all goods to which any of the several rates of tax at present applies.—[Mr. Lloyd.]

5.35 p.m.

Mr. Hugh Gaitskell (Leeds, South)

I rise, in accordance with the tradition of the House, to offer the Chancellor of the Exchequer our congratulations on the statement he has just delivered. As he knows, the congratulations relate more to the form than to the substance of the statement, and on that I gladly accord to him our appreciation of the fact that he has again made a relatively brief speech. I do not think that it exceeded 1½ hours, following the excellent example which he himself set last year.

The right hon. and learned Gentleman covered quite a lot of ground and dealt with some rather complicated matters, but he presented his case with clarity. Where I failed to follow him. I would not reproach him; it is simply that it is now becoming so long since I was Chancellor of the Exchequer and it would require some other change to be brought about in order to put that right.

This is a "no-change" Budget in the sense that there is neither an increase nor a decrease in the revenue which the right hon. and learned Gentleman hopes to achieve. In that respect, the Budget follows the pattern of 1958—that is to say, not the Budget immediately preceding the General Election but the one before that.

Today there was, of course, one novelty—an election promise, or a Budget promise to come in before the next General Election, was made to the Committee. That is rather a surprising thing to do, and I should have thought that the right hon. and learned Gentleman, before making a statement of this kind, would have been able to explain, even a little, exactly what he had in mind. I was not entirely clear as to whether he himself simply thought that he was going to abolish Schedule A. If that is his intention, at least we should be told about it and be clear about it.

The right hon. and learned Gentleman seemed to hint that he might put something in its place, but he made his announcement without giving any idea of what was in his mind, and this was rather surprising. I cannot help wondering whether perhaps his colleagues, when they heard his proposals, said that they were a little too sour and dull for the public generally and particularly for the Conservative Party, and that in the light of certain byelection results and Conservative failures recently it was necessary to do something to improve the morale of the party.

No doubt my right hon. and hon. Friends will deal with these matters in greater detail than I can now. My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) will be making the major opening speech from our side in the debate tomorrow, and, as usual, it is my purpose only to give, as briefly as I can, the immediate reactions of the Opposition.

We welcome some of the changes proposed, particularly the changes, minor but nevertheless valuable, in direct taxation. We particularly appreciate the small income relief and the age exemption relief changes which the right hon. and learned Gentleman has made, and which follow precisely proposals put forward by the Opposition during the passage of the 1961 Finance Act. Even if we could not get these things then, it is nice to have them now.

We will also certainly support him in his efforts to prevent evasion. The most important change of that kind is that relating to Estate Duty, which will stop, I think, this habit of acquiring land abroad and remaining domiciled at home but nevertheless getting away with paying little or no Estate Duty. It may lead to a certain number of people moving abroad, but, if they are that sort of person, perhaps it does not matter a great deal.

I suppose that the most important change is the capital gains tax. I am not sure that we can rightly call it that after what the right hon. and learned Gentleman said. He began that passage of his speech by emphasising that he did not believe in a capital gains tax and would not offer anything of the kind. Nevertheless, I think that we can regard this at least as a small step in the right direction.

The Chancellor said that ordinary people found it hard to distinguish the purchasing power which accrues to individuals as a result of capital gains, if I may use those words, from ordinary income. I think he was quite right. We have said it for many years. But then, when he came to his actual proposals and announced that the tax was only to apply to transactions completed within six months, my immediate thought was that ordinary people will find it very hard to distinguish between a profit made in six months minus a day and a profit made in six months plus a day. It is all very well to say that this is speculation and that is not, but I do not know how the line will be drawn in equity at all.

Frankly, I cannot imagine many people paying the tax. It is just as well that the Chancellor said that yield was not the main purpose of it. There will not be very much yield. Certainly, it will be extraordinarily foolish if a man who is liable to high rates of Surtax engages in transactions within the six months when, by hanging on a little, he can avoid the tax altogether. Seriously, this will not make any substanial difference to the real grievance.

The real grievance is not simply that people make short-term capital gains but that, year by year, those who own securities, in the main, so long as they are reasonably well invested, even without any special knowledge, can count on something like a 10 per cent. appreciation per annum. [HON. MEMBERS: "Oh."] Yes. I do not know whether hon. Members are saying that they have never made 10 per cent. per annum or that it does not exist. They have only to look at the rise in share values to see that it is so. They themselves know perfectly well that what I am saying is correct. It is a fact of experience during the last few years.

What the tax will do is not to relieve the sense of grievance which is naturally felt by those who pay heavy taxation on income, particularly on earned income, as against those who pay no taxation at all on capital profits beyond the six months. It will merely stop a limited amount of intensive gambling in a short period. It will do that, I am sure; but I do not believe that this meets the need of the situation at all.

As for the change in indirect taxation, I am not sure that we should be enthusiastic about the Chancellor's consolidation of last year's surcharge. When he brought it in last year, it did not occur to any of us, I think, that the changes then introduced were to be consolidated in the tax law within a year. Many people will be asking themselves, now that the changes are consolidated into the tax law, whether it is at all likely that we shall ever get rid of them again. Of course, I realise the difficulty that the original surcharge had to be charged—I think I am right—at the same rate across the board on everything and, therefore, if the Chancellor wished to discriminate this year between one item covered by the surcharge and another he had to have some change of this kind. Nevertheless, I think it regrettable, and I do not believe that it is at all what was thought of last year, whether it is what he intended or not.

The more serious point on which we disagree is his handling of the Purchase Tax. We disagree basically on this, for a simple reason. We regard the Purchase Tax as a tax which should be confined as far as possible to luxury articles. We have always thought that, and we have tried to reduce the Purchase Tax on articles more in the nature of necessities while retaining it on those more of a luxury character. The Chancellor says that he does not want to exercise a moral judgment, by which, I suppose, he means that he does not like having to decide what is a necessity and what is a luxury.

It is impossible for the Chancellor to avoid a moral judgment. When all is said and done, if it were really his view that he should not exercise a moral judgment, he would logically, I suppose, have to apply the Purchase Tax to everything bought by consumers. But we do not apply it to books. We do not apply it to food, except to ice cream now, and we do not apply it to a number of items which, happily, still remain exempt from Purchase Tax. He cannot avoid this decision. Therefore, I cannot accept the argument that, on these grounds, it was necessary to broaden the basis of the tax.

I do not myself think that it was necessary to raise any additional money this year by this means. I shall return to this in a few minutes. If the Chancellor had wished to reduce the Purchase Tax rates, I should not have objected. There would be an argument for that, perhaps, as compared with taking the surcharge off. It would mean reducing the tax on certain articles on which the Purchase Tax was levied, while leaving it at its present higher rate on alcohol and tobacco. There might be a case for that. But I do not believe that, in order to bring the tax down on motor cars, refrigerators and the other things he mentioned, there was any justification or need for increasing the 5 per cent. level to 10 per cent. Nor do I think it was necessary in the least to bring in confectionery, soft drinks and ice cream.

I do not know whether the Chancellor still holds that he is not exercising a moral judgment. He might have argued that what he has done was necessary in the interests, perhaps, of slimming—no doubt, it will help a little in that direction—or that sweet eating is bad for children's teeth, or something like that. However, unless one is prepared to bolster one's case with arguments like that, the plain fact remains—let us face it—that what he has done in the redistribution of tax within the Purchase Tax range is to impose tax, in the main, on people more heavily where they have smaller incomes and less heavily where they have not.

I turn now to the basic question which lies behind the Budget today, the state of the economy and whether the Budget is rightly attuned to the needs of the country. Although we have not had the report itself, we have read recently in the newspapers about the report of the O.E.C.D. on our record in recent years. My goodness—what a damning indictment of Government policy it contains. No doubt, my right hon. and hon. Friends will be following this up in greater detail. I say only this. The stark fact—which comes out in our own Economic Survey, too—is that during the past two years the rise in production in this country has been no more than 2 per cent., and, according to the Survey, the rise in productivity in these two years has been nil. In other words, the rise in production is more than accounted for by the increase in the amount of labour employed.

In my view, it is not entirely an accident that this two-year period, as the Survey itself admits, coincides fairly closely with the period of restrictions. It came just after they were imposed. They were, of course, increased last, summer, but they started before then. I cannot help feeling that the Chancellor paid far too little attention in his speech today, as he has done on other occasions, to the problem of production. Not only have we had no rise in productivity over two years, but since July the level of industrial production in this country has actually fallen. The Chancellor may claim that he could not help that, and he had to impose the restrictions because of the balance of payments. I am not sure about that. I venture the opinion that some of the measures he took last July were probably not justified by the circumstances.

In the first place, we tend to muddle up far too much—'this is a complaint I have against the Treasury nowadays—the capital account and the current account of the balance of payments. They are very different things. Last year's crisis was to a very large extent a crisis on capital account. For that reason, I should not myself oppose a sharp increase in Bank Rate as a necessary means of dealing with it; but that is not to say that it was necessary to impose deflationary policies over a wide field.

Secondly, we have to remember that even when we talk about the balance of payments on current account there is one item in it which might be described at capital—certainly it would be in the strict accounting sense—and that is the movement of stocks. It is as clear as daylight that on several occasions since the war when we have had a large increase in our imports it has been associated with a stocking-up process. One ought to try to make allowance for that when one is judging the seriousness of the balance of payments situation.

I am not saying that there was nothing wrong. That would be absurd. I am suggesting that the Chancellor seemed to me to have overweighted the dangers of the situation last July and to have applied remedies which I believe were unnecessarily severe. Not only that, but the consequence of these so-called remedies is inevitably that we have had reduced production. This surely is of crucial importance.

It is all very well to talk about the danger of income inflation and the necessity of a pay pause or wage restraint. The Chancellor knows very well that I understand these problems and that on the basic issue of the need for relating incomes to productivity and production there is no dispute between us. But I suggest that it is a great mistake to concentrate on the wages and to forget about the productivity. The plain fact is that what we should be doing is to concentrate on labour costs, and the trouble is that when there is a fall in production, even if there is no rise in wages, the wage costs go up. If the Chancellor takes, even during recent years, the movement of labour costs in 1959 and the first part of 1960, he will find that although incomes were rising labour costs were falling. In the last six months, although we have had certainly a slower rate of increase in incomes, the decline in production has pretty well offset that.

Let me say to him on the pay pause that our criticism of him is not about his mentioning the basic problem. It is about the way in which he has handled this problem. We believe that, first of all, the main point should be to concentrate on increasing production and increasing productivity. Secondly, we believe that we have to do this by agreement and that we cannot get a satisfactory agreement here unless it is agreed with the unions. Thirdly, we believe that one will not get that agreement if one's policies seem to be unfair and arbitrary, as the Government's have been in recent months.

Broadly, that is our reaction to the Budget. The Chancellor spoke of the rise in consumption which he expected. He did not give much evidence for that. This has been a surprising feature of his speech, and it is certainly contrary to most forecasts in the various journals which go in for this sort of thing. I hope that we shall hear a little more from him about why he thinks that the rate of consumer spending will go up by as much as 4 per cent. in the course of the year.

For my part, I do not believe that the capital gains tax will do in the least what the Chancellor professes that he wishes to do—set at rest the fears and the grievances which people who are heavily taxed on their earned incomes still feel. I do not think that his rearrangement of the Purchase Tax is fair, nor do I think that it was necessary to impose the additional taxation. Finally, I believe that this Budget errs on the side of being too little expansionist at a moment when the crucial thing is to increase production and, with it, to increase exports too.

5.54 p.m.

Mr. E. H. C. Leather (Somerset, North)

It is a pleasure to follow the Leader of the Opposition in his annual exercise in which, in the very kindest way, he always makes it clear to us that had he been running our affairs he would have raised more revenue from less taxation. This is perhaps because, as he himself said, he is getting a little out of practice at forming Budgets, but I hope that that is a position which we shall be able to maintain for a great many years to come, with all kindness to the right hon. Gentleman.

I should like to say immediately, in commenting on his remarks, that I find myself in the unusual but happy position of agreeing entirely with what he said about mixing up capital and current income accounts. I am sure that this is very important. The Chancellor has once again made it clear this afternoon that, despite the overpowering weight of expert advice which must be constantly telling him that it is not possible to do anything about anything, he preserves his enthusiasm for reform and making major changes in our utterly antiquated tax structure. I hope that during the course of the debates there will be recurrent pressure on him to turn his mind to this question, because I am quite sure that the Leader of the Opposition is right. Our national finances are complicated enough in all conscience, and to have capital items thrown in quite fortuitously sometimes makes them almost unintelligible.

I think that I am right in saying that we have been in a position for nearly five years in which our Budget has been stronger and had a better current surplus proportionately than almost any other country in the world, but because we insist on throwing in capital items, we constantly give a much weaker impression than is justified. Over the last five years we have thrown in the capital accounts of the nationalised industries, oddly enough at the precise moment when we took out the capital accounts of the local authorities. I believe that neither of them belongs in the Budget, and if the Chancellor will turn his reforming zeal to this facet and perhaps develop a completely separate capital account Budget, presented to us quite separately and dissected from current account transactions, I think that that would help us enormously and would help the outside world to understand what we are doing. It would give a truer reflection of our position. Within reason, I should be happy in this respect to co-operate with the Leader of the Opposition.

My impressions of the Budget—and I am grateful for the opportunity of being the first on this side of the Committee to say it—are, overall, rather different from those of the Leader of the Opposition. There is one major reservation which I have in mind and to which I shall turn later. But my first impression—and I have been thinking about nothing else in a fairly concentrated way for the last half-hour—is that this has been a very courageous Budget. It has demonstrated once again the courage and intellectual integrity of my right hon. and learned Friend.

What I find particularly encouraging about it is that it is the most reforming Budget, or shows the signposts to most reforms of any Budget speech; which we have had for a good many years. I am naturally delighted that the Chancellor has at long last accepted the view which has been predominantly held in this party for many years and has pointed the way to the abolition of Schedule A. This is good for two reasons. It is frankly party political; we as a party have always said that Schedule A on owner-occupiers was a bad and unjustified tax. I am glad that he has finally accepted that view.

I am glad for another reason: it seems to me that it must be a victory of the Chancellor over his advisers, for we know that their unanimous opinion has been to the contrary for many years. Frankly, I have much more confidence in the Chancellor than I have in his advisers. It is an extraordinary thing about that building in Great George Street—that one knows many eminent and able men who make tremendous sense in whatever walk of life they follow until they are put in the Treasury. They then seem to lose all contact with reality. I think the fact that the Chancellor has clearly said to them, "This will be done", and has not allowed them to talk him out of what he thought ought to be done is tremendously encouraging.

Mr. Loughlin

I appreciate the hon. Gentleman's point, but what I cannot understand is how he can appreciate the Chancellor's intentions for next year in the context of this year's Budget. Perhaps he will explain.

Mr. Leather

Perhaps the answer to the hon. Gentleman is that I was listening a little more attentively than he was.

Mr. Loughlin

Let us hear it.

Mr. Leather

Let the hon. Gentleman read the Chancellor's speech in the morning. He will see it quite clearly there.

The Chancellor, in my view, got the short-term capital gains tax absolutely right. The Opposition have a vested interest in trying to pretend that he did not and in trying to see that class hatred and bitterness are kept alive, but I do not believe that they will have much luck in doing that.

There was one point which I should like to register and about which I ask my right hon. Friend the Chief Secretary to the Treasury for some clarification. If I took down what he said correctly, the Chancellor said that he would grant "allowance for proper and relevant expenses incurred." In other words, that such expenses would be taken into calculating the capital gain. I hope that I am right in assuming that that means the inclusion of such things as Stamp Duty. It would be utterly wrong and unfair for the Government to catch a chap three ways at the same time, by taking off the Stamp Duty at both ends. It is an essential part of the gain, an essential cost, and I hope that I am right in understanding the phrase to mean that it will be allowed in assessing the actual tax liability.

This tax fits in precisely with what the Chancellor said last year, and it has been the theme of my party for many years—that what we have to do is to struggle to reduce the tax on work. This is a tax on luck. I have no scruples about this, for I do not see anything un-Conservative about taxing luck. We must continue to press on with reducing the tax on work, and I hope that that will continue to be an important part of the Chancellor's incomes policy. On three occasions the Government have reduced the standard rate of Income Tax, and from time to time we have raised many other allowances. We must continue to allow a person who earns money to keep more of his own earnings in his own pocket. I am sure that that is essential to any sound economic policy, especially while we are talking about increasing productivity and encouraging people to export more and to work harder. We cannot talk about those things if at the same time we are to make it perfectly clear that those who are a little bit too successful will be hit on the head.

Mr. Hector Hughes (Aberdeen, North)

What has the hon. Gentleman to say about the Chancellor's imposition on the children and workers by taxing the sugar which gives them their energy? Does he also praise that?

Mr. Leather

I think that the hon. and learned Member for Aberdeen, North (Mr. Hector Hughes) has got the brief a little wrong. The tax on sugar was brought down. Perhaps he will be happy to leave it there.

I turn now to Corporation Tax. The Chancellor made it perfectly clear—at least, I hope that it was clear: he nailed his colours to the mast—that he has now accepted that the direct taxation system on industry in this country is completely anomalous. It is complicated and it ties the incomes of companies and individuals together in a way which serves no useful purpose, except, I understand, the convenience of the Inland Revenue. My right hon. and learned Friend said that the Inland Revenue was "seeking possible solutions". I hope and pray that what it is doing is "seeking possible solutions" and not, as I fear, building up a hefty brief to go back to the Chancellor and tell him that nothing can be done. I cannot help feeling that if the advice and sound and solid argument which we get from the Treasury had been available for the first chapter of Genesis, it would have been quite sufficient to convince the Almighty that Creation should never have been undertaken in the first place.

The Chancellor also said that he would "come back and report further in due course". I hope very much that that "reporting further in due course" means in the reasonably near future. It would be eminently desirable, if it were possible, for the Chancellor to make some statement about this matter before we finish with this year's Finance Bill. I have in mind the relevancy of this tax to the negotiations about the European Common Market, which, presumably, will reach some kind of climacteric this summer, because our basic company tax structure is completely out of line with that of the Continent of Europe which has clearly been making considerable strides towards harmonisation. If I understand the matter aright, it is impossible for us even to begin any harmonisation until such time as we have changed over to a corporation tax. It has many advantages of flexibility which are now denied to us, and I hope that the Chancellor will allow nothing to slow down his researches and his enthusiasm in that direction.

I want now to say a few words about some details of the Budget. I strongly support my right hon. and learned Friend in his views about the Excise taxes and particularly about leaving the tobacco tax where it is. I support him not merely because of the views which I happen to hold in another controversy, about the merits of smoking, but for a further reason. Anyone who advocates that we should seriously put a penal duty on cigarettes—and there are some in various parts of the House who do—should consider the effect on and reactions of a number, at which it is hard to guess, but which I judge to be not fewer than 2 million, female old-age pensioners. I wonder how they would feel if they were told by any Government that they could switch over to pipes and cigars? It is only a very few years ago that the Government decided to remove a special token which allowed pensioners to buy tobacco products cheaply, and at that time I did not hear any hon. Member opposite, nor anyone in another place, say that we should have done that earlier in order to discourage old-age pensioners from having the benefits of their cigarettes. Indeed, some of the speeches to which we had to listen at that time were couched very much in the opposite vein.

Finally, I come to the subject of the Purchase Tax changes. I commit myself to supporting the Chancellor's changes in Purchase Tax, including the tax on sweets and drinks, although one of the largest chocolate factories in the country is in my own constituency. I think that this increase is reasonable and right. The economic effect on the industries and on the young people who buy these products, of an extra halfpenny or penny per bottle or bar, will not be very large, but it does what successive Governments have advocated and seldom had the courage to do—broaden the base of the Purchase Tax. There is no logical reason why these products should ever have bean exempted. They were exempted purely because it was wartime when the tax was introduced and these things were Chen either not produced or were rationed. It was purely by historical accident that they were originally left out and I think that my right hon. and learned Friend is absolutely right now to include them.

I now turn to what my right hon. and learned Friend himself described as his main interest—exports and adjusting our economy and fiscal system so as to stimulate the export drive. I have great sympathy with -my right hon. and learned Friend. There has seldom been a time when the economic barometers have been so confusing, or when all the eminent economists in the country have been putting forward such completely different views and remedies. The only thing which I cannot resist saying is that it is fair to say that no group of economists has been so consistently wrong as the Treasury.

There was a reference in a newspaper the other day—I do not know whether the Chancellor of the Exchequer read it—recommending—and I think rightly—that if he ever gets an odd Saturday evening off he should watch that excellent Perry Mason television series. It must be that he is getting a little tired of playing poor old Hamilton Berger, following false trails of evidence consistently laid down for him by Lieutenant Tragg in the Treasury. I am not sure that there is not a good deal of truth in the analogy and I hope that my right hon. and learned Friend will study it.

The Chancellor of the Exchequer has said time and again—and I do not think that there is any argument politically or in any other way against it—that exports are the key to the problem. My right hon. and learned Friend referred to the Report of the Federation of British Industries. I agree with the F.B.I. Report. I agree that it and the Chancellor are right in saying that there is no good looking for any more gimmicks. The E.C.G.D., the trade promotion service of the Board of Trade and all these other things that are offered are, in my view—and I spend my working life amongst them—as good as those of any other country, and most of the complaints from exporters evaporate when one studies them.

But here I must take issue with my right hon. and learned Friend and ask him to look again at the F.B.I. Report, because he is not correct in saying that the Report said that there was nothing more that the Government could do in this direction. This seems to me to show that once again—perhaps naturally—my right hon. and learned Friend did not have time to read the Report, but un- doubtedly read a brief prepared for him by his experts who conveniently left out the most important paragraph in the Report. The No. 1 recommendation on home policy in the Report—and I speak only from memory—was that the Government should make an urgent study of fiscal policy to see whether it was not here that the damage was being done to our exports.

I am sorry that the Chancellor made no reference to that, because I believe that it is the most important part of the export problem which we now face. Everyone who has studied this problem has come ultimately to the same conclusion, that our fiscal system, our system of direct taxation of companies, is uniquely disincentive, and in this way differs from that of our major competitors abroad. There is the German turnover tax which has been referred to time and again, and the French Taxe Valeur Ajoutée, T.V.A., as it is referred to. Are these things being studied? There is no doubt that they are an incentive to exports.

Having spent many years studying this, it seems to me that the position can be summarised very briefly indeed. We all know—and there is nothing that we can do to change the fact—that export sales and export deliveries are inevitably more costly to a manufacturer than home sales and deliveries. The cost of sending salesmen abroad, the cost of translations, the cost of adjusting, packaging and so on for the export trade inevitably means that on a level price the exporter must get less net profit on an export sale than on a home sale.

But in Germany, in France, in Italy and in Japan the tax system is deliberately adjusted to reverse this process. Frenchmen, Germans, Italians and Japanese—and there are probably others whose systems I have not had a chance to study—deliberately adjust their company tax system so that the exporter gets slightly more net profit on an export deal than on a home deal. This is surely the key to the problem. It is not very much more. It is only 2 to 3 per cent. more, but the basic fact is that the English exporter is, and must continue to be, at a direct disadvantage; he must continue to have a direct financial disincentive in relation to his competitors, purely because of the way in which his tax is assessed.

I hope and pray that the Treasury will face this, and that Ministers will tell us that they have some really serious study going on of this problem, because at the moment our export position is not improving, and we all know it. The Chancellor, with the greatest good will in the world, has nothing but good will to support his hope that exports will get better, and today he did not say a word about what we were doing about them. I am sure that exports are the key to our whole financial situation. Exports of another two or three hundred million pounds a year could revolutionise the whole Budget problem. We could be finished with restrictions and all these worries and constant headaches about our balance of payments if we had this shot in the arm from exports.

People from every walk of life who have studied it have all come to the conclusion that the root of the problem lies in our taxation system. I hope, therefore, that my right hon. Friend the Chief Secretary to the Treasury will make a careful point of this and tell us that the Government have some plan to deal with this problem, and will not go on trying to confuse the issue with statistics and complicated arguments when it all boils down to the simple fact that on an export deal a foreign exporter gets a better net profit than we do solely because of taxation; solely because of something that is entirely within the Government's control.

I have one further query. I hope that I am not being ungracious if the tone is wrong, I should like to go back and say how good I think the Budget is and congratulate my right hon. and learned Friend for introducing it. But I should like just to question once again this whole doctrine of restriction. My right hon. and learned Friend used the phrase that "growing home demand must be carefully watched to keep the way clear for growth in exports". This is the essence of the whole doctrine of restricting home demand to see that there is capacity available for exports. I wonder whether this is really true? I know that it is the doctrine of the experts in the Treasury, but when one stops looking at the overall averages and statistics, and gets down to facts, I wonder whether there is any ground for believing that this economic doctrine is not in fact as dead as the dodo?

I wonder whether my right hon. and learned Friend, or perhaps his right hon. Friend the President of the Board of Trade, could tell the House of a single company that was ever kicked into the export market because its trade in the home market was made more difficult? I suggest to my right hon. and learned Friend that what happens is that this "on again—off again" process has happened so many times that when home demand is restricted the good exporter goes on working just as hard to export—the only thing is that he is a bit angry about what has happened, and things are a little more difficult for him—and the bad exporters, those who cannot be bothered, or do not want to, simply cut back production and say, "Wait for six months and it will be off again and we can then start from where we were before".

I suggest to my right hon. and learned Friend that if he gets into industry, into sales conferences, or on to the shop floor, he will find that that is what happens 99 times out of 100. There are a few people who are so inefficient that they may go broke, but the vast majority who do not want to get pushed into the export market say, "Cut back production Profits will be down this year, but what does it matter, because the tax collector takes half of it anyway? The Government cannot keep this restriction on for long, and then we will be right back where we started".

I suggest that the only effect of these restrictive measures is to make life even more difficult for the good exporter, by forcing up costs. Furthermore, the more mechanised and modern and tooled-up a manufacturer becomes the higher are his overheads and the more essential it is that he should operate at his maximum capacity. The manufacturer with old-fashioned plant, who is using a lot of labour inefficiently, has a smaller overheads-to-labour ratio, and he can lay off a few men in difficult times and probably even keep up his profit. The modern manufacturer, with the largest fixed overheads, is most hardly hit, and must inevitably be the first to suffer from rising costs through the restriction of his home market. I hope that the Treasury will give this matter more serious consideration.

My right hon. and learned Friend was quite right in saying that we have a great opportunity for exports ahead of us, but the atmosphere must be created by the Government and the best two things they can do are, first, to allow industry to have a clearer run—not by throwing the brakes away, as we did some years ago, but by relaxing a restrictive policy—and; secondly, to plan our direct taxation system so as to remove the positive brake, or disincentive, which is now inhibiting British exports and doing major damage to our economy. We all hope that the Chancellor will be allowed to succeed in his policy.

6.22 p.m.

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

For many years I have said that economic organisation should be taken out of the hands of the Treasury and also that it is extremely urgent to improve Government economic publications and to provide statistical information at least equal to that of other countries. I congratulate the Treasury officials, especially those who must have worked very hard behind the scenes, upon reaching the present standard of publication, as shown in the documents provided for Members of Parliament and other students of financial and economic-matters.

These publications, together with all the statistical information provided, bear favourable comparison with any others in the world. Information and statistics of this kind are not produced without a great deal of work behind the scenes. The men and women who are engaged upon this work are never identified, and when great changes are made for the better in these matters we ought to give credit where it is due and make it clear that the House of Commons has taken note of their good work, in order to encourage them in the future.

The logic of this development is the need for real planning. On that matter I differ fundamentally from many of my hon. Friends and from most hon. and right hon. Members opposite. For about twenty years I have said that the time has arrived for us to plan our economy in harmony with scientific developments in this country and throughout the world. I make every allowance for the many shades of political opinion that exist among us, but although we may differ in our respective approaches to the problem and in relation to the extent to which this policy should be applied we cannot but admit that there is an unanswerable case, in the mid-twentieth century, for a proper planning of our economy in order to obtain the best results.

That is why I say that there is an urgent need to take the control of our economic affairs out of the hands of the Treasury and to place it in the hands of a mid-twentieth century organisation—a Ministry of Production and Economic Planning. Fox over ten years, at General Election after General Election, Conservative candidates have said that they would reduce national expenditure and taxation. That is why so many people who are better off than most of us are becoming disillusioned with the Government. Each successive General Election has produced a betrayal of the promises made in the previous one.

I charge the whole House with some responsibility for our difficulties. We have continued to perpetuate the eighteenth century Monk Resolution, and the application of virement. When manufacturers are producing exports to keep us all going they must have regard to every penny of the cost of production and to overhead charges, but each July the House has acquiesced to the application of the eighteenth century policy of virement.

The Chancellor said that we should now be able to increase our exports. I hope that he is right. He said that we could reasonably expect an increase in world demand for our exports. If that is so, I hope that we shall organise ourselves to take advantage of this in a better way than we have done in the past.

The Chancellor went on to say that, as a result of the work of the new National Economic Development Council, he hoped that we would be able to obtain a faster and more continuous expansion of our economy. I hope that we shall be able to do that, and I shall produce evidence to support the necessity for doing so later. The Chancellor also said that we should aim at an ambitious but realistic target, and it was good to hear a Conservative Chancellor saying that, with the acquiescence of his supporters.

The right hon. and learned Gentleman then dealt with Purchase Tax. I have said over and over again that that tax has now become a revenue tax, especially in respect of the export industry. The Chancellor later said that he proposed to reduce Purchase Tax on motor cars. According to the Financial Statement with which we have been provided we shall spend £1,721 million this year on war preparations and defence. This is an increase of £79 million. We are going to reduce the taxation on motor cars at a time when we are placing new burdens of taxation upon children and continuing to impose the prescription charge upon invalids, who are suffering through no fault of their own.

We have arrived at a situation in which, as happened a few months ago, an hon. Member can go to Manchester and have the audacity to make the type of speech which he made on that occasion about there being no longer any need to talk about the class war. Our present situation is riddled with examples of class warfare, as I shall produce evidence to prove. It is time that these facts were brought into the open.

In its latest issue the Economist makes reference to the results of our economic policy. It states that the greatest discouragement is the continued decline in the British share of world trade. I agree with the Chancellor and his supporters that we must exert ourselves to increase our volume of exports and to obtain a greater percentage of world trade. Our hope of progress in this country will fade unless we can achieve those two objectives. I am able to make that statement because for many years I have advocated constructive proposals which are to an increasing extent, but within limits, being accepted by the Conservative Party and by others. Therefore, I accept the logic of the analysis of our relationship with world trade provided by the Economist.

The responsibility for the decline in our share of world trade and for the uneasiness which is felt regarding our volume of exports should be placed squarely and solidly on the shoulders of those who have mismanaged our economy, particularly during the last eleven years. The indictment does not come from Socialists. It may be found in the columns of yesterday's Observer. There may be found extracts from the survey of the United Kingdom prepared by the Organisation for Economic Cooperation and Development. I could quote example after example from that article but for the fact that I wish to devote my time to discussing other important matters, but in yeserday's Observer may be found evidence to support the terrible indictment which could be levelled against those who are responsible for eleven years of mismanagement of our economy.

The Economic Survey, with which we were presented last week, stressed the necessity for increasing exports to ensure prosperity and with that I wholeheartedly agree. But do the Government accept that proposition? Do hon. Members opposite accept it? If so, it means that we must adopt a policy to maximise our exports. Every other need should be subordinated to that. Will the Prime Minister issue a directive to his Ministers to give priority to matters affecting the export trade? If the right hon. Gentleman is prepared to do that, and if the Government really mean business, priority will be given to those areas where there are firms engaged in the export trade.

To carry such a policy to a logical conclusion will require an investigation into a situation which has resulted in the strangulation of export business due to high overhead charges associated with the importation of raw materials. This handicap places the firms in the export industry in the position of having to compete, as it were, with one hand tied. It is necessary to maintain the best possible labour relations among the workers engaged in the export industry. Such a policy would result in a dynamic advance. It would enable us to make the same progress as was shown during the war years. I know my fellow workers well enough to be able to say that.

In order to improve the morale of men and women engaged in the export trade I ask for a more positive and constructive economic approach and a policy which will result in maximising our production. For twenty years I have taken part in debates in this Chamber and advocated economic planning, often in the face of "iceberg-like" opposition. There was a period when for a few months, and in association with some of the greatest intellects working behind the scenes, I had an opportunity to labour for the implementation of this policy. It was opposed during that period by anarchists of all political parties, by businessmen big and small and by those who preferred to put their individual interest before the welfare of the country.

A book to be published—"Paper Tigers"—will provide the latest condemnation of the economic outlook of those Conservative anarchists, and after twenty years as a Member of the House I am a more convinced Socialist than ever. Where Socialist ideals and collective ideas are applied by men and women who really mean business, the best results are obtained. We could achieve in this country in peace-time the same results as were achieved during the war years, were individual and business interests subordinated and the welfare of the country put first, as happened during the war.

Sir Cyril Osborne (Louth)

The hon. Gentleman said that where Socialist principles were being most rigidly applied they were producing the best results. Less than two years ago I was in China where Socialist principles are being tersely applied and there is a great deal of poverty.

Mr. Ellis Smith

I will answer the hon. Gentleman because his intervention must be given an answer. He has made a very serious statement. It will take time for me to answer.

First, let us be accurate. I did not say where Socialist principles have been "rigidly applied". I did say where they have been satisfactorily applied. Certain people in this country were supposed to be applying the principles of nationalisation. But I know the way in which nationalisation was actually applied in certain cases, and that is why I am on my guard when I use phraseology of this kind. The hon. Member should hang his head in shame for quoting China. If he really believes in what he says when he goes with my hon. Friends and others to places like the Free Trade Hall in Manchester, he will admit before I have finished my speech that there is a great deal to be said for my point of view.

The only difference between us is that I belong to the class which was treated like millions of people in China were treated, but it was a matter of degree. The hon. Gentleman knows that there are millions of men and women in China as good as any of us who have never had a real chance in life. He knows that China was subject to foreign intervention, foreign wars and civil wars.

The Deputy-Chairman (Sir Robert Grimston)

Order. The hon. Gentleman has been drawn astray. We cannot discuss the position of China.

Mr. Ellis Smith

Thank you, Sir Robert. The hon. Member was trying to be clever, but he has been put in his place nicely now, as he has been by the Labour Party in particular, and as he will be by the country, for the way he has been responsible for some of the terrible events which has happened outside.

Yesterday's Observer contained the following statistics: 0.5 per cent. of the adult population owns 27 per cent. of the personal wealth; 1 per cent. of the adult population owns 35 per cent. of the personal wealth; 1.5 per cent. of the population owns 42 per cent. of the personal wealth; 2 per cent. of the population owns 46.5 per cent. of the personal wealth; and 2.5 per cent. of the adult population owns 52.5 per cent. This is an indication of the tiny minority which owns half Britain's wealth.

This matter should have been dealt with this afternoon when appeals were made for greater output and more exports. It will have to be dealt with before there are satisfactory relations between those who produce, those who live in working-class areas, and those who live in the areas of the tiny minority. One of the best memoranda I have ever read on this was given to me nearly twenty years ago by my right hon. Friend the Leader of the Opposition. He has taken a special personal interest in the maldistribution of this country's wealth. As my right hon. Friend is so fully informed on this matter, I cannot understand why the Labour Party has not pursued the matter more vigorously in the past few years.

The Conservative Party, reflecting itself through the Conservative Government, is now applying its traditional classic policy of making the workers pay for our difficulties. If anyone doubts one word of my speech, he should go to the Vote Office or the Library and obtain the Government Blue Book. He should look at Table 11 on page 7 and make an analysis. He will find that during the last decade this country's gross national product and increased by 90 per cent. Consumers' expenditure has increased by only 76 per cent. Government expenditure has increased by 101 per cent.

These figures require further analysis and explanation. Who produces the gross national product? In the main it is those engaged in industrial areas. Who spends the greatest proportion of the total consumers' expenditure? It is not the workers, because in the main they take home only just enough to live on, have a holiday and keep going. The logic of these official figures is that inflation has not been caused by excessive incomes but by lack of control and regulation of our economy and excessive Government expenditure. I am the first to fear inflation, because I was in Germany in the Army of Occupation after the First World War when inflation reached a hitherto unknown height. I know the dangers of inflation. I emphasise that in this country inflation has not been caused by excessive incomes but by lack of control and regulation of our economy and excessive Government spending.

The pay pause is not designed to curb inflation. It is designed to carry out the promises made by the Government to the International Monetary Fund. Only one paragraph in the Government White Paper relates directly to profits and dividends, whereas almost every paragraph refers to the need to restrict wages and earnings. The White Paper is an attack on wages which is consistent with the Tories' classic policy of making the workers pay when the country is in difficulties.

I speak for the most highly skilled men in industry. I speak with a touch of bitterness because of the way that we have been treated in two world wars. We had to work as men had never worked before to help to save the country. I do not complain of that. What I complain of is the way we have been treated since then. The engineering industry is now responsible for at least 60 per cent. of the country's exports. The Government are playing with fire in their attitude towards the engineering industry. There has been no pay pause in mining nor, relatively speaking, on the railways and in certain other sections of industry. However, the engineering industry has not had one penny. That is why there was complete unanimity about the two day strikes. There was a united stoppage on those two days such as had not happened hitherto in this country.

This is an indication of what the result of the mass vote now being taken could be. A long dispute in the engineering industry could be catastrophic. The Government should take steps to prevent this and put relationships on a better footing. They should save the industry and the country so that there will be no stoppage in the engineering industry.

The logic of the Government's ten-year policy is that they have failed to plan our economy. Hon Members opposite constantly interrupted and opposed us when we were putting forward our constructive proposals for planning. It is now pleasing to see that within fairly narrow limits, they are beginning to propose a certain amount of planning. This afternoon, the Chancellor of the Exchequer also suggested that targets should be fixed.

The explanation of the Government's policy has been to carry out their undertaking to the International Monetary Fund, to make the workers pay for the difficulties, to carry out a policy of monetary deflation and to carry out a policy through the pay pause—and many unseen economies have been made, like those on the welfare foods of the mothers and children. Now, similar proposals are being made to tax the same people's sweets, to tax the medicines that they want and to tax the foods on which invalids rely, such as preparations and extracts of meat, yeast, eggs and milk.

Therefore, while making my indictment of the Government's economic policy, I join with the Chancellor in pleading for an increase in exports and for carrying that to its logical conclusion with real planning. I hope that this step forward that is being taken will result in better control and regulation of our economy than in the past.

6.52 p.m.

Mr. A. E. Cooper (Ilford, South)

The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) has the one great virtue of never using one word where two will suffice. Nevertheless, he still continues to fight the battles of fifty years ago, battles that have long since been won and lost. Knowing how assiduous the hon. Member is in his duties in the House of Commons. I wonder what he has been doing in the last generation. There really have been changes in society since the war. There really has been a considerable upgrading in the standard of living of every man, woman and child.

I do not suggest that that has come about entirely as a result of the activities of a Conservative Government. There is no doubt that the Labour Government had things to do which they thought were right and from which undoubtedly the nation benefits. But let us not always keep going back half a century. It does nobody any good, and I am sure that the country is heartily sick and tired of hearing one party say what the other did twenty-five years ago.

What we are anxious to know today is what we will do for the future and to try to learn from some of the things which have taken place in the past. That is the duty of the House of Commons. I make one point only to the hon. Member for Stoke-on-Trent, South. When he refers to the inflation of the past few years, I merely make the point that since the war the greatest period of inflation was during the time of the Labour Government. That is all I wish to say about the hon. Member's speech.

Mr. Loughlin

I appreciate the hon. Member's reference to people being a bit tired of what took place fifty years ago. Does he not begin to accept that people are getting equally tired of the reiteration of what took place in 1945? In his last few words, the hon. Member himself could not resist looking back to what happened under a Labour Government.

Mr. Cooper

If the hon. Member had not been so impetuous, he would have realised that I said I was making one point, and one only, in answer to the observations of his hon. Friend. I have nothing more to say about the past. I want to deal entirely with the future.

Both the Leader of the Opposition and my hon. Friend the Member for Somerset, North (Mr. Leather) have talked about how we appear to have become muddled, in our balance of payments, with capital and revenue payments. They wished that we could split these items to give a better appreciation of our actual position. On paper, I suppose, that would be so. The facts are that however we make these payments overseas, whether on capital account or on revenue account, the money has to be found from our trading position and this is reflected in the monthly state of our gold and dollar reserves.

To divorce the two and to attempt to tell the country that, because the one is capital and the other is revenue, the situation is not really as bad as would appear, is not unlike the man who has an overdraft and who says to his bank manager, "I am spending £50 a month on my revenue requirements and £50 a month on my capital account." The bank manager is surely entitled to say—as, indeed, are the overseas bankers when thinking about the affairs of this country—" Very well, you can engage in this sort of dual activity provided that your income is capable of matching that expenditure."

The fact is that over a period of years our revenue from all sources overseas has not matched the expenditure which we were imposing upon it. The crisis of the last year, and probably the crises that we have had over a number of years, have been crises of the nation trying to do too much and stretching its resources beyond its ability. Nobody would seriously deny that.

The Labour Party and the Liberal Party are somewhat dishonest in talking simply about productivity, production and, in a loose way, growth, as if all our problems would be solved simply by increasing productivity. That is not so. My right hon. and learned Friend the Chancellor of the Exchequer could cause production to rise literally overnight if it were in the national interest for that to be done. The nub of our problem, however—and I assure the hon. Member for Stoke-on-Trent, South that this is not something which has just dawned on a few people—is what always has been, and always will be, the nub of the country's problem, and that is our ability to export in sufficient quantity to pay for the imports which we need to sustain a high and rising standard of living. This is the A.B.C. of economic facts of life today We cannot get away from it.

We could increase our productivity by £1,000 million or, probably, by £2,000 million a year without any trouble, but to do so by £1,000 million would require £250 million of extra exports and £2,000 million would need £500 million of extra exports to correspond with the amount of imports that we would need. If right hon. and hon. Members are prepared to take a chance and say, "Very well, we will have this additional £1,000 million and, in consequence, improve our position in the export markets", that is at least an argument, but I do not believe that it is a sound one. The real problem is our ability to sell in overseas markets, and it is not always within our own hands to be able to increase our sales in other countries.

I spend a lot of time trying to sell goods abroad and I know some of the problems that are involved. One could spend a year or two in building up inside a market and getting one's goods accepted in the face of the most fierce competition from all sorts of foreign competitors. Then, just as one is ready to get an order, the country in which one has been building up runs into a balance of payments difficulty and the market is cut off.

That does not happen only in foreign countries; Commonwealth countries take the same action to protect themselves. We all know of the action that Australia has had to take on two or three occasions in the last two or three years to protect herself, and those actions have had serious effects on certain of our manufacturing industries. I therefore beg hon. Members opposite not always to talk in terms of an increase in production and an increase in productivity as if that were the answer to our problem—

Mr. Sydney Silverman (Nelson and Colne)

The beginning?

Mr. Cooper

It might be the beginning of the answer, and it is because I think that it is the beginning of the answer that I believe that this Budget will, over the years, prove to be a first-class one. In fact, it is probably one of the most far-seeing, far-reaching and inventive Budgets that we have seen in a long time, and hon. Members opposite will be very surprised tomorrow when they read the comments of the financial editors of the general Press—[HON. MEMBERS: "Taxing sweets."] The trouble with many hon. Members opposite is that they cannot get their minds above a sweet lolly. Other factors are involved in running a country.

We are likely to spend some very long nights during the summer on what will probably prove to be one of the longest Finance Bills on record. We shall have some Amendments to put forward on certain aspects of it—

Mr. John McKay (Wallsend)

I am interested in what the hon. Gentleman is saying. He is putting problems to us that make us begin to think. He says that he is not particularly fond of the idea that the solution of the international problem is a matter of production, individual and collective. What about prices? For instance, if we could reduce the price of our goods by 10 per cent., would it make any difference to international trade?

Mr. Cooper

There are many factors that help in getting markets, and holding on to them. Price is an important consideration. Delivery is a very important consideration, and we have not been helped over the last few years by the activities of certain of our trade unionists. They have done Britain a very great deal of damage overseas. In particular, Ted Hill and his Boilermakers' Union have a very heavy cross to bear for many years to come with regard to the shipbuilding industry's difficulties.

The lesson of this Budget is very simple. It is that exports are our first priority; that we must have sufficient elbow room within the economy in order to have the goods available to sell abroad. That is the first lesson to be learnt, and I am sure that this Budget will succeed in doing just that.

There are one or two things about the Budget and its presentation that are open to very severe criticism in the House and in the country as a whole. No reference at all is made to the control of Government expenditure. No mention whatsoever is made of the nationalised industries, or to the part that local authorities should be expected to play. I must tell my hon. Friend the Economic Secretary that we cannot expect the country as a whole to give wholehearted support to policies of restraint all the way round when the Government, the nationalised industries and the local authorities go on spending as hard as ever they can.

What system of budgetary control operates in the Government Departments? We would all accept without question that in a country such as ours, where there is a very high level of expenditure and a very complex form of society, errors in estimating either revenue or expenditure are to be expected. We would be very churlish if we thought that the Treasury could budget to within about plus or minus £5 million in one year. I think that it was my hon. Friend the Member for Somerset, North who talked of the Treasury's errors since the end of the war. It is a very illuminating exercise to study the out-turn of figures of every Budget since the end of the war; the volume of errors is quite astonishing. One wonders just how much confidence we can place in Treasury estimating.

I should like to see the Treasury impose on the spending Departments a very serious system of budgetary control, and one that every company of any size has to impose—

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

The hon. Gentleman has said that the Government should bring in more control on local authorities—

Mr. Cooper

I have not argued that yet.

Mrs. Slater

—but can he tell us, as a matter of interest, in which departments he would lower the expenditure of local authorities, in view of very high interest rates?

Mr. Cooper

The trouble with hon. Members opposite is that they do not permit one to get on with one's speech. I shall deal with that, if the hon. Lady will be just a little patient—

Mrs. Slater

I cannot tell what is in the hon. Member's mind.

Mr. Loughlin

There is not much.

Mr. Cooper

The hon. Lady would learn if she would just sit down in patience.

I turn now to the nationalised industries. We are spending huge sums on the modernisation of practically every one of them, and we must soon take a good look at that expenditure and see whether we are getting a return for the investment. We all admit that we have to invest a huge sum, but after all that has gone into those industries after all these years we want to know whether we are getting a fair return on the money. Expenditure on the nationalised industries is something that will have to take much more of the time of the House over the next few years than it has in recent years.

The local authorities are having forced on them by virtually every Act of Parliament more and more obligations, and those obligations are very costly. Each of the objects that we ask the local authorities to achieve is desirable in itself. Everyone says that we must have more teachers, more schools, more roads, or that this section or that must have more pay. Whenever we have a debate on roads, each hon. Member rides his hobby horse and tells us how road safety would be improved and lives saved if we took this or that action. So we go on.

As has been said so ofen, everyone is in favour of economy in general, but no one is in favour of it in particular. So the local authorities have all these duties thrust upon them—

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

What would the hon. Gentleman economise on?

Mr. Cooper

This is not the Scottish Grand Committee.

Mr. Willis

The hon. Gentleman would not get away with this nonsense there.

Mr. Cooper

If I were there, the probability is that I would not be allowed to speak because of the volubility of hon. Members opposite.

Mr. Willis

Not this sort of stuff.

Mr. Cooper

Local authorities throughout the country—and I have had seventeen years' experience of local government—have a tendency to borrow money rather than take it out of revenue and they are encouraged in this by the Government. Loan periods are laid down for certain types of equipment. For example, a loan is possible for five years for the purchase of a motor car. Loans can be taken over short periods like that and the periods can build up to about sixty years.

Borrowing small sums of money, as many local authorities do, imposes a burden on the rates over a long period ahead. Not only is this intolerable, but, at the same time, it limits the future amount of development a local authority can undertake. My right hon. Friend should seriously consider telling municipal authorities that sums of £2,000 and under must be taken out of revenue. It would be for the Government to say that sums of that amount and below would have to be taken out of revenue, for whatever the items might be, and not out of capital.

The Government should further consider telling local authorities that they cannot borrow for periods as short as five years. The effect of this has been carefully worked out by a number of borough treasurers; that for the first four or five years there would be a greater burden on the rates, but that, thereafter, the burden would fall appreciably. We have reached the stage in our local government finances where we are asking ratepayers to carry too large a share of the burden and we must discover how this can be readjusted in view of the great development that we are imposing on local authorities.

Developments in education will impose burdens which, I fear, many hon. Members do not fully appreciate. In Essex, for example, we shall be extremely seriously handicapped as the years go by. I mention these three points— Government expenditure, the nationalised industries and local authorities—simply to illustrate the enormous demand on our resources that public expenditure is demanding and how, as a result, our outside activities—what can be made available to the taxpayer and ratepayer for his needs—must become reduced unless we really take a hold of this problem of public expenditure.

I very much regret that the Chancellor has not told us what steps the Government are taking to control this enormous build-up. I believe that we have now, in the coming year, one of the greatest opportunities to develop our exports. All the signs are there. In America, Europe and in the South Americas there is every opportunity for the agile and virile British exporter to go ahead. To impose a bigger demand on our resources now would limit our ability to accept that challenge and it is because I believe that this opportunity exists, and that we can grasp it, that I congratulate my right hon. and learned Friend on his Budget.

7.14 p.m.

Mr. Robert Woof (Blaydon)

I feel somewhat gratified to have this opportunity of taking part in this important debate and I hope that the hon. Member for Ilford, South (Mr. Cooper) will not think me discourteous if I do not follow him closely in all the points of special interest which he raised. After listening to the Chancellor's long dissertation today, in which he presented the left side and right side of the nation's balance sheet, it seems quite apparent to me in the early stages of this debate to be faced with the difficulties, either to delve deeply or examine all the details the figures and analyse the position presented to us.

Whatever entities there are and can be seriously argued, I suppose that in many ways it will be substantiated that one indissoluble inter-relation rests on what we are accustomed to accepting to be the practice of Government; to collect compulsory revenue for expenditure that confers a common benefit. But from an altruistic point of view what seems more obviously different from any community faculty is the financial burden imposed on the less fortunate strata of society.

To distinguish intentions from realisations, far be it for me to try to compete with the Chancellor when it comes to financial language. Nevertheless, it seems only right that we should all voice our major criticisms. By looking at certain factors it might be useful to endorse the value of economies derived from the Greek word meaning "household management" in wider terms. For that reason, when we come to consider the country's economy, we realise that it affects a great number of people. To bring the figures more into reality it must be remembered that so many of these people are trying to keep up a decent standard of living.

Whether or not hon. Gentlemen will accept that view, I would remind them that Plato spoke of a society in which there would be men of brass to engage in trade and commerce, men of silver to protect the state and men of gold to provide the political and cultural relationships. If he were living today I am afraid that he would have to go back to school to learn political economy, particularly in view of the rivalries and conflicts in the behaviour of present-day money and the fact that we have such a tough Chancellor of the Exchequer with whom to deal.

As usual, the Chancellor went out of his way to stress that wages must never rise higher than increases in the national productivity. Naturally, we are all deeply concerned about increased production but it is quite a common disposition not to forget the outrageous way in which the Government attempted to interfere with the negotiating machinery which had existed for many years in many industries and professions and which machinery and history resulted in bringing the pay pause policy under heavy fire from many quarters.

Although the Chancellor has induced leading members of the T.U.C. to take part in the National Economic Development Council, the fact remains that if the workers, skilled or unskilled, or professional are to improve or defend their living standards they must also be prepared to battle against any efforts the Government may make to impose greater burdens on them. It will not be surprising, therefore, if, when faced with the sort of economic policies that this Government have entered, these workers are prompted to criticise. After all, they are affected by vitally important domestic issues and there can be no wonder why bitterness and moral indignation can always be found.

The hon. Member for Ilford, South mentioned local Government expenditure. If there can be one example of something which causes anxiety among the workers, nothing has proved more conclusively than has the nightmare of those who are absolutely sick to death of trying to find a home for themselves. Serious repercussions are due primarily to the Government's attitude of continuing the high interest charges to local authorities for house building, forcing them to confine their housing programmes to slum clearance. I am speaking from my own knowledge and from the experience of having received heartbreaking letters, many of them written in an emotional fashion and some written in a state of panic, in which the writers have expressed the sad conditions in which they live. On investigation I have found the statements in these letters to be quite true.

The evidence can best be seen in the housing situation as it affects the younger people who cannot afford to buy homes of their own. This situation is no accident. It is created by design. Those who buy homes of their own know only too well what the operation of interest rates means. In many instances, contrary to outward appearances of good graces there will remain a heavy debt burden in years to come as a result of encouraging people to undertake mortgages. The majority of people affected cannot remain unperturbed in such a situation. I suppose the hon. Member for Ilford, South is aware of the operations of the Public Works Loan Board as they affect local authority long-term borrowing and the payment of interest. On a £1,600 house the rate of interest over sixty years is 6 per cent. A total of £4,340 in interest would be paid, making a total cost of £5,940.

Many local authorities have been forced, for this reason, to raise rents, through differential rent schemes or other methods, and the rents still go higher and higher. When we consider the shackles that are placed on a person trying to pay off a mortgage on a £2,500 house with repayments at 6½ per cent. over fifteen years, we see that the building society will have received its original loan of £2,500 plus £3,994, making a total of £6,494. To anyone with nothing to fall back upon, and however laborious, such a struggle to shoulder this load of financial responsibility cannot fail to produce profound worry.

In addition, there may be an invitation to irritate people still further in view of what we know of the Government's rerating proposals which are to come into effect next April. Whether the wedge enters the thick or the thin end, in all probability there will be some nasty shocks when tenants and householders are called upon to pay a bigger share of the local rates, if that should happen, not forgetting that it will mean a further cut in the weekly pay packet, it will be futile for anybody to "belly-ache" about the local authorities. The facts will have to be faced. The blame will have to be placed where it belongs. In these circumstances, one will not need to take refuge in ambiguity of thought and expression. The sum of the situation is that we cannot expect workers not to seek to reimburse themselves with pay increases.

The hon. Member for Ilford, South took my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) to task for referring to the class struggle. I am sorry that the Prime Minister is not present. On 15th December last year, on receiving the freedom of the City of London at the Guildhall, he proudly announced: It has been a peaceful revolution. The class war is dead, or nearly dead. Almost its only exponents are a few eccentrics. Everybody may have his own conscientious approach to these matters. In fact there is a very old saying—" He that loses his conscience has nothing left that is worth keeping". However true this may be, even the best of faculties will remain barren without experience. There can be no subjective faculty unless there is something objective to be seen. One cannot have the faculty of vision without seeing things.

There is strong reason to believe that the mass of the people concerned in our productive and distributive activities are becoming cogs in wheels in the great system of human mechanism. But whoever believes that the working class no longer exists in modern industrial society ought to take another look into the financial realities of economic life in which it should be conceded that a good case can only be made if the pungent mark is ignored, and in this respect workers can best judge for themselves. Nobody can possibly relegate all the confusion to a myth and shadow.

In reverting to the question of interest on money lent, this has a long history. It is anterior to rent. For centuries the exaction of interest for money lent was universally denounced as usury and was condemned as anti-social and immoral. Such a practice was frequently punished by law. Even the Church regarded this method of acquiring riches as most reprehensible, invoking all the torments of hell against greedy and rapacious usurers. Needless to say, nowadays no moral stigma is attached to profit making. The economic system which is dominated by the financial structure of banks and insurance companies is in some circumstances accounted virtuous. Such an indulgence in gain with a craving for more power illustrates how manipulators of finance are looked up to with sophistry.

In view of the grave situation involving interest rates, whether in the form of increased rent or mortgage, one is entitled to remonstrate and to express grievance. There is a spirit of discontent, and this financial weight must be lifted. But there was no indication from the Chancellor that there would be any relaxation. There is evidently going to be no encouragement. I would only add that such profligate audaciousness imposed on a great number of people for the sole behoof of financiers is the price they are paying for Tory freedom.

For a few moments I want to turn to another important aspect. It is to be specially noted that the Chancellor refused this afternoon to detach himself from the long overdue measure to introduce a real capital gains tax. Quite lately it has been hinted at often enough as being dubbed a political tax designed to appease the trade unions and to reconcile them to wage restraint. In view of what we have heard this afternoon about relief in this respect, it will probably be accepted with some rejoicing in the City. But, however divided in purpose, and while not wanting to go into many other implications, I would only say that, let alone in times of crisis, I fully apprehend the Chancellor's task in estimating income and expenditure for the forthcoming financial year.

With this admission, I also take the view that it is not exactly the end of the matter. As in all speculation on human affairs, no one will deny that critical circumstances do demand some sense of personal value and responsibility with a determination of purpose. There is scarcely any good ground for optimism these days. No one can afford to be complacent or indifferent. But I think it may fairly be said for what is to be seen in the light of national importance, whether events denote conditions that differentiate between one another by changing economic movements, they can equally be applied as an irreducible local concern.

In this connection, and in dealing with the business of the day, the main thing that turns in my mind at the moment is the distinctive trait of individual thought that naturally turns on the consequences of the contraction of industry. I must relate this to the Chancellor's theme of growth and economic expansion.

As economic considerations must be taken into account, I wonder whether the right hon. Gentlemen realises the extraordinary dimensions and depth of the adverse economic transformation prevailing even in my constituency. I offer no apology for having perpetually to repeat that this is due to the submerging of the mining industry and partly also to the fact that the area has never been identified with the endowment of industrial development.

Apart from the inevitable social consequences, in which it is common to conceive anxiety that is pressing so heavily on people—the effect, I admit, is a slow grinding one rather than one of sudden collapse—one can judge from the product of the circumstances the fear which points all the way to a chronic lack of industrial adjustment. The drastic alteration in the industrial and economic state of the area appears to be at the beginning of greater troubles. It cannot be considered as a passing storm arising out of economic conflict, with one expecting it to die down as stability regains its position in the general run of things. It is a situation that must be reckoned with, not so much as what constitutes the preserving of the existing pattern of industry, because before long there will be very little left to preserve. But there can be no mistake about what is now unfolding. What must centre on the immediate future should be the object of offsetting endemic tendencies towards under-employment of the available productive sources through a better distribution of industries. Such an issue ought to be the responsibility of the Government in the scheme of economic development and planning in order to create the means to full production and to sustain the standard of living of all classes.

If we are to take it that the Chancellor means what he says, in seeking to improve efficiency to achieve faster economic growth, then, of course, on the ground to which I have just referred much will be desired in extensive changes to bring about economic success.

7.35 p.m.

Mr. Edward Gardner (Billericay)

I cannot help but be fascinated to hear the references made by the hon. Members for Blaydon (Mr. Woof) and Stoke-on-Trent, South (Mr. Ellis Smith) to the working classes. It used to be easy for anyone to identify the working classes. Indeed, they used to identify themselves, and that was the way it was done. But they do not identify themselves any longer.

Who are the working classes? How does one identify them? I am fairly well acquainted with an industrial area in my constituency—the new town of Basildon—and I have never met anyone there who will say that he or she is a member of the working class. They are members of a community. That is the new approach. What has been said is old-fashioned language which does not apply any more.

One cannot help feeling surprised to hear from the hon. Member for Blaydon this dislike of profit making. I have never heard of any railwayman who is proud of the deficit on the railways. On the other hand, I have known many people who would like to work, and take a pride in working, for firms which are doing well and making a profit. I should have thought that there was nothing at all disreputable about profit making. Indeed, there is something sound, healthy and dynamic about it.

I return to the realties of the debate and to the Budget. I find it a pleasing, if not exciting, Budget. I think that most people will find that they can accept it with satisfaction. I know that parents and no doubt their children may well be displeased by the tax on confectioneries and ice-creams, but I also know—I speak as a parent with two young children—that dentists will be delighted at the discouragement—at least, I hope that it will be discouragement—of the new tax.

Brigadier Sir Otho Prior-Palmer (Worthing)

It will put them out of work.

Mr. Gardner

It may well do so, and I hope so.

One feature of the Budget which delights me and which, I believe, will give pleasure to millions is the fact that we can look forward to the abolition of the Schedule A tax on property.

Mr. Loughlin

That is not in the Budget.

Mr. Gardner

My right hon. and learned Friend the Chancellor of the Exchequer has promised that that is something that we can look forward to next year. The Chancellor is to start on the abolition of Schedule A tax next year. Whether there will be complete abolition next year is something which my right hon. and learned Friend will have to decide at the time.

Mr. Robert Cooke (Bristol, West)

My hon. and learned Friend is right in what he has so far said about Schedule A, but the Chancellor of the Exchequer, if I heard him aright, referred to owner-occupiers.

Mr. Gardner

I am obliged to my hon. Friend. Perhaps I ought to qualify what I have said by relating it to owner-occupiers. It is on their behalf that I say to right hon. and hon. Members opposite that there will be a good deal of pleasure and satisfaction on this point.

Mr. Loughlin

While I appreciate the type of argument which the hon. and learned Gentleman is advancing, I think that he ought to relate the alleged promise about next year to this Budget. If he cannot do that, he ought not to discuss alleged promises.

Mr. Gardner

This is not an alleged promise. This is a promise given by the Chancellor of the Exchequer. If it means nothing to hon. Members opposite, it certainly means something to this side of the Committee and comes as a great relief. It is an absurd tax. It has always been regarded by hon. Members on this side absurd, and it is quite remarkable that there should be so little enthusiasm for its future abolition by hon. Members opposite.

Mr. Ron Ledger (Romford)

I am sure that the hon. and learned Member would not want to mislead the Committee. Surely what the Chancellor did was to relate the abolition of this tax to rating revaluation. He said that he could not see that it would be fair to continue with this tax. Obviously, what he was referring to was that there would be very much more rates to be paid on the part of everyone and that he would not want to charge Schedule A as well.

Mr. Gardner

That is not so. The Chancellor said that he was waiting for the revised rating valuations which would indicate that it was a wholly unsatisfactory tax. There was no question of balancing any increase in rating against Schedule A for owner-occupiers. This was an opportunity next year, when the revised rating valuations would come in, for the Government to revise their approach to Schedule A tax for owner-occupiers. I think that that is right.

I should like to have heard the Chancellor say that he would abolish this tax next year. The point is, and I repeat it without apology, that it is surprising that right hon. and hon. Members opposite, particularly hon. Members of the Liberal Party, should not be showing enthusiasm. There is not one of them here.

Mr. Richard Marsh (Greenwich)

They do not come here in the evening.

Mr. Gardner

That is probably right.

Schedule A tax is an absurd tax. It is one which hon. Members on this side have regarded with distaste for years. We believe—I shall be very upset if I find any hon. Member opposite who does not accept this—that people who own their houses have a stake in the country, which gives them a sense of stability, of responsibility and of being a part of the country. I am sure that that is something that we all accept.

Mrs. Slater

May I ask the hon. and learned Member a simple question? An Amendment on Schedule A was tabled on last year's Finance Bill. How many hon. Members on the Government benches voted for it?

Mr. Gardner

I find it very difficult to understand the relevancy of that interruption. The point that I am making, and I hope that it is a valid one, is that here is something which ought to be an attraction to all people who have an interest in making people interested in the country. I believe that to give a person a stake in the country by allowing him on the best terms possible to own his own property is something that must ultimately benefit the country. I believe it to be one of the greatest and most effective obstacles that we can raise against any threat of Communism.

Mr. Arthur Probert (Aberdare)

Since the hon. and learned Member is showing such interest in the owner-occupier, which I thoroughly applaud, would he not agree with the principle of leasehold enfranchisement?

Mr. Gardner

Much as I should like to go into that subject, I certainly do not intend to be drawn away from my main theme. It is simply this. I find in this Budget the theme of equity running throughout it. The Chancellor said that he was trying, and is trying, in this Budget to exercise a broad theme of equity, to bring about a sense of fairness into taxation. One thing that he has done which illustrates what I maintain to be this excellent ambition is to introduce a short-term capital gains tax—a tax which I personally applaud.

I think that there has been in this country a deep and continuing dissatisfaction by many people who feel that distinction in the way that the law treats earned income and the way in which capital gains are treated is something that cannot be tolerated indefinitely. The new tax which is now to be introduced will assuage that dissatisfaction. We are coming nearer to closing the gap, to eliminating and abolishing the distinction between earned income and the accumulation of capital gains.

In 1920, when the Royal Commission on Income Tax reported, it found that there was a discrepancy in our tax system and that short-term capital gains were escaping without any incidence of tax being imposed upon them. Now this gap is being closed, and, I believe, being closed in the only way possible. Apart from short-term capital gains, all the other capital gains which are in the nature of trade are now covered by the tax basis which has been broadened considerably since 1920. I cannot help feeling that this is a tax which will be accepted with satisfaction by the majority of people.

It is a tax that will bring, as the Chancellor has said, a sense of fairness into our taxation system. I would accept what my hon. Friend the Member for Ilford, South (Mr. Cooper) said about the failure of the Chancellor—it is my only criticism—to make any reference to the containing of Government expenditure. I believe that there is a great deal of disquiet in the country about the feeling—it is a very strong feeling—that the Government are not showing or employing all the will that they might in order to reduce Government expenditure.

Of course, we all know the immensity of the problem. We all know that from time to time everybody wants to spend more money and, in the next breath, wants to save even more money. I would have liked to have heard from my right hon. and learned Friend the Chancellor some reference to the need to restrain Government expenditure. I should also have liked to have heard that he intended to give direct incentives to exporters. I hope that his anticipation that our export trade will be able to match up with the opportunities now being created abroad will be fulfilled.

I believe that the Budget is the basis, and will be the basis, of a new and growing prosperity in this country. I believe that it is a Budget of which this party, and, in particular, my right hon. and learned Friend, can well be proud.

7.50 p.m.

Mr. Ron Ledger (Romford)

I am sure that the hon. and learned Member for Billericay (Mr. Gardner) will not mind if I do not comment on what he said. I want to make references to what the Chancellor said and to deal with two matters affecting my constituency. One thing which amazes me is that the last three speakers from the benches opposite have referred to the class war, saying either that it is wrong to perpetuate it or that it no longer exists. I cannot see that this is the Government's true attitude, because the Chancellor has put a tax on lollipops and sweets in order to raise £30 million. Is it really true that there was no other way in which he could have raised this sum without letting it bear heavily on people who cannot afford it?

It is only a year since he gave away £80 million to Surtax payers. One would have thought that he could have gone back to them in the present crisis and that they would have been glad to make a contribution. I have been staggered by the extent to which Members opposite have applauded the Chancellor. Whatever they say about him and his efforts, I do not think that anybody would accuse him of being imaginative.

At present, the Government are negotiating to enter the Common Market and everybody knows that the basis of our economic problem is exports. Therefore, this was a golden opportunity for the Chancellor to introduce the sort of legislation that would have encouraged the expansion of industry and an increase in exports. But I defy anybody to find a relationship between the need to export and 15 per cent. on sweets and 5 per cent. on clothes. It is ridiculous that the Chancellor should come here, in the present economic conditions, and tell us that he must introduce Purchase Tax on goods that have never had it before—including a tax on sweets and lollipops.

I was considerably interested, up to a point, in one important matter raised by the right hon. and learned Gentleman. This was when he spoke of taxing speculative investments. I do not pretend to understand economics very well. As far as I can see, he was making a case that many people are evading tax by certain methods, and that those who invest in speculative investments for quick gains are doing something which he dislikes.

Had hon. Members opposite growled when the Chancellor introduced proposals to deal with this, and had they shown some objection to them, I should have thought that he was being serious. But when I say that they were smiling while he was making these proposals, it was obvious that there was a get-out somewhere, that this would not cost them anything and that he was really saying nothing. After having told us that he would tax these speculative investments, he showed the way out by saying, "If you do not collect for six months, the tax will not apply". I then understood why hon. Members opposite were not at all too displeased with his suggestion.

Nor can I understand why the right hon. and learned Gentleman, in his Budget speeches, does not relate his arguments to some of the problems which exist in industry. I want to refer to two industries in my constituency to which we could give a little help. I admit that the first one does nothing to help us to increase productivity or to export, but it is involved in a niggling matter about which I know that the Chancellor has received representations. It is certainly time that something was done about it. I refer to the 10 per cent. basic tax which came into force in 1958 and was imposed upon all bets placed on the totalisators in greyhound racing establishments.

There is one of these establishments in my constituency and I have kept fairly closely in touch with this matter. It is obvious that the Chancellor can no longer justify the difference in treatment between those who bet at greyhound racing tracks and those who bet at horse racing tracks. The time has come when he should stop the discrimination and remove this tax from the greyhound racecourses. I have heard the argument that there is a lot of difference between the crowds attending horse racing at Ascot and elsewhere on afternoons during the week and those who attend greyhound races in the evenings. Some have said that this is an unfair tax because greyhound racing is supported by working people. I ask the right hon. and learned Gentleman to consider again whether he cannot remove this discriminatory tax.

My other point does concern exports, through an industry in my constituency—the radio and television industry. It has suffered considerably during the past ten years, particularly as a result of the legislation of the present Government. Since the war, there have been no fewer than eight changes in Purchase Tax upon radios and television sets. This has made it impossible for the industry to plan ahead for any sort of expansion.

Again, the Chancellor showed no imagination today. It is obvious that we are going into the Common Market within a year or two. One would have thought that he would have given all the assistance possible to this industry. There is a tremendous market in Europe for televisions and radios. The industry in my constituency would have been only too prepared to play its full part in seeing that we secured a proper proportion of exports.

The figures show that, whereas in this country four out of five families have television sets, in Europe the ratio is one house in three. That is a considerable market and it is estimated that its potential value in the next ten years is £1,200 million. Securing a large share of that market could do a lot to assist us in increasing exports.

But the sad picture we see as the result of Government legislation in successive Finance Acts is that, during the past eighteen months, production of television sets has gone down by 57 per cent. One reason is that Purchase Tax is much too high. It has been 55 Per cent. and I and my constituents are pleased that this has been reduced to 45 per cent. But it is extraordinary that, in these days, when, in order to be well-informed on day-to-day matters one has to have a television set, it carries a heavier tax than jewellery and furs, on which the tax has been reduced from 27½ per cent. to 25 per cent.

Mr. Gardner

Will the hon. Gentleman explain why one has to have a television set any more than one has to have jewellery?

Mr. Ledger

I am not suggesting that the hon. and learned Member should have a television set. Perhaps he can get no value from the programmes. But everyone in my family has seemed better able to discuss far more matters of general interest as a result of television—but of course, in my family we try to be selective. I cannot advise the hon. and learned Gentleman in that matter. It is entirely up to him. Certainly in my income bracket, there is no selectivity as regards jewellery; we cannot get near jewels anyway.

In my opinion, the television set is no longer a luxury, yet it carries nearly twice the Purchase Tax of jewellery and furs. Therefore, although we welcome the reduction on Purchase Tax on television and radio sets, we think that the Chancellor should have gone a lot further.

A high rate of Purchase Tax on television sets tends to encourage rental arrangements. This has disadvantages in manufacture for export. People connected with the industry know very well that the workmanship which goes into a rental set does not compare with the workmanship which goes into sets backed by a well-known trade name. It would be sad if, as a result of the Government's policy in encouraging the development of rental schemes and, therefore, the manufacture of substandard sets, by the time we entered the Common Market we had lost a lot of skilled workers and a great deal of the good name of our radio and television industry. I ask the Chancellor, therefore, to consider this point more carefully and to see whether something further could be done.

Another effect of Purchase Tax on radio and television sets is that a manufacturer making for the home market and for export has, almost by necessity, to keep two different production lines. One is for the home market to produce sets carrying Purchase Tax which must be made more cheaply to be saleable at home. If he produces a set for the Continent at, say, £20, a set produced for sale at home at a similar price must take account of a Purchase Tax element of about £7. Therefore, the real value of the set will be less than £14. The manufacturer has to have two production lines in order to produce for export and for the home market, and in this way he is put at a disadvantage as a result of Purchase Tax.

There is the other disadvantage that a television or radio set bought on the home market requires a 20 per cent. deposit on hire purchase, whereas for rental only 10 per cent. is required.

I ask the Chancellor to spare a thought for these matters. The electioneering in his Budget speech was obvious. All hon. Members opposite have referred to Schedule A. The Chancellor made no promise whatever except that Schedule A would be considered at the next Budget, and it was plain that he and hon. Members opposite are far more concerned about pending by-elections than making the changes which are necessary now. They know very well that the Tory Press tomorrow will, in its usual way, have headlines about the abolition of Schedule A and the small print will indicate that this is not a firm promise at all but a possibility for next year's Budget.

If the Chancellor can drag himself away from his obvious electioneering, he should give a little time to the points which I have raised regarding the problems of industry in my constituency.

8.4 p.m.

Brigadier Sir Otho Prior-Palmer (Worthing)

I agree with what the hon. Member for Romford (Mr. Ledger) said about the export of television sets. There is also the problem caused by the different line systems which militates against our manufacturers and requires them to have two production lines. I hope that the hon. Gentleman will forgive me if I do not follow him further, because I know that many wish to speak and I hope to be brief in what I have to say.

I have spoken to many exporters in recent months and I know that it is not only fiscal assistance which the Treasury or the Government can give to exporters which matters, but it is also administrative assistance throughout all the Departments of Government which matters enormously. Many exporters have said to me that, although they need financial assistance up to a point, what they really want is to be allowed to export. They complain about all the forms which must be filled in and the delays and frustrations which, over and over again, result in the cancellation of orders.

Delay leads to loss, and responsibility for this delay rests fairly and squarely on the permanent officials in the various Departments whose motto appears to be, "Put off for two days what can be done in five minutes". Something really must be done about this if we are to help our exporters to compete abroad and take the opportunities which some people believe will be open to them this year.

At last, after many years when I and others have spoken in Budget debates, something is being done for retired people on fixed incomes. It is something, and for it my constituents, many of whom are such people, will, I hope, be grateful. I am grateful for the little which has been done, though I still believe that the lower limit for relief from Income Tax should be raised higher still for those over 65.

A concession has been given to those under 65 years of age, but I am not really so much interested in them, and I hope that on the Finance Bill we may succeed in having the limit raised for those over 65 who are living entirely on their savings and who have not had pension schemes of their own because it was not the fashion to have them in their time. They have been hard hit by what has happened to War Loan. They were advised to buy Government stocks, but at their low price they cannot dispose of them and they receive hardly any dividend.

Again and again in Budget debates, it has been said from the Treasury Bench that what really helps these people most is the stabilisation of the cost of living. We should have to halve the cost of living to give them any substantial help. Of course, the cost of living has been stable up to a point, but these people have been hit hard enough by past taxation and what has happened to Government stocks. They watch the big boys, the trade unions and big business, get away with wage rises, salary rises and price rises, always being cushioned against the inflationary consequences by further rises in wages and salaries. They are infuriated when they see this going on. They are unorganised. They have no union to speak for them. They have to sit and suffer.

A new shadow is rising on the horizon to obliterate the pale sunlight of their old age. Each year, by leaps and bounds, rates are rising, based as they are not on capacity to pay but on the sort of house a person occupies. Rates are soaring. It is well known that education is responsible for a very large proportion of the rates they pay. I know that the Government pay for some of it, but I estimate that, on average, about 60 per cent. of our rates are for education. The call on rates for education will increase rapidly during the next few years if we are to keep pace with the country's education needs. The time will come fairly soon, if it has not come already in some cases, when the ratepayer is just unable to pay. I know very well that many of my old constituents in Worthing are no longer capable of meeting any further rises in rates.

It must be realised that there are people trying to live on £180 or £200 a year in their retirement, which is very hard. Something must be done. The majority of people do not pay rates at all. I rang up my county hall this morning, before coming here, to ascertain the figures. In the West Sussex County Council's area there are 400,000 people, of whom 136,000 pay rates. About a third of them pay rates. I am not talking only of wage earners. Many of those people are earning very good wages and salaries and, perhaps, getting good dividends, but they happen to be living in a house with somebody who pays the rates for them. This, again, hits the aged and the retired.

Mr. Ledger

Who pays the rates for these people? If the hon. Member is referring to people in council houses, I had always understood that their rents included a proportion for the rates.

Sir O. Prior-Palmer

I was not making a point about council houses. I merely say that the householder pays the rates, and that very often a large number of people who live in the houses and do not pay rates earn good wages and enjoy all the amenities of the town or borough, including education, without making any contribution.

Mr. Loughlin

And drawing dividends.

Sir O. Prior-Palmer

Yes. This situation should not be allowed to continue.

The other day, we heard of a council in Carmarthenshire which had got to the stage of saying, "We are not spending more. We must cut somehow on education to keep the rates down". Accordingly, the council sacked 65 teachers. Is that what the country or members on either side of the House of Commons wants? I cannot believe that it is. I learn from an educational magazine that last year the City of Birmingham cut its expenditure on education by £1 million to avoid a rise in rates. I do not know whether there is an hon. Member present from the area who can confirm or deny this.

Mr. Loughlin

The Financial Secretary to the Treasury represents a constituency in the Birmingham area.

Sir O. Prior-Palmer

These are only two examples of what soon, undoubtedly, will be a flood. One council dismisses 65 teachers and a city like Birmingham says that, because the limit has been reached, £1 million must be taken off the education bill.

The Government will be faced with two alternatives. One that they must subsidise education to a greater extent than at present, but I would not be in favour of that. It would merely mean that a local authority would have less say in education in its area and this would be a bad thing, because an authority which does not have financial responsibility does not have the last word. Of my two suggestions, that is the least good.

My main suggestion, which came as a great surprise to my right hon. Friend the Minister of Housing and Local Government when I put it to him the other day, is to set up quickly a committee to examine the question of local income tax, so that people are taxed on their ability to pay and not on the sort of house in which they live. That would be the right thing to do. I hope that the Government will wake up to the seriousness of the situation, which is worsening every minute. Every educationist on a borough or county council knows how serious it is. Possibly, we may get an answer to this suggestion during the remainder of these debates. I might table a proposal during the proceedings on the Finance Bill so that we may get the views also of hon. Members opposite.

I am all in favour of housing subsidies and of subsidising people who cannot afford any other sort of house. What I cannot stand is to see people living in a cellar with no light, no heat, no water and with a family of five while outside a council house not far away stands a Jaguar car. It is known very well that the man owning the Jaguar lives in a council house on rent which is subsidised by the people living in the cellar when he could very well get a house for himself. This is not a question of either Conservative or Socialist policy, but is merely a matter of common sense.

Council houses were not intended for people with Jaguars, big business interests or that sort of thing. It is high time that the Government wielded the stick to local authorities who will not play on this basis and who sometimes get their old boys and their friends into council houses. The Government should say to them, "If you do this sort of thing, you must look elsewhere for the Government subsidy. We will subsidise only those in need." If somebody who wants accommodation can prove that he is in real need, the ratepayers would not object to helping him, but what happens in some areas is a crying disgrace. There is not a borough or county councillor who does not know this to be true. I hope that the Government will do something about it.

The Financial Secretary to the Treasury (Sir Edward Boyle)

I always listen with interest to the criticisms of my hon. and gallant Friend. He is, however, overlooking the Housing Bill of last Session, which made a major change in the system of paying subsidies. It was a tough Measure and one which I would gladly defend. It cannot be said that the Government have neglected the matter.

Sir O. Prior-Palmer

I did not say that they had neglected it. What I say is that still tougher measures are needed. The evil has not yet been eradicated. I remember what was done in the last Budget concerning double taxation benefit to allow able married women to continue at work by raising the exemption limit for Surtax, but it did not go far enough. This, also, is a subject which I have raised time and time again. We are losing our able women teachers and scientists when they marry, because they still cannot afford to go on earning the sort of salary which puts them into a higher taxation bracket so that they are taxed at the highest possible rate, including Surtax, on the first penny they earn. This is a crazy situation and I could give evidence of it.

I am in favour of the tax on sweets and soft drinks and would have suggested it myself if it had not been included in the Budget. In Austria, beer is not taxed, but soft drinks are. I do not suggest that we should go as far as that, but it is absurd that no tax whatever has been culled from either soft drinks or sweets.

I wholeheartedly support my right hon. and learned Friend's proposals to prevent tax evasion. I have pleaded for years for something like this. Honest people are getting sick to death of having to screw up their last penny to pay their rates and taxes while others ten times better off than themselves "get away with murder" over and over again. This is not a question of whether the prevention of tax evasion is economically sound, or would cost more in administration than the revenue that it would secure. It is simply a question of justice.

People want to feel that justice is being done. If they feel that they are justly treated, then when a crises occurs they can be asked to co-operate wholeheartedly in restraint or whatever else the Government wish them to do. It is no use appealing to people when they feel a sense of injustice and that others are "getting away almost with murder". I hope that these measures will be pushed forward with all the ruthlessness that the Government can exert.

My last point concerns television, on which people pay tax, and the control by the Government of the actions of the B.B.C. Whether this control is too weak, I do not know, but it certainly needs to be tightened. We are getting accustomed to pornography, homosexuality and prostitution, but the latest example on television is blatant blasphemy. Usually, when one writes to the Director-General to complain, he has not seen the line in question. When he has seen it, however, in this case he writes a smug letter saying, "There, there, it was not as bad as all that." This makes one feel quite sick and gives rise to a conviction that all is not well. In our debates on the B.B.C., I hope to be able to enlarge upon this matter.

8.20 p.m.

Mr. Charles Loughlin (Gloucestershire, West)

I ought to begin by congratulating hon. Members opposite on the adroitness and dexterity with which they have attempted to support the Chancellor of the Exchequer in this Budget debate. Each of them has set up his own Aunt Sallies and has not dealt with the Budget at all. When they have attempted to deal with it, they have spoken of the Chancellor's promises rather than of the Budget's tangible effects and proposals. Each has referred to Schedule A and the Chancellor's promise that next year he will do something about it. But we have had so many promises from right hon. and hon. Members opposite—for instance, about the Offices Bill—and so often has nothing materialised that the Opposition cannot accept the Chancellor's promises as readily as do hon. Members opposite.

All their speeches have had nothing to do with the Budget but with the political advantage to be gained by the reiteration that in formulating his Budget proposals the Chancellor has promised to do something about Schedule A next year. They are trying to say to the people who will be voting in the forthcoming by-elections, "Do not desert us because we will help you next year." Of course they will help them next year, because it is more than likely that next year will be an election year and we can expect to have a Budget very different from this, unless the pattern of Toryism somewhat changes.

The hon. and gallant Member for Worthing (Sir O. Prior-Palmer) spoke of subsidies for council house tenants and he quoted, as Conservative speakers usually do, the council house tenant who has a Jaguar outside his house. I have heard this argument so often that I am amazed that it should be repeated by so many. In our council house development we ought not to be creating ghettos of lower-paid working-class people—and there are still at least a few working-class people left in this country—and we ought not to be creating separate kinds of houses for people who cannot afford anything better.

What we ought to do is the sort of thing which has been done in the City of Birmingham. The Financial Secretary to the Treasury represents the Birmingham constituency of Handsworth. Birmingham's approach to its housing estates ought to be an example to the rest of the country. I lived in Birmingham for fifteen years. Its aim has been to create mixed communities in which at least junior executives—I do not want to stretch the hon. Member's loyalties too much—rub shoulders with fellows who work at the work bench.

Even if a man who lives in a council house has a car outside, is there anything wrong with that? It is not argued that subsidies should cease when a council house tenant does not have a car outside. It arises only when the tenant has a car.

Sir O. Prior-Palmer rose

Mr. Loughlin

I will give way in a moment. I am used to intervening myself, and I should not like the hon. and gallant Member to think that I am not prepared to give way.

This argument is used only when the council house tenant has a car. If he has been wasting his money on betting, on the football pools, or on buying beer and cigarettes, to the disadvantage of his family, the argument does not arise, but when he has a car it is said that he is not entitled to a subsidy, although his family is then able to enjoy the advantages of having a motor car.

Sir O. Prior-Palmer

I took the example of the motor car as only one example. The hon. Member is putting up a great Aunt Sally, but if he will read my speech tomorrow he will see that I said that people ought to have to prove need before they were given a council house. Of course a council house should be available to a man earning £1,500 or £1,800 a year—provided that all the rest of the people have been properly housed. The hon. Member for Gloucestershire, West (Mr. Loughlin) as a Socialist cannot argue that someone earning £1,500 or £1,800 a year should have a council house if in the next street there is a family living in a cellar and with its name on the council house list for five years, a family with five children and without water and light. Or is that what he is arguing?

Mr. Loughlin

I am merely arguing against the case put up by the hon. and gallant Gentleman.

If we are to apply the principle of paying subsidies solely on the basis of proven need, which is what the hon. and gallant Member is arguing, I will accept that principle if he will totally accept it for the whole of the economy. I have recently been a member of a Standing Committee dealing with a Bill to give subsidies to a section of an industry. There has been no question of proving need on the part of a firm—the biggest monopoly in the industry, which made a profit of £640,000 last year and paid a dividend of 26 per cent.—before it is paid £500,000 of taxpayers' money in subsidies in the forthcoming year. The hon. and gallant Member cannot have it both ways. He cannot say that the council house tenant must prove his need while, without proving need, he agrees to the paying of subsidies to the biggest monopoly in an industry, a vertical monopoly from production to distribution. He must be a little more consistent. I notice that there is a smirk on the face of the Financial Secretary. Does he dispute what I have just said?

Sir E. Boyle

The hon. Member for Gloucestershire, West (Mr. Loughlin) does get unnecessarily violent in debate. I do not necessarily want to dispute anything, although I was reflecting that the Chancellor announced that the figure for grants and loans for private industry, below the line in the Budget, was substantially going down this year. That was the only thought which was crossing my mind.

Mr. Loughlin

Perhaps I do get excited, but I do not like supercilious smirks when they are not founded on anything. Now to deal with the Budget itself.

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

Hear, hear.

Mr. Loughlin

The hon. Member says, "Hear, hear ". If I had not spent some time dealing with the hon. and gallant Member's speech, it would have been said that I was running away from it. I had to devote some time to his speech if this was to be a debate.

Sir O. Prior-Palmer

The hon. Member could have learned something from it.

Mr. Loughlin

I might, but I will not be taught by the hon. and gallant Gentleman what I should learn.

I had hoped that the Chancellor's proposals would benefit the economy as a whole. The hon. Member for Ilford, South (Mr. Cooper) talked about exports and referred to our primary task being that of seeing how we could improve our export position. The Chancellor of the Exchequer suggested that the future of our export industry was pretty rosy. I do not know on what information he based his contention. Recently the Federation of British Industries asked firms in all sectors of the export trade to state what they considered to be their prospects for the next six months and the next twelve months. The majority of firms said that the prospects were not very bright, and I should have thought that hon. Gentlemen would have accepted that if we are to improve our standards of living, or even to maintain them, something must be done about our export trade.

The hon. Member for Ilford also talked about productivity. He said that even if we could increase our productivity by £1,000 million it would make not one iota of difference to our exports. I should have thought that if we increased our productivity, as distinct from production, by £1,000 million this would have made a substantial contribution to our exports, because to some degree the success of our export trade depends on the price at which we can produce goods for the export market, and if productivity can be substantially increased the cost of goods and services is bound to fall.

What contribution will the Budget make to our problem? It does not seem to make any realistic appraisal at all of the difficulties with which we are faced. Is the Budget to cease to be a mechanism for stimulating the economy? Is it to cease to be a mechanism for stimulating exporters to further efforts? I am not criticising our export manufacturers. I think that for far too long they have been working under serious handicaps compared with their competitors. One of the things that I have appreciated recently is the setting up of some form of export credit corporation. This assistance is being provided through the banks and finance houses. I would have preferred the Government to do this at fixed rates below those charged by the banks and finance houses, but the Budget makes no proposals for assisting our manufacturers.

It is very difficult to evaluate correctly some of the proposals outlined by the Chancellor, but it appears to me that this Budget makes no impact at all on the economic problems with which we are faced, and a Budget that fails to do that cannot hope to command the respect of the people.

What does the Budget amount to? It is simply a reshuffle of the pack—nothing else. The only thing it proposes to do is to extend Purchase Tax to kiddies' lollipops, orange juice, and confectionery. Not long ago we spent some time talking about the fireworks Order which imposed a 25 per cent. tax on a penny banger. Now the Chancellor proposes to put 15 per cent. Purchase Tax on a penny liquorice stick. Hon. Gentlemen opposite may not know what a liquorice stick looks like.

Mr. T. H. H. Skeet (Willesden, East)

I do not.

Mr. Loughlin

I will tell the hon. Gentleman. I have two children and I take an interest in what they buy. Sometimes they purchase penny liquorice sticks and sometimes penny sherbets. The Chancellor now proposes to impose a 15 per cent. tax on these sweets. The Financial Secretary may be proud of this, because when it was referred to earlier I noted that he was in favour of the proposal. The hon. Gentleman is a bachelor. He can afford to applaud this proposal because he has no kids to consider. This 15 per cent. Purchase Tax on sweets represents the sum total of the imagination and ingenuity of the Chancellor of the Exchequer, who had to drink brandy and water to sustain himself. Hon. Gentlemen opposite are expected to support the Chancellor of the Exchequer for imposing a 15 per cent. tax on children's sweets.

The other proposals in the Budget amount to absolutely nothing. I could spend a long time discussing this capital gains tax. It will not matter two hoots. Very few people indeed will be caught by this tax. The people who will be caught will be the amateurs, not the professionals, and in six months and a day this will be the biggest bolt hole that could ever be devised. Hon. Gentlemen opposite say that this is a wonderful proposal and that they support it. If they are sincere in trying to catch people who are enjoying themselves at the expense of the rest of the community, I hope that during the discussions on the Finance Bill they will support the Amendments that we shall table to widen the scope of this tax.

The same remarks apply to the Schedule A Tax. I hope that when we table Amendments about this tax hon. Gentlemen opposite who now consider this the right step to take will come into the Division Lobby with us to prove their sincerity. However, if experience is any guide, none of them will be there.

The proposals in the Budget are not related to the economic problems of this country. Let us consider the question of the readjustment of the Purchase Tax percentages. During the Chancellor's speech I said that this was a tax on the newly-weds, and so it will be. The bulk of this reassessment falls on furniture, which is the first essential for any newly married couple. This means that newly-weds will be hit more hardly than any other section of the community. It is no good telling us that they will gain to the extent of a reduction of 2½ per cent. on a carpet if they are going to have to pay a 5 per cent. increase on a bedroom suite. If any section of our community has been hit pretty badly by the Government it is those lads and lasses who are just starting on their married lives. In the past they have been harshly treated in practically every kind of way, including buying a house by way of mortgage.

I do not want hon. Members opposite to repeat what they said during speeches of my hon. Friends a short time ago—about "putting on the water works". I should have thought that this was an opportunity for the Chancellor to do something for the old people. Not one hon. Member opposite has suggested that he ought to have done it. I know that some hon. Members opposite recognise the difficulties with which our old people are faced at present, and I hope that they will voice a little more strongly than they have done in the past their objections to the Chancellor's failure to do something for the old people.

The Budget fails on three counts. It does not seek to deal with the economic situation with which the country is faced; it contains no tangible proposals for social justice, in the sense of giving relief to those who are now living on the borderline of destitution, and it only tinkers with the issue of social reform in the matter of a capital gains tax.

8.42 p.m.

Mr. John Howard (Southampton. Test)

The hon. Member for Gloucestershire, West (Mr. Loughlin) came out with the theme, familiar at Budget time, that further aid should be given to the old-age pensioners. He must know that increases in old-age pensions are given invariably at some time other than at the time of the Budget. Nevertheless, year after year, this sort of discussion is injected into the Budget debate. It is irrelevant, but it presumably has a certain political value.

The hon. Member gave us his description of the Budget. Other hon. Members have described it as a by-election Budget, but hon. Members on this side of the Committee cannot accept Chat description. There is nothing in it to tempt voters at by-elections, other than the fact that the Government are adhering steadily to the course on which they have embarked, of wage (restraint and realism in our economy. I would have thought that this Budget might ultimately become a "Parkinson's Law" Budget, An that the items of importance have been disregarded by the Opposition, who have fastened on the small items, to which they can apply their minds, such as the imposition of Purchase Tax upon sweets, which will mean an addition of as much as 1½d. in 1s. worth.

I was interested in the hon. Member's advocacy of the differential rent scheme when he was replying to my hon. and gallant Friend the Member for Worthing (Sir O. Prior-Palmer)—

Mr. Loughlin

I know that the hon. Member does not wish to put words into my mouth, or to distort what I said. I did not advocate a differential rent scheme.

Mr. Howard

Not in so many words, but the hon. Member accepted the principle. When reference was made to a Jaguar motor car standing outside a council house the hon. Member agreed that those who can afford to pay an economic rent should do so—and that is the whole basis of the differential rent scheme.

Some confusion seems to have arisen about Schedule A tax. I suppose that we are all relying upon our notes, or our recollections of what my right hon. and learned Friend said. It seemed to me that he referred to this tax because new rating assessments are pending, and he wished to allay any concern that might be felt that these assessments would be applied for the purpose of Schedule A tax. At the same time, he possibly wished to avert a spate of appeals against rating assessments purely because people would be concerned about the amount of Schedule A tax that they might have to pay if this impression was not disabused.

The hon. Member referred to putting down Amendments relating to Schedule A tax. That seems to happen every year. The whole point about the repeal of the Schedule A tax is that it must be related to the structure of the Budget. If the tax were repealed when the Budget has been compiled as it is at present, the result would be that the Budget would be out of balance. Exactly the same considerations applied last year.

Mr. Loughlin

And they will apply next year.

Mr. Howard

Next year is a different matter. If I understood my right hon. and learned Friend correctly, next year he will take the first step towards abolishing the Schedule A tax on owner-occupiers. I hope that we shall abolish the tax altogether. It is a futile form of taxation. People who own a string of houses could just as easily be assessed under Schedule D and there would be some saving effected in the work at the tax offices.

Exports were described as our greatest need and with that I agree. One of the important things about exports is to get the price right. My hon. Friend the Member for Ilford, South (Mr. Cooper) referred to his own efforts to sell goods overseas. It is hard work and a difficult job. Not only must the price be right, but the seller must himself visit the territories where he hopes to sell his goods. It is no use trying to sell through an agent, however good the agent may be. British exporters must be prepared to make use of the introductions provided by agents, or else we cannot hope to achieve the increase in the volume of exports which this country obviously needs.

This Budget is just right in the circumstances. It is designed for a period of transition, when we are moving from the acceptance of certain principles to a situation in which I hope there will be an acceptance of new principles. As was said by my right hon. and learned Friend, we are certainly moving forward with the pressure of consumer demand in mind. There is, therefore, need for room in which to manœuvre, and that my right hon. and learned Friend has retained by keeping the Purchase Tax and Customs Duty regulators, although he has discarded the possibility of a payroll tax as regulator.

I am sorry that my right hon. and learned Friend has done so, because that regulator was something, even though it was not used, which it was advantageous for him to keep up his sleeve as a possible means of influencing the community. The simplified Purchase Tax structure has been criticised, but, clearly, there is an advantage if the rates of Purchase Tax applying to a whole range of goods are few. They are more easily understood. Admittedly, new commodities have been added to those which fall within the range of Purchase Tax, including soft drinks, ice-cream and sweets. I share with the hon. Member for Gloucestershire, West a liking for liquorice.

Mr. Rankin

Liquorice is not a sweet. It is a medicine.

Mr. Howard

Sweets were the subject of a debate recently when, on behalf of certain dentists, I referred to the considerable disadvantages—(including the spread of dental caries—accruing from eating an excessive number of sweets. I imagine that dentists will applaud this proposal by the Chancellor, even though they may not have the same motives as the Chancellor had in mind in imposing the tax.

I suppose that children will be mainly affected by the tax on sweets. However, some advantages for youth were tucked away at the end of my right hon. and learned Friend's speech. He referred to the release of funds for youth activities. I applaud the fact that he has taken this into account. In my constituency schemes for sporting activities are held up, but I hope that they will now go forward.

At present, the country is in a state of transition from an era of happy-go-lucky wage demands to an era in which steady costs and increases in production are accepted as of paramount importance. My right hon. and learned Friend referred to the National Economic Development Council, on which great hopes are pinned, not only in the House of Commons but throughout the country. I hope, too, that the services of nurses, medical technicians, civil servants, Post Office engineers and others who give a service to the community will be recognised by those directly involved in production. If uncontrolled wage claims absorb the whole of increased production, it will make nonsense of our cost and economic structure and nothing will be left over for those who render services to the community.

Until it is generally recognised that stoppages at Longbridge, in Birmingham, and one-day strikes in other areas hold up and lose exports, we shall not have made the educational progress which the country needs if it is to move into the new era of the 1960s. These strikes are directly responsible for deferring the day when nurses and others giving service to the community can obtain new pay structures. I hope that this is generally recognised.

The Government have certain other responsibilities in addition to pursuing a policy of restraint, important though that may be. They have responsibilities to those on small fixed incomes and those of advancing years. My right hon. and learned Friend has given some small concessions to those on small fixed incomes and to those who already enjoy a measure of age relief. I know that this is generally supported in the Committee.

At the other end of the scale it has been necessary to take care of the speculator who has been augmenting his income by profits from regular speculations, which have so far escaped tax. As I understand it, the capital gains tax has to tread a difficult course between taxing speculation and deterring genuine long-term investment. Therefore, the distinction between a speculation and an investment must be a matter of the length of time involved. My right hon. and learned Friend has fixed the term at six months for stocks and shares speculation. In the case of land speculation, where, obviously, it may take much longer to find a buyer, he has fixed three years. These two terms are realistic and will reasonably accurately measure the distinction between an investment and a speculation.

I and many of my hon. Friends had feared that my right hon. and learned Friend, in a fit of enthusiasm, would tax only the profits accruing, but he has been equitable. He intends to allow the losses which may arise from speculation to be taken into account. After all, speculation is a matter of judgment and judgment may not always be accurate. Several hon. Members have made it clear that expansion is the only answer to inflation.

More production is demanded, but, obviously, more production must be in the right direction and particularly in those industries which provide a considerable proportion of our exports. There is clearly a strong influence on the export position if we also help those industries which are savers of sterling as well as earners of sterling. I refer particularly to shipping and shipbuilding. A small concession has been made to shipping which I advocated last year—namely, that the unabsorbed capital allowances which arise in a company which is making a loss from trading can be allowed against other income. I understand from the shipping industry that this is a relief which they, in particular, wished to see.

The possibility of a sales tax as an incentive has been mentioned, but I do not propose to refer to that. I should like to turn to some of the tax reforms which my right hon. and learned Friend instituted. First, he referred to a conference with accountants to see whether it was feasible to replace the present Income Tax and Profits Tax on companies by a single corporation tax. I hope that he will find it possible to devise such a tax and that the difficulties of the opening period of the new tax can be overcome

The Estate Duty proposals are also designed to stop a particularly blatant form of avoidance which arose from purchasing land and property abroad and also mortgages. The country will be pleased to see that this gap has been closed.

There are various other recommendations which have been put to the Chancellor from time to time by professional bodies—in particular, the amalgamation of Income Tax and Surtax and their replacement by a graduated tax. Another possibility is the institution of a system of self-assessment to Income Tax to avoid work in the tax offices. These have been advocated by reputable professional bodies, and I hope that they are receiving consideration in the Treasury.

Another professional point is that the law relating to Surtax directions on companies is still as vague as it has been for many years. Suggestions have been put forward for a revision in the law, and I thought that my right hon. and learned Friend would have looked at this aspect of taxation law with the object of tightening it, since he proposes to introduce a number of reforms.

The Chancellor has explained his reasons for bringing Schedule A tax to an end. There is, however, an immediate reform which should be considered, and it might be appropriate to put down an Amendment in Committee. It relates to flat dwellers. There is a growing custom in this country to purchase one's fiat, but it is extraordinarily difficult to obtain relief for Schedule A purposes on the contribution which the flat owner has to make to the common upkeep of parts of the building, such as the roof and the external structure generally. I agree that this will become of less importance next year if the whole of Schedule A is abolished, but in the meantime there is an anomaly and an unfairness on flat dwellers. I hope that consideration will be given to removing this defect in Committee.

Much has been said this evening about the owner-occupier. We must all accept that he is a responsible member of the community. He has assumed responsibility for housing his family. He assumes responsibility for repairs, for rates and for the current rate of mortgage interest, to which hon. Members have referred. I am sure that he deserves the lightening of his burden by the removal of the Schedule A tax.

Mr. Douglas Houghton (Sowerby)

Is the hon. Gentleman suggesting that the owner-occupier is a more responsible person than the occupier of rented accommodation? Is there some distinction in the matter of responsibility between the owner-occupier and the tenant?

Mr. Howard

I said that the owner-occupier was a responsible member of the community, that he accepted the responsibility of housing his family. I do not say that he is more or less responsible than someone who has moved into rented property. Quite clearly, each of those people may well have taken the right line towards his personal responsibility. I merely said that the owner-occupier has assumed a greater number of liabilities, such as the direct, as against the indirect, payment of rates—

Mr. Costain

And also in not being subsidised by other members of the community.

Mr. Howard

He has assumed responsibility for rates and mortgage interest, and he has the need to repay his mortgage burdens that do not fall on a tenant—

Mr. George Lawson (Motherwell)

The farmer is heavily subsidised. Is it suggested that he is not a responsible member of society?

Mr. Howard

I am sure that the intervention has taken the discussion much wider than was intended. We are not referring to people who are subsidised, but to whether or not the owner-occupier or the tenant is the more responsible member of the community. I think that we came to the conclusion that, in most oases, they were equally responsible, but that the owner-occupier had assumed heavier financial commitments than had the tenant—

Mr. E. Fernyhough (Jarrow)

Does not the hon. Gentleman realise that under the 1957 Rent Act there are plenty of tenants who are paying far more than is the owner-occupier for their accommodation, though they rent it and never own it? Are they not responsible citizens?

Mr. Howard

I do not say that they are not responsible citizens. I have tried to make it clear that the owner-occupier has assumed a wider range of financial responsibilities than has someone who is a tenant. Without measuring the rent that someone is paying, the responsibility for immediate outgoings is, perhaps, more difficult to assess.

This is a good Budget and one that has been designed for the circumstances for the day. No concessions have been made because of recent by-election results. Its policy, particularly in regard to the National Economic Development Council, is right. The Chancellor has, with his customary courage, set a course towards a sound income policy and economic sanity, and I am sure that this Budget will take us further along that road.

9.3 p.m.

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

The hon. Member for Southampton, Test (Mr. J. Howard) dwelt at some length on Schedule A, rather pointing out that the owner-occupier takes on greater responsibilities. Perhaps he remembers that his own Government introduced the Rent Act of 1957, under which by way of rent tenants are already paying towards repairs, and that many are not getting them done. I could give the hon. Gentleman numerous cases where the rent has gone up by 6s., 7s., 9s.—even 15s. a week—but where the tenants have a dickens of a job to get their repairs done. Therefore, the people who are unfortunately compelled to live in rented houses also have a heavy responsibility.

It is obvious from our discussion on Schedule A that the Tory Party is out to claim that it is the party that is particularly concerned with those desiring to buy their own houses, but if hon. Members opposite really wanted to help in that way, and really wanted a property-owning democracy, they would make one of their first steps the reduction of interest rates.

One of my hon. Friends gave figures concerning a man setting out to buy a house. They showed that while originally the house might have been said to cost £1,750 or £2,000, by the time he has paid the total amount, including interest, a tremendous sum of extra money is involved. The figures also showed who gets all this extra money and who are making the large incomes. The organisations lending money, including the building societies, are making huge profits.

The main theme of hon. Gentlemen opposite has been that this is a sensible Budget. "It has gone a long way," they are saying. I maintain that it is a standstill Budget—a preparation affair, not for by-elections but for the next General Election. It is a Budget which contains promises, but they are promises for next year. Not only will one coach and horse be able to get through the proposals to deal with the "dodgers", but for the clever guys a dozen coaches and horses will be able to get through and the "dodges" will remain.

It is the sort of Budget whereby the Chancellor is obviously getting ready for the next General Election so that, this time next year, he will be able to give bigger concessions, thereby persuading, or trying to persuade, the people how clever he is and how good are the Government. A lot has been said about the need to increase production and we all agree with that. We all agree that we must try to export more, because our very lives and standard of living depend on exports. But the Government cannot introduce a Budget today and, by so doing, dispense with the Economic Survey. This document sets out the aims of the economic policy and the foremost aim for 1962 indicates that concessions must be maintained so that exporters in the United Kingdom can take advantage of the opportunities open to them to achieve greater expansion. The Survey points out that this cannot be achieved by Government action alone, but that in two main respects the Government can help. The document states that the Government can: … regulate the strength of total home demand"— and I suppose that this Budget regulates the demand of the kids which would otherwise compete with export demand for… skilled labour.. The following is the significant sentence: They can also influence the level of incomes and, therefore, the costs of production. The whole burden of the demand up to now from hon. Gentlemen opposite has been that, somehow, wages must be kept in check. If the Government want to do that I suggest that they should do it fairly and justly. The trouble today—and this is what hon. Gentlemen opposite do not like to hear—is that even though living standards have moved forward greatly in the last 50 to 100 years, there still remain great differences in the standards of living of different people.

We still find those who can afford many luxuries and an expensive way of life while other folk must live on wages well below the average. How can hon. Gentlemen opposite speak in the way they do when there are men taking home £8 17s. 6d. a week, out of which their wives must run their homes? Do hon. Gentlemen opposite realise that a great number of people are earning less than £10 a week and that they must run their homes and care for their families out of this amount? How can they talk of justice and about keeping wages low when this state of affairs exists? Hon. Gentlemen opposite know jolly well that people at the other end of the income scale spend more in one day than these folk have to live on for a week.

Who are the people to whom the Chancellor has appealed? To what kind of trade unions did he appeal last week to keep wages down? In the main he appealed to those in which the incomes are very low indeed. Take the textile worker, for example. In Leek, which is almost on my doorstep, the textile worker takes home about £9 15s. 6d. A woman takes home from £5 to £6 when she has worked a full week. What justice is there in saying to such people that if we are to export more, their wages must be kept at a low level?

What about the railwaymen? Whenever the Government talk about the railwaymen they always refer to the amount that we are spending on them. Do not forget that it took a war to make private enterprise get any profit out of the railways, when this country had to subsidise them to the tune of £40 million. We are now having to spend money to subsidise the railways because the money was not spent in the pre-war days, and we were left with an out-dated industry with bad rolling stock.

The Chancellor appeals is to the railwaymen, the nurses, and even the teachers, those girls who get £10 a week when they come out of college after three years training. To the nurses the Minister of Health has the impudence to say that they will have to be satisfied with 2½ per cent.—a miserly 6d. in the £. It is to the textile workers and these other lower-paid income groups that the Economic Survey and the speeches of many hon. Members opposite have been directed. There is still not justice in the way in which we deal with these people.

Mr. J. Howard

What about the higher-paid workers? Does not the hon. Lady think that they should participate in wage restraint?

Mrs. Slater

I believe that all workers should participate, but we should not stress the need for restraint among the lower income groups. What did the pay pause do? It saved about 1/10th per cent. of the total wage and salary incomes of this country. What did it do on the other side of the balance sheet? It gave to our people a grave sense of injustice and unfairness. It did not achieve the purpose for which it was designed.

A great deal has also been said about the need to cut down Government expenditure. I was relieved to hear the hon. and gallant Member for Worthing (Sir O. Prior-Palmer) say that he did not want to save money on education. The municipal elections are coming along soon, and on every Tory leaflet throughout the length and breadth of this country we shall read of the need to cut down local government expenditure. In nine cases out of ten education will be mentioned as one of the parts of local authority work where money should be saved. It was, therefore, a great relief to hear the hon. and gallant Member say that he did not believe in cutting down on education. At least he has enough foresight to see that if we want to advance and to become a nation which can measure up to many other nations, we have got to make better use of our brains than we have in the past.

Obviously, local authorities will have a greater burden to bear, and a very large proportion of that burden—I return to the point I made earlier—is influenced considerably by high interest rates. Let us take the example of a school. If we build a school in my city, we have to put an awful lot of material underneath it because of mining subsidence. Because we have to take these precautions, a school costs us a great deal more than it would an authority such as Worthing. In reply to a recent Question I was told that a school which is tendered for at £113,000 will have cost £421,000 by the time my local authority has paid for it. If we borrow money for capital expenditure in any sphere of our local authority work we are imposing on the people a heavy burden which could be obviated if we had lower interest rates.

The hon. Member for Ilford, South (Mr. Cooper) expressed himself in favour of the Treasury having more controls. He said that he had long experience of local authorities. Does he not know that the Treasury exercises control on local authority spending? That is why there have been cuts in educational building during the last year. It is because of Exchequer control that local authorities have been prevented from doing some very essential work.

The hon. Gentleman suggested that amounts up to £2,000 should be met out of local authority revenue. It is true, of course, that one gets very little for £2,000 these days, very largely because of the very high prices which prevail. For instance, a school requires furniture, or one sets up an old people's home and requires furniture for it. Because of the rise in prices one gets very much less for £2,000 than one used to get. I am sure that local authorities would look with very great disfavour at the hon. Member's suggestion.

If the Government want to keep down the wages of the majority of workpeople and if they want people to recognise their desire that wages and costs should be kept down in order to increase our exports, they must do very much more to control the cost of living. In answer to a Question last week I was told that the £ on the basis of its value in 1951 buys only 15s. 8d. worth of goods today. This is a very important factor to "the old-age pensioners and persons on low incomes, about whom the Tories seem to be very much concerned, and also to the woman who has to buy for a family.

Also, if the Government want some response from the lower-paid people they must do more than they have done to get a response from those who are making large profits and dividends. Last week Whitbreads announced a dividend of 30 per cent., an increase of 3 per cent. over last year. That is more than the increase which the Government think the nurses should have.

I turn now to the changes in Purchase Tax. The tax now brings in more than £606 million a year. It was introduced to restrain people from buying goods, but it has become such a source of income for the Exchequer that I have no hope of seeing the abolition of Purchase Tax in my lifetime.

In the proposals today there is a further injustice. A person who buys a car—I drive a car—will get a considerable reduction in Purchase Tax, but the poor woman who wants to buy more furniture will have to pay on every £100, £2 17s. 6d. more. On the average car there will be a reduction of £34 tax. I think that it is disgusting that Purchase Tax should go up on furniture and on all clothes, other than children's clothes. It is disgusting that in such an excellent Budget—as hon. Members opposite believe this to be—the Chancellor should have to resort to this very mean business of putting up Purchase Tax on furniture and clothes. It means very much more to the women with an income of under £10 a week to have to pay more for her coat than it does to the person who can buy an expensive coat. It may not be very much more. An hon. Member said that it was about l½d. on something. But every 1½d. mounts up until it becomes a very real burden.

The meanest thing in the Budget is the tax on soft drinks and sweets. Hon. Members opposite may think that this is funny but it is not

Mr. James Dempsey (Coatbridge and Airdnie)

It is contemptible.

Mrs. Slater

The Home Secretary will go down in history as the Chancellor who introduced the pots and pans Budget because he put up the tax on ordinary household commodities. The present Chancellor will go down in history as the Chancellor who had to tax the children.

Mr. Dempsey

The lollipop Chancellor.

Mrs. Slater

I see no reason why soft drinks should be taxed. We are at the stage when we are regretting the amount of crime and the Home Secretary and the Minister of Transport are concerned that people should not drink more, yet the Government are taxing the very thing that young folk would be very much better drinking than the other stuff that makes them irresponsible.

The only good thing about the proposals is that they will enable more money to be spent on young people. The question we ask is: how much more money, and how soon will it be before we have legislation on the Albemarle Report introduced?

Mr. Willis

The Government will not spend it on schools.

Mrs. Slater

No, but on playing fields, sport and that kind of thing. How long shall we have to wait before we get action on the Albemarle Report and the Wolfenden Report on sport? The only pleasing part of the Budget is that which deals with youth. I look upon the Budget as mean and miserable. It is a standstill Budget so that the Tories may have more election propaganda at the next General Election.

9.24 p.m.

Mr. David Gibson-Watt (Hereford)

I hope that the Committee will forgive me if I do not follow the hon. Lady the Member fox Stoke-on-Trent, North (Mrs. Slater) back to the schoolroom, because I want to address my remarks to the Budget.

The Budget, as I see it and as it has been described by other hon. Members on this side of the Committee, is fair and reasonable. We have here the Chancellor of the Exchequer in his second term. There are few Chancellor's of any party or any Government who seem to grow younger after they have been at the Treasury for very long. It seems to me that my right hon. and learned Friend does just that.

I cannot help feeling that this Budget should be judged in its context as the second of possibly three. Last year was, perhaps, the first one of the series. This is the second and next year's will be the third. [Interruption.] Members opposite who are talking so much at the moment are generally supposed to be in favour of planning. It may be that, in its wisdom, the Tory Party has found a Chancellor who is prepared to look ahead and to put the finances of the country into some sort of order. That is my hope. This is a non-inflationary Budget, and that is wise. The present time, in view of all the problems that we face, both internally and internationally, would not have been a wise one to reflate in any way.

First. I wish to say something about Purchase Tax. Here again, I look upon this Budget as part two in the process of changing this very difficult tax, as my right hon. and learned Friend said, in preparation for our entry, perhaps, into the Common Market. I hope that this country will go into the Common Market, provided that the conditions are reasonable to our agriculture and Commonwealth. I believe that the time has come when many of our people should be thinking in that direction and setting their sails accordingly.

The second point I am glad about is the nature of the proposed tax on short gains—a term I use advisedly. It has been wisely framed. It is not extreme. I am glad that it is to be non-retrospective. Tories do not like retrospection. Furthermore, the fact that it allows losses makes dt far more reasonable. But anybody with a knowledge of this country must realise that we are a race of inveterate gamblers.

Mr. Willis


Mr. Gibson-Watt

Inveterate gamblers.

Mr. Willis

That is what ten years of Toryism have done.

Mr. Gibson-Watt

Whichever side of this Committee we are on, we are all fond of gambling. It may well be that the gentlemen who, in the past, have conducted a good deal of gambling in the City may change their place for doing so.

One of the problems we have to face is that of how businesses in this country afford themselves certain privileges in certain ways. I spoke a moment ago of a three-year plan. Last year, my right hon. and learned Friend limited the size of motor car and other expenses which people could claim in their businesses. Again, he spoke words today which show that he has not taken his eyes from this difficult problem.

Many firms conduct their businesses in a proper way and see that their directors' expenses are within reason. Furthermore, they see that business expenses—on lunches, and so on—are kept down to a reasonable size. When one is dealing with people overseas, particularly in international trade, one must not over-look the fact that business expenses are very much a necessity. This places great responsibility on the chairmen of companies, and I believe that the standard of the best should be copied by all.

The limit for the incidence of Estate Duty is being raised from £3,000 to £4,000. This is wise. Nobody who is as much against Estate Duty as I am could ever accept that the estate of someone who dies worth £3,000 should have to pay Estate Duty. I hope that the Chancellor, in pursuing my idea of a three-year plan, will look at this matter again another year because it must be possible to relieve a great number of Inland Revenue officers of the unremunerative activity involved in this connection. Perhaps we shall be told during the debate how much we can hope to economise in this way.

I come now to the question of Schedule A. I understood my right hon. and learned Friend to say that it was his intention, over the course of, perhaps, two years, to reduce and then to abolish the Schedule A tax on owner-occupied houses. Plainly, this is right. I am sure that hon. Members on both sides in their heart of hearts believe that people who wish to have a stake in the country and own their own houses should be encouraged to do so and should not have to pay this tax. But it was realistic of the Chancellor to say that he could not remove it in one year. To do so would cost well over £50 million.

The Budget that my right hon. and learned Friend produced today does not deal in £50 millions. It is a matter of £2 million off here and £1 million on there. It is that sort of Budget. I commend my right hon. and learned Friend for saying that this will take up to two years. Clearly, the tax has lost any logical basis for its continued existence.

I know that there are people in my constituency who will regret that cider is to be subject to the 15 per cent. tax. We have heard many arguments from the Treasury about this matter and about light cider as against heavy cider. No doubt, we shall have to discuss it on the Finance Bill. But I shall not make such a fuss on behalf of Hereford about cider as some hon. Members have made about the tax on ice-creams and lollies, which, of course, affects all our families.

This is a sensible Budget. It does not immediately fill one with great excitement. It is a Budget which one can chew over. There are points for and against it, and I, for my part, commend it.

9.33 p.m.

Mr. John Rankin (Glasgow, Govan)

I have now taken part in more than twenty Budget debates. Every one of those Budgets has gone through the same sort of process. When the new Session starts in November and the Chancellor is faced with Questions, he tells us that he cannot anticipate his Budget. By the time Christmas comes, the pot begins to be stirred. After Christmas, things come on to the boil, and before Easter the whole business is worked up and everyone gets into a state of excitement and anticipation, wondering what the right hon. Gentleman will do this time.

This was reflected this afternoon in the massive attendance of hon. Members opposite. I have never known such a splendid turn-out of hon. Members supporting the Government since the last Budget. The place was packed. Never have I heard people praying so fervently as hon. Members opposite did this afternoon—praying, I suppose, that the Chancellor's purse strings would be unloosened. When the Schedule A tax was referred to, off came the top hats, out came the handkerchiefs and a scene of such excitement ensued as would only have been paralleled at White Hart Lane last week had Tottenham Hotspur scored that vital goal. It was all on a promise that Schedule A tax would be removed.

Mr. Dempsey

In two years' time.

Mr. Rankin

Yes, on the eve of the next General Election. The Chancellor evidently had nothing much to give, so he promised something. I am not thrilled about the removal of Schedule A tax, even though I am an owner-occupier. It does not make much difference to the ordinary owner-occupier. It may be that hon. Members opposite live in such huge houses that it will make a great difference to them.

I do not know whether the promise will materialise, because so many Tory promises are forgotten almost as soon as they are uttered. One can go back over quite a period during the Budgets to which I have referred and find lots of Tory promises of which one never heard again once the Tories were returned to power.

In every one of those Budgets, the problem of exports has arisen. They were the vital topic. We were told that we must increase our exports and that it was a matter of life or death, but in no Budget since 1950 has the visible trade balance produced anything but a deficit, except in one year, 1958, when there was a surplus of £35 million. Apart from that, every Budget since 1950 has given us a deficit on our trading balance. At the end of one long period of deficits, the Tories won an election with the slogan that the country had never had it so good. In other words, we were having a great time on the losses which Tory Budgets showed. We had never had it so good as when, in Budget after Budget, the Tories were serving up deficits.

Another thought that came to me today and which recurred during the speech of the hon. Member for Hereford (Mr. Gibson-Watt) was whether we had heard the last Budget that we will hear in the House of Commons. If what the hon. Member for Hereford said is true and we enter the Common Market, our Budgets will be decided in Brussels and merely sent across here for our approval. The Commission will look after all that.

Mr. Gibson-Watt

I did not say that.

Mr. Rankin

I know. I am saying it as a deduction from what the hon. Member said.

Mr. Dempsey

He did not say anything.

Mr. Rankin

It is not for me to criticise the hon. Member's speech, because he might criticise mine. I do not mind that, but he said that he hoped that we would join the Common Market. If we do, this might be the last Budget we shall ever hear in this place, because our Budgets will come ready made and stamped "Made in Brussels".

On one side we are faced with the prospect of our Budgets being made in Brussels, and on the other with an even greater threat to policy. I have in my hand yesterday's colour section of the Sunday Times. The authority behind this is indisputable. No Tory will dispute the power which promotes the sale of this part of the Sunday Times. We are told that In the last ten years the investment of American big business in British industry has nearly trebled. It is now more than ten times what it was before the war and is increasing at an average rate of well over 13½ per cent. annually, getting on for £170 million per year.

Mr. Peter Walker (Worcester)

Jolly good.

Mr. Rankin

Here is a pro-American, a Yankee cousin. It is probably now close to £1,250 million. More American money is invested in British industry than in any other country except Canada and Canada is not thriving on that type of investment. One British worker in twenty in the manufacturing industries now has an American employer. Britons never, never shall be slaves—except to the Yankee dollar. This American take-over bid is a post-war phenomenon which, no doubt, the hon. Member for Worcester (Mr. Walker) supports.

Mr. Walker

Will the hon. Member give the other side of the balance sheet and mention that in the past ten years we as a country have invested £2,500 million in American industry?

Mr. Rankin

But the money which we invest in America produces for us only a small fraction of the income which American investment in this country produces for America. This is a take-over bid and no one can tell me that, with the vast stake which America now has in British industry, she will not have an important say in shaping British policy. This is happening now. On one side we shall have the Budget shaped in Brussels, in the Common Market, and on the other side our policy will be shaped by American influence. Money talks. Mr. Roy Thompson told us yesterday that his religious principles will not allow him to lose money. The religious principles of hon. Members opposite will not allow them to miss any opportunity of getting it. They turned out in such huge numbers this afternoon in order to pray for more. Of course they did not get it. They received only a promise.

Mr. Dempsey

The motor car lobby did not do too badly.

Mr. Rankin

I will leave my hon. Friend to develop that point.

We are continually being told that we need more exports. I agree, but we do not want this demand for increased exports to be used as a brake on wages and better conditions for the men who produce the goods for export. This demand has been used in just that way for the past thirteen years.

For the past thirteen years, with the exception of 1958, there has been a deficit on the trading balance, yet the Tories adopted the slogan, "You never had it so good ". What would they have said if we had had a surplus for thirteen years? How did it happen? Our invisibles saved the position. In 1950, with a deficit of £82 million, our invisibles amounted to £417 million. The result was a current balance of £335 million. This was when the Conservatives took over from Labour. This was how they started. Since 1950 the invisible surplus has continued to shrink, and this year it is down to £65 million.

This is the serious aspect of the problem facing the Government. No plan was produced by the Chancellor today for dealing with this steadily deteriorating situation, and the Tories have been cashing in on it. This is the remarkable thing. They have been producing false balance sheets and creating a false background in the minds of people. Instead of calling on all hands to man the ship, the Prime Minister was allowing the crew to play bingo in the forecastle. Nobody knows this better than the Economic Secretary. He is well acquainted with the facts. I am sorry, Sir William, it is no longer bingo; it has been changed to bingola.

What has been happening to our invisible earnings? I am glad that the Budget provides a little assistance for shipping. I am interested in this subject because the people in my constituency depend on shipbuilding for their livelihood. Shipbuilding depends on the amount of shipping required, and since 1959 our earnings from shipping have declined from £624 million to £327 million.

This is a serious picture indeed, and once again the Government have not put forward any plans for reversing the present trend. I know that some people say that flag discrimination by the United States is making it harder than ever for us to get cargoes into our ships, but there axe others who say that the Government are spending so much of our foreign earnings on military adventures abroad that they are living beyond their income and consuming these earnings before, in effect, they even arrive in this country. We must remember that they are doing this because our policy on defence spreads our forces all over the world. We are paying for that today, in this nondescript lollipop Budget.

Invisible earnings, on interest, profits and dividends have gone down from £698 million to £363 million this year. This fall in income from abroad, either through investment or through earnings, is having a tremendous impact upon the policy upon which the Government are forced to embark. Much has been said about the need for exports. Table 27 in the Economic Survey provides an area analysis of United Kingdom exports. Our exports to Australia and New Zealand have steadily fallen from £375 million in 1957 to £326 million in 1961. I hope that before the debate is concluded the Government will find time to tell us why there has been this fall in our exports to Commonwealth countries. In the case of India, Pakistan and Ceylon the fall in the same period has been from £236 million to £222 million. That is the overall tendency.

The most interesting figures in respect of the non-sterling area are those relating to the Soviet Union and Eastern Europe. There we have increased our exports from £57 million in 1957 to £105 million in 1961. If we add our imports from those areas we find that we are now carrying on a fine trade with these countries, running to over £200 million a year in respect of Russia alone. If we enter the Common Market, however, we must remember that no nation will be permitted to carry on trade with any country east of the Iron Curtain to an extent greater than 5 per cent. of its total trade at the moment. Our trade with these countries represents about 4 per cent. of our total trade.

It seems absurd that the Government and their supporters should be telling us that we must have more exports, while, at the same time, they are prepared to put into effect policies which will control the level of exports and prevent that level increasing. Particularly is this so in view of the fact that in Scotland we are now faced with greater long-term unemployment than ever before. Yet there are over 200 million people in the Commonwealth area alone, and, when we consider also the trading areas outside Europe, there is a market of more than 1,000 million people waiting for our goods. I do not know whether there was anything humorous in that remark, but what I am saying is true.

We have this great market available while at the same time Stewarts and Lloyds in the division of my hon. Friend the Member for Bothwell (Mr. Timmons) is threatening to close down its works; when Rolls-Royce is paying off 3,000 workers and when Scotland, already overloaded with unemployment, will have to carry her share of the further unemployment which this will cause. The shale oil industry is finished and unemployment continues in Scotland at a rate which is a disgrace, particularly when we are told that this country should be exporting more. All we can create would appear to be jobs in the pipeline. When are those jobs to be released. The pipeline is packed with jobs and the employment exchanges are packed with unemployed workers looking for the jobs which are secreted in the pipeline.

I shall be co-operative; and now enter on my peroration. I am not in any way suggesting, Sir William, that you are an agent in assisting me to return to the seat from which I rose such a very short time ago.

This Budget does not represent a plan because the Government do not know how to make plans. Nor has it a policy because the Government cannot find one—at least they have not revealed one so far. I hope that I have said enough to shake the Government—[Laughter.] Yes, I notice that the Economic Secretary to the Treasury is shaking. Even if he has not been impressed I hope that he will tell the Chancellor what I have said. If the right hon. and learned Gentleman really wants an export policy there are plenty of places to which goods could be exported, and he will solve for Scotland and the rest of England—[HON. MEMBERS: "Oh."]—

Mr. George Thomas (Cardiff. West)

Scotland is not "the rest of England".

Mr. Rankin

Well, it is most of it.

Mr. Archie Manuel (Central Ayrshire) My hon. Friend means Scotland and the rest of England.

Mr. Rankin

The right hon. and learned Gentleman could solve the problem of unemployment which afflicts both the northern part of England and the whole of Scotland and prevents the export of goods which would mean so much to this country at the present time.

Whereupon Motion made, and Question, That the Chairman do report Progress and ask leave to sit again.—[Mr. Whitelaw]—put and agreed to.

Report of Resolutions to be received Tomorrow.

Committee also report Progress; to sit again Tomorrow.