FINANCE BILL

HC Deb 06 July 1962 vol 662 cc847-901

Order for Third Reading read

11.6 a.m.

The Chancellor of the Exchequer (Mr. Selwyn Lloyd)

I beg to move, That the Bill be now read the Third time.

Today the House approaches the final stage of the Bill. Like other Finance Bills, it has received exhausting and exhaustive consideration and I am grateful to the House for allowing its passage through Committee and Report stages, because without the help of the House, without some continence in comment and criticism, a Finance Bill would never get through.

The progress of the Bill has been illuminated by certain features; one the striking speech of the hon. Member for Middlesbrough, West (Dr. Bray), a maiden speech on which I congratulate him. How orthodox it was I am not certain. I think that it is for the hon. Member for Cardiff, South-East (Mr. Callaghan) to say, but I noticed a certain amount of caution in his immediate reactions to the speech.

There was a critical moment for both Front Benches, and for other parts of the House, when the solicitors' branch of the legal profession formed a popular front and made its demonstration, and another moment, at ten to three in the morning last Wednesday, when the hon. Member for Cardiff, South-East was so moved by the prospect of another speech by my hon. Friend the Financial Secretary that he allowed the Government to have a point on trust.

I am most grateful to my ministerial colleagues for their help, the Chief Secretary, the Financial and Economic Secretaries and the Law Officers. It would be very damaging to the hon. Member for Cardiff, South-East to pay a similar tribute to him, but, of course, that would not be enough to deter me—indeed, it might excite me to do so. I will say only this, that I have admired the persistence of the attack and the ingenuity of some of the Amendments.

Last year, in one of those flights of fancy to which I am so much addicted, I placed the Opposition speakers in a cricket team. The hon. Member for Sowerby (Mr. Houghton) was the good steady bowler who kept a very good length all the time, and the hon. and learned Member for Kettering (Mr. Mitchison), so very skilful with his pen, was the scorer who was also allowed to play. Of the right hon. Member for Huyton (Mr. H. Wilson), who was then the captain of the team, I said that I could not always remember whether he was batting or bowling.

This year, I think that the game is probably not cricket, but billiards. The right hon. Member for Orkney and Shetland (Mr. Grimond) is here to hear me say this: I think that the Labour Opposition have gone "in off the yellow." I think that I have got the colours right.

In moving the Third Reading, I must confine myself to the Bill, but I do not propose this morning to traverse it in its entirely the whole 86 pages. I will content myself with selecting for comment a few points. First, there are a number of useful provisions in the Bill of the sort which do not receive much attention because of the controversy raised by other proposals. I would put into this category the special Income Tax reliefs for small incomes, the increase in the Estate Duty exemption limit, the enlargement of the arrangements for the relief from double taxation, the relief which we were able to propose, I think with the good will of the whole House, for the blind, the provisions for the strengthening of the tax code and defeating avoidance. In the Income Tax field, the anti-avoidance legislation of 1960 has been strengthened and special provisions have been framed to deal with particular devices.

The Bill also begins the process of reducing the protective elements in certain of the Revenue duties on imports from E.F.T.A. countries and there is a Clause which provides for the abolition of the Revenue element in the "break-fast table" duties. As the House will remember, sugar is principally affected, and the total cost of the changes is over £15 million. These have all been useful items in the Bill.

Coming to more controversial matters, I think that there was a good deal of criticism at the way in which I dealt with the 1961 Regulator. Some people said that I should have removed the 10 per cent. surcharge in its entirety from the time of the Budget. Others said that I should have let the 1961 surcharge run on to the end of August, having taken the power to continue it then, if necessary. I stick to my opinion that neither of those would have been right. They would not have been the right way to treat the House or the economy. The method which we chose left no misunderstanding or uncertainty, and the taxpayers and the traders knew where they were as from Budget Day.

On the other hand, I think that it was also right to ask for a renewal of this type of regulatory power. It is not possible to be certain at the time of the Budget how production and demand will go throughout the year, or, indeed, about the effect which international affairs will have on the economy. It is, therefore, right that the Government of the day should have within their power the possibility of taking action in a rather simpler and less sensational form than a Budget. It is a provision for dealing with unforeseen and perhaps unforeseeable developments in the situation.

I nevertheless maintain my view that it is an exceptional power which should only be used in exceptional circumstances. I make no prognostication now as to whether it will be necessary to use it in the course of this financial year. Naturally, I hope that it will not be necessary; equally, I shall not hesitate to use it if I think it right, and if the House approves.

I think that the proposals in the Bill constitute a reform of Purchase Tax in that they reduce the spread of the rates to a band of from 10 per cent. to 45 per cent. As compared with 5½ per cent. to 55 per cent., I think that that is an important improvement. It was not, however, only the total spread, the length of the concertina as I think the hon. and learned Member for Kettering called it. It has been possible to make the incidence of the tax rather less arbitrary, and I believe that the changes that I have made are in keeping with present-day opinions as to what is and what is not essential. I do not go so far as to say that we ought to have a single rate of Purchase Tax. Nevertheless, I did think it right this year to take some steps towards bringing the incidence of Purchase Tax a little more in line with present-day consumer expenditure.

The selective nature of the Purchase Tax also convinced me that it was right to bring into its scope confectionery, soft drinks, and ice cream, rather than to raise the same amount of extra revenue by increasing the rates of tax on goods aready subject to Purchase Tax. Of course it has been represented that this new Purchase Tax on sweets was an attack on the standard of living of the children. I received a formidable representation from the children in a school in the North, that they would eat no more sweets until I removed this tax. I was able to sustain that threat with composure, having regard to the saving in the school dental service which I felt would follow. But, really, the case for this tax has been made again and again by Members on the Opposition benches during the course of the debate.

Eloquent appeals were made to me to reduce other taxes on the ground that they were taxes on necessities or near-necessities. I was asked to give relief to a variety of types of deserving causes. As I have said, I have done a little this year for people with small incomes in Clause 8 and there have been considerable reduction of tax on some goods. But it is necessary to sustain the revenue, particularly if one is to be able to make concessions at all, and I believe that this method which I have chosen, which will bring in £50 million in a full year and £30 million this year has been generally accepted as sensible.

Finally, I come to the short-term gains tax. The provisions for this have taken up a lot of space in the Bill although they have been disposed of fairly speedily by the House. In spite of the criticisms, on the one hand, that I have done nothing, and, on the other, that I have dealt a fatal blow at a variety of activities, again I think that the basis of my approach in the Bill is correct.

There are certain transactions which are essentially short-term designed to make what is, in fact, income. I do not see, for example, how one could possibly suggest that a man who goes in and out of a particular stock in the same account is an investor. I think that he should be taxed as he is taxed on the rest of his income. I do not think that it is possible or practicable to apply a motive test, and, therefore, I had to take another test—the period of time within which the transaction is completed.

I admit that six months is an arbitrary period, and that three years in the case of land is an arbitrary period; but in these matters any period is arbitrary. We selected these periods because we considered them to be the best time tests of short-term transactions likely to be of an income-seeking nature. We have made every endeavour to be fair and to provide for reasonable treatment of exceptional cases, for example, transactions as a result of a death or compulsory purchase.

My hon. Friend the Member for Nottingham, West (Mr. Tapsell) asked the Government whether we would pay attention to the incidence of this tax on Stock Exchange dealings. I should just like to add something to what my right hon. Friend the Chief Secretary said on my behalf on this matter during the course of the Bill earlier this week. I do not for a moment suggest that this tax has had no effect on the number of transactions on the Stock Exchange.

It may be that some speculative transactions have not taken place because of the tax. However, what I do say is that it is much too early to say yet whether it has had any undesirable effect. I know that there is a school of thought which propounds the idea that speculation is beneficial to a market. If there is a rapid fall speculators come in in the expectation of an improvement in prices and, therefore, they steady the market. This certainly may happen sometimes, but it may also be that they come in as "bears" in the expectation of further falls and aggravate the slide which is taking place. There are times when speculation can take hold of a market.

Anyhow, the effect of a particular tax on a particular market is not the only test. I believe that there is a wide feeling that it is unjust that people who make this sort of short-term gain are going tax-free, and I think that for social reasons it was wise to make these proposals in the Bill, and that it is wrong to seek to minimise their importance.

I do not think that it is necessary for me to detain the House longer. The background of the Bill was set out in my Budget speech and in the Budget debates. It would be out of order to develop those arguments again on this occasion, and I therefore commend the Bill to the House.

11.17 a.m.

Mr. James Callaghan (Cardiff, South-East)

Without making this too much like a mutual congratulatory affair, I should like to thank the Chancellor and the Treasury Ministers for their unfailing courtesy during the course of the debates. They gave a demonstration of good temper and equanimity which made their path easier, which should be a lesson to all aspiring Ministers.

I should like to thank also my hon. Friends who helped me on this Bill and did most of the work, especially my hon. and learned Friend the Member for Kettering (Mr. Mitchison). I do so because on him there falls every year this great burden of drafting a whole series of new Clauses and Amendments which are put down in my name. My hon. and learned Friend is not here, so I am glad to say that this is a labour which is especially well done, as I am sure the House will agree. Indeed, I sometimes wonder what would happen to the British constitution if my hon. and learned Friend took it into his head not to draft any more new Clauses or Amendments.

The Chancellor, delving back into his ill-spent youth, returned to the shady haunts of the billiard saloon for his metaphor. I prefer a healthy out-door game like cricket. Although my hon. Friend the Member for Sowerby (Mr. Houghton) and the rest of us kept up what I hope was a well-directed attack, we took only one wicket, and that was in respect of the provisions for blind persons. When the Chancellor said that he hoped he had the support of the whole House in respect of the relief that he was giving to the blind, I thought that he was a little less than accurate. In fact we would not have had that concession for the blind if the House had not held up another Clause which he wanted to get.

I am glad that the Chancellor acquiesced in the wish of the House and gave this relief, but that was the only wicket we took. I do not say that we did not hit the stumps many times—but the Chancellor declared himself not out. He said, of the Finance Bill, "It is my bat; you shall not have it." I have a feeling that, having hit the stumps as regularly as we did on a number of occasions, the results of his batting practice may be seen in a better performance on a later Finance Bill. That is my view of the present position.

The Finance Bill raises an extra £289 million in taxation. Every major tax that we have been considering has risen—except one. As a result of the Chancellor's Budget he will collect an extra £81 million in Purchase Tax. He has put up the rates on some things and decreased them on others. They have been increased on shoes, clothing and furniture, and have been decreased on motor cars and television sets. The Chancellor is collecting an extra £30 million on sweets and an extra £59 million on oil, including the heavy fuel oil used by lorries and buses, so having a direct effect on fares. His action is a direct cause of the withdrawal of what are called uneconomic services in the countryside, by which bus operators merely mean that the level of costs is so high that they have to withdraw these services.

The Chancellor is raising an extra £36 million on beer, but only another £7 million on spirits. That is not right. The beer drinker ought to be given more relief than the spirits drinker. I am sorry that the balance has gone in that way.

In all these measures he is raising a considerable additional amount of tax. Now he says, "I was right to remove the regulator and reimpose it." But he has never faced the argument that that is not exactly what he is doing. He is removing it in one sense, but reimposing it, at a permanent level, 10 per cent. higher. When he claims that he is taking this action so that he can move either way he is right, but he is starting at a point 10 per cent. higher than he was a year ago. He is not just removing it and replacing it he is pitching a number of his Customs and Excise duties 10 per cent. higher this year than last year and, starting there, giving himself room to move up or down 10 per cent.

I hope that hon. Members opposite realise that a number of taxes on certain commodities, including hydrocarbon oils, are now higher—including the tax on beer, spirits, tobacco and betting. A number of these are higher than they have ever been. Over the last decade Chancellors have been content to use any buoyancy in the revenue generally and to take the uncovenanted benefit that they get as a result of continuing inflation. But this Chancellor has done worse than that. He has not only taken his surplus out of the benefits of inflation—so far as they are benefits for the Chancellor in terms of revenue—but has increased the actual rates of duty. He is getting a double benefit. He is directly responsible for the increase in the retail price index and the cost of living over the last twelve months.

I cannot agree with him about his regulator. He says that he makes no forecast about the future. I notice that Ministers are getting very coy at the moment. According to Press reports, the Leader of the House was rather coy last night, at a meeting in another place. He said that there was a cat in the bag, but that the Prime Minister did not propose to let it out. One of the cats in the bag is the regulator. The whole country is now waiting cynically for the pre-election boom, and I can forecast that one of the cats that will jump out of the bag when the Prime Minister and the Leader of the House judge that the election is getting nearer is a reduction in the tax on beer in the clubs and pubs, in Purchase Tax on clothing and other essentials, and perhaps even in betting duty. If I were the hon. Member for Southend, East (Mr. McAdden), I would not place too much hope on that, but the hon. Member might get some relief at the expense of something else.

We shall have all the old games and circuses once again in order to deceive the electorate in the hope that it will jump through the ring as it has done on the last two occasions. I hope that the country is becoming much more cynical about this. In speaking of letting cats out of the bag, in terms of future Government policy, the Leader of the House is not using language that will commend itself to many of our people, who now feel that there are many grave problems ahead which should not be discussed in terms of electoral considerations.

Although the Chancellor made no forecast, if an election is coming nearer I am cynical enough about the Tory Party to think that the regulators will go down, even if they have to be reimposed a year later. If I am asked the reason for my scepticism, it is just history. It has happened before and it will happen again.

I thank the Chancellor warmly for his concession to blind persons and to persons living on small incomes, but I regret that he has not gone further. He knows my view, which I hold very strongly, that the balance of taxation is wrongly adjusted at present, and that those people at the bottom of the income scale are being mulcted too heavily. He knows that in my view he should readjust the balance as between those people at the bottom and those people at the top of the scale.

I am told that in these days it is unfashionable to talk about people earning £8, £9 or £10 a week; that the average income is now £14 or £15 a week; that we are living in an affluent society, and that it is only the fuddy-duddy Labour Party which goes on talking about people living on £8 or £9 a week. I do not know whether or not it is bad politics, but I am sure that it is good morality, and I am sure that many hon. Members opposite agree that, putting electoral considerations aside, our society should not endure a situation in which we still have to tax an elderly married couple living on a mean pension of £7 or £8 a week. But we are still doing this, and it is the first task of the Chancellor to put it right. I am not being fuddy-duddy at all in saying that—or, if I am, that is the rôle of the Labour Party and I am proud of it. We must take all people into consideration, and our first care should be for the elderly, the sick and those who need help most.

I deeply regret many of the things that have been left out of the Budget, as well as some of those that are in it. The Chancellor has not shown a proper sense of values, in failing to make even the comparatively small adjustments that could have been made.

Earlier, I said that the yield of only one major tax was going down. Hon. Members opposite may groan when I say this, but it is Surtax. We are collecting in Surtax £23 million less than we collected last year, although we are collecting more from other taxes. When introducing this relief the Chancellor told us that it was to be a measure of social justice. What are we to think of the values of a Government that believe that it is a measure of social justice to give this relief and at the same time to deny the same sort of social justice to nurses and probation officers? I do not understand it, or applaud it, and I shall continue to attack it.

As for the speculative gains tax—I have no complaint about the periods being arbitrary. Any period is bound to be arbitrary. The periods suggested by the Labour Party would have been just as arbitrary as those selected by the Chancellor. My complaint is that the tax will not bite on anything, and that the possible yield from it will be extremely small. It would have been far better to impose a long-term capital gains tax, and I regret that we failed to get this into the Bill. Failing that, however, I would have made the periods of such a length as to make them bite and to yield some revenue, on the Chancellor's hypothesis. What is his hypothesis? It is this. The right hon. and learned Gentleman stated it on 9th April: The speculative gains tax without affecting growth will meet a long felt and widely held grievance and sense of unfair treatment as between taxpayers."—[OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 994.] Is there any hon. Member opposite who has gone to his constituents and told them that "mularky" and whose constituents have believed it? There is no one in the country who believes that this speculative gains tax meets a long felt and widely held grievance and sense of unfair treatment as between taxpayers. That is not because we on this side of the House have been misrepresenting it, but because the Chancellor has been so clear in explaining it. Everyone understands that the transactions will be of such a character that this will be largely a voluntary tax.

What the Chancellor has done is this, and this is a good point. As he said, he may well have lessened the amount of short-term speculation within the account. I have heard the argument that this helps the markets. I rather share the right hon. and learned Gentleman's view on this. It is a good thing to cut out—if, indeed, the Chancellor has cut out—short-term speculation within the account.

Where the right hon. and learned Gentleman has not met the long felt and widely held grievance and sense of unfair treatment as between taxpayers is in the longer term capital gain on which people pay no taxation at all. During one of our earlier debates I went out to get an evening paper and saw in it a report of the case of the Bexley Borough Council which is having to pay £35,000 for an acre of land which it was offered a few years ago for £2,400. The speculative gains tax does not touch that sort of thing, and if the right hon. and learned Gentleman wants to get at the roots of the long felt and widely held grievance and sense of unfair treatment as between taxpayers he must take other steps. It is precisely because there are people in the country today who by holding on to a piece of land for two or three years can see their profit on it rise from £2,400 to £3,500 that there is this sense of grievance. This is a deficiency in the Finance Bill, and this is why I cannot approve the speculative gains tax.

We wanted to do a number of things, which, I regret to say, we failed to do. I think that the extra £289 million which the Chancellor is raising from these small measures is too much, and, therefore, I felt quite free to press upon him a number of reductions all of which, cumulatively, would have added up to more than £289 million. As they were all rejected one by one, we were entitled to go on putting the various alternatives to the right hon. and learned Gentleman.

I believe that the Chancellor is collecting too much taxation this year in view of the state of industry at the present time. I think that the economy has been clamped down too hard. We know the reason for it, but we believe that the Chancellor is wrong in raising all this revenue in order to assist his economic policy. I think that rather than assist that policy the construction of the taxes in this Finance Bill are militating against the successful achievement of that policy.

We would have liked to have seen the Purchase Tax reduced, and/or—I do not say that the right hon. and learned Gentleman could have done it all—the Chancellor could have reduced the tax on oil and thus kept down fares and helped to sustain the country bus services. We failed on the capital gains tax. We wanted fair treatment for the elderly and the P.A.Y.E. taxpayer. I believe that that will come. I suspect that it will come before the election. We have made out such a case on this matter time after time that there cannot be an hon. Member who, though he may be sick of it, cannot at least acknowledge that the case has been made out many times before, but it has never been answered in detail. The P.A.Y.E. taxpayer is bearing an unfair proportion.

We would have liked to have relieved unemployment in Scotland, in North Wales, in South Wales, in Llanelly, where the heavy pockets of unemployment are, and in other areas. We would have liked to have secured a better location of industry by increasing investment allowances and by giving other financial aids to industries establishing themselves in these areas. We believe that this would have been of benefit not only to the people living in those areas but to people living in the overcrowded industrial areas generally.

We would have liked new incentives given to industry for installing new plant and machinery. We failed on that, too. In fact, we took no wickets at all, except one minor one. I am sure that it would have been right to do this, and I very much regret that we have not done it and that in this rather tedious Finance Bill room could not have been found for fiscal measures that would have assisted to a greater extent the better distribution of industry and the relief of unemployment in areas where it is still heavy. In Scotland, as we were told this week in the Report of the Scottish Board of Industry, unemployment is twice as high as the national average.

We think, too, that if the Chancellor had accepted some of these measures he would have assisted growth and not retarded it. We believe that the time has come to let up. Indeed, we have felt this throughout these three months of debate. We believe that the Chancellor should not collect so much in taxation. The right hon. and learned Gentleman could have distributed the money in one or more of the ways which we suggested and which were designed to achieve greater social justice, a greater distribution of industry and a better location of industry. I very much regret that the Chancellor has not taken that opportunity.

I have discussed the Surtax and do not wish to say any more about it. Throughout all these debates, the Chancellor has gone out to try to restrain the rise in prices. He has tried to provide a base for an expansion of exports and has tried to stimulate growth. I am glad to see that exports are increasing slightly. I hope that they will continue to do so. Production has not increased, so that the object of the exercise as far as increase in production is concerned has really not begun to be achieved.

I see that the level of production in this country in April, which is the last figure I have, was lower than in April a year ago. Therefore, there has been no stimulus in production. The Chancellor has also said that he wants to restrain prices, but, in fact, prices have gone up more in the last twelve months through his own actions than since the index was constructed in 1956. I say to the right hon. and learned Gentleman that he may have thought that he was going out to do battle in a worthy cause but that if one chooses unfairness as one's sword and selects the weak as one's victim, one cannot really claim to be clad in the armour of righteousness.

This is the real reason why the right hon. and learned Gentleman's policy is failing. When we strike a blow and win a victory on the pay pause, the Chancellor says, "You are not striking at me, the Chancellor; you are striking at the nation". He believes this to be true. But the right hon. and learned Gentleman does not appear as the champion of righteousness, he appears as the villain. That is the trouble with him. The country believe that his policies are not fair, that they are discriminating unjustly, and that is why they will not succeed. The country can be got to follow a policy as tough as can be if it is fair.

How can the Chancellor justify the fact that the only tax which is being reduced is that imposed on those who are the richest in the country? I do not think that the right hon. and learned Gentleman is too sure of it himself. I must say that it was most remarkable to see the Chancellor the day before yesterday congratulating himself very properly on introducing an incomes policy. I think he did right to try to introduce it. But then he went on to condemn himself on the ground that it was unfair to the nurses, to the probation officers and other public servants and agreed that it could not be maintained. He undertook to announce a new pay policy and to make a positive statement on what he intended to do. That seems to me a remarkable case of schizophrenia. He went into the Lobby and voted for all that.

I am sure that the hon. Lady the Member for Tynemouth (Dame Irene Ward) would never be guilty of an un-ladylike action. But if she were, she would whistle with surprise to see the Chancellor of the Exchequer, the Financial Secretary to the Treasury, the Chief Secretary and the Chief Whip—and the Prime Minister—all trooping through the Lobby in support of a Motion which condemned the Government's present pay policy as unfair, unjust and unable to be sustained and which called for the introduction of a new one. I can only draw the conclusion that the Government in that respect would be obeying the old motto—"If you can't beat 'em, join 'em." There can be no other reasonable explanation of the Chancellor's speech this morning and his sustenance of his existing pay policy by trooping through the Lobby in support of a Motion which was in complete opposition to it.

No wonder the right hon. and learned Gentleman is reducing the Tory Party in this House to a state of nervous breakdown. And as for his followers in the country, there the whole party is in a state of complete collapse. That is why I say that I do not think the right hon. and learned Gentleman is sure about what he has done. I do not think the Chancellor understands how wages are negotiated. I regret that he has not someone at his elbow to talk to him and to make fewer speeches about the Commonwealth and a few more about how wage negotiations are conducted in this country. It would be a great help to us if the right hon. and learned Gentleman had someone to do that for him.

We have spent sixteen days on this Finance Bill and so many hours—too long, I agree. Looking back over those long and weary days and nights, I cannot think what we have been talking about all that time. It would seem that the Finance Bill and the Government share many things. They are both tedious, trivial, unfair, unrealistic—and they have been with us too long. We shall be happy to say farewell to both.

11.42 a.m.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

The hon. Member for Cardiff, South-East (Mr. Callaghan) has told us, in eloquent but light-hearted language, where he differs with the Bill, the concluding stages of which we are now celebrating. It seems to me that the hon. Gentleman's differences have been of a minor character and his criticisms have been criticisms of degree rather than kind. So much so, in fact, that in his enthusiasm the hon. Gentleman claimed for himself and his party the credit for a Clause designed to give relief to the blind. He overlooked the fact that it was moved by my hon. Friend the Member for Plymouth, Devonport (Miss Vickers) during the Committee stage discussions on the Bill and that at that time it was not supported by the party opposite. Although no doubt historically and properly the Opposition do claim credit for concessions made in the Finance Bill, in fact this was moved by my hon. Friend.

Mr. Callaghan

I said that it was the result of pressure by the whole House. I said that deliberately. Our Amendment was not selected. We moved such an Amendment in 1959, in 1960 and in 1961. On this occasion, it was swept up in a much broader Amendment dealing with the whole of the disabled. I did say specifically that it was the whole House which held up the passage of the Clause of the Government's.

Sir H. d'Avigdor-Goldsmid

Naturally, I cannot refer to the hon. Gentleman's speech today, but he did not make any mention of my hon. Friend who did present the Clause. I think that his meaning would have been made clearer had he mentioned that.

I remember that in 1955, at the time of the second Budget, the autumn Budget of that year, I was invited to do The Week in Westminster on the B.B.C. and I then referred to my right hon. Friend the Chief Secretary and the present Financial Secretary to the Treasury as having been invited by Horatius to stand at either hand with him and to help him keep the bridge. It is an agreeable feature of this Finance Bill that we should witness these two eminent warriors on either side of my right hon. and learned Friend the Chancellor to support this Measure through the twelve days of its existence in this House. I do not wish to identify either of them in the terms used by Macaulay, but he did refer specifically to Herminius and "stout Lartius". I leave the House to draw its own conclusions. Macaulay went on to say—I did quote this on the B.B.C.: Never, I ween, did swimmer, In such an evil case, Struggle through such a raging flood Safe to the landing place: But his limbs were held up bravely By the brave heart within, And our good old Father Tiber Bare bravely up his chin. Perhaps the problem of holding up the chin of my hon. Friend on the Government Front Bench would have been more than even "Father Tiber" could have managed. But the fact is that this is an agreeable combination, as I think the House will confirm, and not only on the Government side but on the Opposition benches also.

Having sat through all the stages of this Bill without making more than a minimum contribution, I wish to pay tribute to those who have made its passage agreeable. Before dealing with the Bill, I wish to draw to the attention of my right hon. and learned Friend an article by Sir Frank Bower which appeared in Lloyds Bank Review. He is a tax expert of considerable standing and what he has to say is of great interest. He makes the very important point that, theoretically, it would be possible to divide the Budget into a taxation Measure and a tax management Bill.

I think that there are strong arguments for considering that separation. The Select Committee on Procedure did not recommend any change in our procedure regarding the Finance Bill, but I still think that this would bear further investigation. We all agree that the right place to discuss taxation is on the Floor of this House. We do not want such discussions to be tucked away in a Standing Committee. But on the actual management of taxes, with which so much of this Measure deals, much of the time of the House could be spared. Not only that, but a much more appropriate investigation could be given to the highly technical points which are involved in it.

My right hon. and learned Friend referred to the fact that a group of twenty hon. Members who are members of the legal profession, solicitors and barristers, voted against a Clause on Report. On that occasion, I was a member of the majority. But I do not think that decisions taken at 2 o'clock in the morning are very appropriate for this House on matters of real importance. I felt that we were in the position of children who had "got away with it". We had voted down the lawyers, and we all felt pleased. Perhaps there was a feeling of satisfaction. But I think that there was some feeling of conscience as well.

I stress this point because, in the nature of things, the pace of a Measure of this sort is dictated by the Opposition, and naturally, the Opposition want to bring to the attention of the House and have the fullest discussion on these major matters of taxation which affect the country as a whole. Therefore, in the way our procedure works, we discuss the management questions not in daylight and with full attention, but rather late at night, with a feeling that people want to go home, and that the discussion ought to be shortened and that, anyway, it does not really matter. I suggest to my hon. Friend who is to reply to the debate that these things do matter, that the management of taxes, though not as important, is of comparable importance to the taxes themselves. Turning to our tradition of secrecy about the Budget, it would seem impossible for my right hon. and learned Friend to get the advice of professional bodies of all sorts, before the Budget, on measures which he was proposing, such as would normally be done in respect of Measures of another nature. I do not think we should legislate about white fish or other problems we deal with without getting the views of the interests chiefly concerned. On Budget matters we simply do not do that. A Chancellor of the Exchequer retires into purdah and no one outside the Government is privy to what is going on inside. As a result matters are put before us which of course have had the fullest attention of the Treasury but which have not been subjected to the criticism of outside.

The Financial Secretary to the Treasury (Sir Edward Boyle)

Is not my hon. Friend rather overlooking the interval—this year a rather longish one—between the Committee stage and Report stage of the Bill? A number of Government Amendments on Report, which were fairly criticised by the hon. Member for Cardiff, South-East, reflected the notice which the Government have taken of criticisms of the Bill outside when it first appeared.

Sir H. d'Avigdor-Goldsmid

I take that point, but it would be very much more satisfactory to all concerned if, instead of the Government having second thoughts, those Amendments had been part of the Government's first thoughts; I instance particularly this matter where the solicitors as a whole voted against this House. We in the majority may have been wrong. I do not know whether we were right or wrong. I was in the majority, but we may have been wrong because they are an important body of people and had not been consulted. They had not had a chance of expressing their views before the Government made up their minds.

This strikes me as basic. I do not think a Tax Management Bill would do us any harm. It could safely be taken in Committee in an upstairs Committee room where it would be properly thrashed out and all the various points would be cleared up to the satisfaction to the interests concerned. We spend the daylight hours discussing matters such as Purchase Tax, allowances and other matters of interest and importance to the greatest number of people, but the tax management side is neglected. If we stick to the tradition of pre-Budget secrecy, I think we should take the tax management in Committee upstairs and deal with these matters in the autumn.

I want to say two things arising out of the article which I quoted. The first point is a tribute to my right hon. and learned Friend for his clarification of the national accounts. This is an improvement and Sir Frank in his article goes a little further and says, why do we not have a consolidated account showing the movements, not only on the national account, but on the accounts of local authorities and nationalised industries? He does a brief consolidation at the end of the article and shows a result which we should all bear in mind and which is that in the current year and also in the previous year more than £400 million has been taken out of the economy into the Treasury. This, in terms of our gross national product, is a very major act of deflation. We must have reservations on whether it is right this year for the Treasury to take £400 million out of the economy. In the words of Sir Frank: Therefore the private sector in its capacity of customer of the nationalized industries will repay to the Treasury these loans which it initially provided as taxpayers. This should not be entirely overlooked.

Another point he makes is that the balance between direct and indirect taxation, irrespective of what Government was in power, between 1950 and the current year shows almost no variation in the proportion borne by direct and indirect taxation respectively in the national accounts. Throughout those years under both the Socialist Government and this Administration, the direct taxes have contributed just under 50 per cent. of the total burden of taxation. I do not know if the experience of twelve years and five Governments proves that this is the right proportion, but it is extraordinary that the variation has been so very small when so many different ideas have been current at one time and another.

My right hon. and learned Friend has spoken of this Budget as one of a series. I think the objective of the next Budget must be something which he has discussed rather loosely, an attempt at the separation of corporation taxation from Income Tax. Our task in this House would be very much easier and our purpose as a Parliament could be very much more clearly expressed if we could vary corporation tax without at the same time varying the burden on individuals as a whole. I have found that when people reach a conclusion and do not know how to bring it into action they say, "It can't be beyond the wit of man to devise a scheme". I do not use that phrase, but Sir Frank argues against this. I urge my right hon. and learned Friend, if he pays great attention to Sir Frank's article, that on this point he should cast a less apprehensive eye.

I congratulate my right hon. and learned Friend on a Budget, which has gone through all its stages without engendering friction or that sense of unfairness to which the hon. Member for Cardiff, South-East referred on more than one occasion, and which I think Will not only be well received by the country but is calculated to meet the country's needs.

11.58 a.m.

Mr. J. Grimond (Orkney and Shetland)

I, too, wish to thank the Treasury Ministers for their courtesy during the passing of the Bill. I do not at this stage want to be unnecessarily contentious nor, like the hon. Member for Cardiff, South-East (Mr. Callaghan), to claim to be an expert in those games in which the Chancellor apparently mis-spent so much of his youth.

I doubt, however, if there is a game played on the billiard table in which the object is to get in off the yellow. There is a well-known game in which the object is to pot the blue and to pot the red. That is the game we are trying to play. Another feature is that one may be snookered. What frequently happens is that the Chancellor is snookered in trying to pursue his long-term plans by temporary crises in the balance of payments. There is widespread dissatisfaction with the economic purpose of the country and growing dissatisfaction with the way in which we handle our financial affairs.

Mr. G. R. Mitchison (Kettering)

Is not the essential difference in this game that we are getting out of pocket rather than putting them in?

Mr. Grimond

I accept that very important further complication of the game.

I should like very much to follow the line of thought explored by the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), but starting in a slightly different way. I should have thought that there is a need to cease trying to compress our whole financial management within the compass of the annual Budget. There is a great need at the Treasury for longer term planning and a need—here I follow very closely what the hon. Member said—to examine the whole structure of our taxation.

This, I believe, cannot be done by picking out some anomolies each year and getting them corrected in the course of the general Finance Bill. There may be a lot in what he said about a reform in handling financial matters by which to divide the Bill, as he suggested, between the imposition of taxation and the management of taxation. I am not very clear where that division would fall, nor that it would meet the particular point of criticism he made about what took place in the small hours of the morning in relation to powers to demand information from solicitors. I take it that he would say that is part of tax management, but I am not very clear that the Government could consult any better with the bodies concerned by having the Committee stage upstairs than as we have it now.

As the Financial Secretary pointed out there is a considerable time which may elapse between the publication of the Finance Bill and the Committee stage and then between the Committee and Report stages. I should have thought that there was opportunity for very considerable consultation. On this occasion articles were written in the newspapers and hon. Members had the matter drawn to their attention.

Sir H. d'Avigdor-Goldsmid

The point that I had in mind was that, granted our secrecy and the lack of previous consultation, it was important that these matters should be fully discussed and that owing to our Parliamentary timetable it is not possible to get them fully discussed on the Floor of the House.

Mr. Grimond

I take that point and I agree with the hon. Member that to consider this matter at two o'clock in the morning is not the best time of the day to do it.

There are other matters concerned with taxation which need examination. In the Bill we speak of a standard rate of Income Tax at 7s. 9d. I wonder whether that is any longer a useful way of dealing with Income Tax. No one pays 7s. 9d. Many people get the impression that this is an average rate, or, in fact, the rate at which Income Tax is now being levied on the taxpayer. Of course, it is not. I think that the time has come when the whole method of describing Income Tax and all its allowances should be reviewed.

I agree with the hon. Member for Walsall, South that it would be extremely valuable to distinguish between personal Income Tax and corporation tax. I doubt whether this is the sort of reform that we shall get unless there is a section of the Treasury that can take its eye off the immediate annual Budget and take a rather longer term view, applying this suggestion also to the capital gains tax, if one may call it that.

The Chancellor has explained that, in his view, it is simply an expansion of Income Tax, and I think that he is right. I do not think that it touches the real case for taxing capital or taxing capital gains. There is no doubt that this matter will have to be examined more fully. The difficulty, if one extends this matter very far, is one of administration. It would be valuable if the Treasury could give us some information, or prepare some information, on the administrative difficulties if we want to carry this attempt any further.

I think that everybody is deeply grateful to the Treasury and the Inland Revenue for the amount of trouble that they take over taxation and in dealing with the complaints from individual taxpayers. I am always agreeably surprised at the very great courtesy and accuracy with which they tackle any complaint, and the trouble they take to explain the taxation system. But it is almost impossible for many people to compete with their own taxation returns, and if the matter is to be simplified this will need a longer time of review of our taxation system.

I cannot understand the Chancellor's proud defence of his conduct of the regulator. It may be right for him to include increases in the Excise duties in the current Finance Bill, but we cannot avoid the conclusion that what he is doing is simply to put up certain taxes and, on top of that, taking power to reintroduce the regulator again. There is no way around this. He has increased the level of taxation and kept his power to regulate it. I personally thought that the introduction of the regulator was a reasonable step. Again, this confirms my view that we cannot handle our financial affairs entirely within an annual Budget.

It would be helpful if we heard a little more about how this particular regulator is worked. There is some indication that it may have a considerably delayed effect on demand for certain products and it would be interesting to know from the Treasury whether it is satisfied with the effects of this regulator, how long it thinks that it takes to work and whether it is undertaking any steps to find forms of regulators that may be required between Budgets.

I must add my quota to the case which other hon. Members have made against the increase of the fuel tax. This seems inexcusable at a time when we are trying to keep down the costs of industry and it has put some transport already in difficulties in even greater difficulties.

There is never a great deal that can be said on the Third Reading of a Finance Bill, particularly so this year, when the striking feature of the Bill is not what is in it but what is not in it, so that even less than usual can be said about it. I do not think that the Bill faces up to the need of a reform of the taxation system, or to the changes that will have to be made in our economy if we are to get a steady rate of expansion. In spite of all that the Chancellor and the other Ministers have said, I do not detect in the Government a firm decision that they are going for a steady and sustained rate of expansion and that they have put it at the head of their economic priorities.

I do not see in the Bill any encouragement to investment in this country, which is so urgently needed. Nor am I satisfied that the Chancellor is right in thinking that, if he takes the amount of taxation which the Bill will take, he can afford to do so because of the tendency towards expanding production. There is precious little evidence that production is expanding at a satisfactory rate and I am not convinced that the Chancellor has not miscalculated the confidence of industry in the future and the dangers of over-hasty expansion at which the Budget seems particularly to be aimed.

12.8 p.m.

Sir Stephen McAdden (Southend, East)

I intervene only briefly, first, to defend the reputation and rectitude of the youth of my right hon. and learned Friend the Chancellor of the Exchequer, who affected to have some knowledge of the game of billiards and who was reprimanded for this by the hon. Member for Cardiff, South-East (Mr. Callaghan). It is quite clear from what the Chancellor said in referring to the game of billiards as being concerned with going in off the yellow that he has never played billiards in his life and that neither he nor his officials at the Treasury have much knowledge of games of skill or of chance, or of skill and chance combined.

It is true, as the right hon. Member for Orkney and Shetland (Mr. Grimond) said, that there is the related game of snooker which has a different value for different colours, but I am sure that the right hon. Gentleman will not get much satisfaction from knowing that the red has the least value of all, that the yellow is valued only a little higher, but that the blue is valuable and well worthy of support.

Mr. Mitchison

Are there not many more reds?

Sir S. McAdden

The hon. and learned Gentleman is quite right. There are far more reds, but the object of the exercise is to get rid of the reds at the earliest possible moment. There is also in the game of snooker the pink. It is valued higher than the blue, but because of its dangerous situation at the base of the pile of reds it is reckoned that it is not a colour to go for if there is a more conveniently situated blue.

I draw the attention of the House to a very fair point made by the hon. Member for Cardiff, South-East when he drew the attention of my right hon. and learned Friend to the fact that taxation must be seen to be fair between different sections of the population and in its incidence on those who contribute to the revenue in various forms. I share very strongly the view expressed about the retention of the surcharge in a permanent form on selected forms of taxation. During the passage of the Bill, I have tried to draw his attention to the fact that I have no objection to gambling being taxed, but that it should be taxed fairly between the sections of the population, and that is not being done now.

If we give, as I am sure we shall, a Third Reading to the Bill, it does not mean that we are entirely satisfied with the existing method of taxation in it, and it is only the assurance that we have received that it is intended to look more carefully over the whole field which enables us to give our support. The Third Reading of any Finance Bill must be an occasion of joy or disappointment according to one's point of view. There are those who advocated a reform which has not found favour with the Chancellor, and it is in a spirit of compromise that we assent to the Third Reading of a Bill which does not espouse our individual point of view.

However, in so far as the Chancellor has held out hope that on a future occasion he may be able to remedy the injustices which still exist in the Bill, and because we have faith, confidence and hope in my right hon. and learned Friend, believing that he will do more to carry out his promise than is evidenced by his knowledge of games of skill, or skill and chance combined, we wish him the very best success not only in this Finance Bill, but, much more important, in remedying the present injustices in the next Finance Bill that he introduces.

12.11 p.m.

Mr. William Hamilton (Fife, West)

I saw last night, on television, the Leader of the House, when he was answering a charge by Robert Mackenzie that the Tory Party and the Government were tired. The right hon. Gentleman replied that the Tory Party was bubbling over with ideas. Having gone through the complete and utter boredom of the Finance Bill, I began to wonder where those ideas were going. Clearly, they have not reached the Chancellor of the Exchequer.

The following are the ideas that we find in this Finance Bill, a Measure to which we now welcome the opportunity to say goodbye. First, the surcharge imposed last year is to be permanent, which means an uplift to the cost of living, now at an all-time record level, as it has been for many months past. Secondly, there are the Purchase Tax increases, particularly the tax applied to sweets, clothing and furniture, all of which items give a boost to the cost of living.

The Chancellor of the Exchequer excused himself for the tax on sweets on the grounds that it would improve the dental health of children, but he did not say anything about improving the health of tobacco smokers in view of the report of the medical authorities about the dangers of lung cancer. One must logically follow the other.

My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has already spoken about the continuation of the fuel tax plus the surcharge, which also affects the cost of living and inevitably leads to pressure for wage increases to offset the rises in costs. All this is creating a feeling in the country among ever-widening sections of the community that the Government have no intention of seeking a policy based on social justice or any sense of fairness whatever. The "phoney" capital gains tax, which is in some ways one of the central features of the Bill to which the Government attach very great importance, is designed simply to give a feeling of fairness and get co-operation from the workers in the incomes policy.

The hon. Member for Southend, East (Sir S. McAdden) recognises that there is a considerable degree of unfairness in our society today. The Finance Bill does nothing whatever to remedy it. On the contrary, it perpetuates and intensifies it. I have one or two points to make to underline that charge.

Most hon. Members received last week—I do not know why they are sent to us—copies of the annual report and accounts of the Beecham Group. I have looked into the remuneration of the directors of the group, of whom there are twelve. One of them sits on the other side of the House. He is the Chairman of the Kitchen Committee. I have been here twelve years and have never heard him make a speech in the House; but he is a director of Beechams.

I find that in 1960–61 the remuneration of the directors amounted to £142,470, an average of about £12,000 a year for each director. But the directors found it very difficult to exist on £12,000 a year, and in 1961–62 the total rose to £157,580, or about £13,000 a year each. In other words, the directors of Beechams, of which one sits on the other side of the House, no doubt supporting the pay pause policy, had an increase in one year of £1,000 each.

These are the people to whom the Government are this year giving £83 million in Surtax concessions, and yet the same Government are telling the nurses, probation officers and university teachers that the economy will be jeopardised if they receive more than a 2½ per cent. increase in pay. It is this kind of thing to which I and many millions of our people object most violently.

When the Minister of Pensions and National Insurance announced the other day that, because the economy was on the move again and the Government had a sense of social justice, £20½ million was to be given to recipients of National Assistance, I made a quick calculation and found that that is about a quarter of the concession which has been given to 300,000 Surtax payers. That is the context in which we must view this matter, and it is the context in which I seek to examine the Bill.

The Bill is grossly and patently unfair to millions of people. There is nothing in it for our retirement pensioners. On the contrary, they will be hit very hard by the forcing up of the cost of living, presumably by deliberate intent. As my hon. Friend the Member for Cardiff, South-East, said, it is grossly unfair to the P.A.Y.E. paying workers of whom there are many millions, earning much less than £12 a week. There is nothing for them in the Bill. Therefore, I take the view that it is patently unfair and obviously irrelevant to the problem that the country is facing.

What we want, and what the Government recognise that we want, is an increase in production, productivity and exports. So far as I can ascertain, there is nothing in the Bill to give the stimulus to our economy which is so much needed.

I wish for a moment to refer particularly to problems in Scotland. During the Committee stage of the Bill we sought to obtain some differential treatment in order to solve the problems which plague the Scottish economy. We had no success. The recent Report on Industry and Employment in Scotland is an extremely gloomy document. When a Government Department produces a document as gloomy as that, the situation must be very grim indeed. We have a strong belief that the economy of Scotland is in for a very hard shaking up in the next two or three years, unless the Government recognise that there are special facets of the problem which need special treatment. The Budget and the Finance Bill do nothing whatever to even attempt to tackle the problems.

I have found the Finance Bill a very boring exercise. There is a very good case for taking some of it upstairs in a Committee. The Government listen to arguments and, however powerful they are, consistently reject them. There is a very good article by A. P. Herbert in the Guardian this morning about the tyranny of the Treasury. How right he is. One can produce the most foolproof and convincing arguments on a Finance Bill, but the Government have already made up their mind that they will not yield and the Opposition make no headway.

It is true that this year my hon. Friends took one wicket. It was a very important one to a small section of the community. We laboured for days and produced this one little mouse. That is what we get for our endeavours. This is an extremely, boring, irrelevant and unfair Bill, and I am not sorry to see the last of it.

12.22 p.m.

Mr. Peter Walker (Worcester)

I hope that the hon. Member for Fife, West (Mr. W. Hamilton), if he takes part in next year's debates on the Finance Bill, will again produce the report and accounts of the company he mentioned and tell the House about the substantial increase that will have taken place in the Profits Tax imposed on the company, an increase of about 25 per cent. resulting from the action of my right hon. and learned Friend the Chancellor, which was taken at the same time as the decrease in Surtax.

This is only the second Finance Bill with which I have had the privilege of being concerned. Therefore, unaware of the intricacies and complications of steering a Finance Bill through the House of Commons, I have admired both the astute way in which my right hon. Friends and hon. Friends on the Treasury Bench have steered the Bill through the House and, if I may say so without being presumptuous, the work of hon. Members opposite. There were perhaps a few of us on this side of the House who hoped that with the disappearance of the right hon. Member for Huyton (Mr. H. Wilson) from these debates there would be a decline in the skill with which the Opposition conducted their affairs. This, alas from our point of view, has not happened. I hope that the hon. Member for Cardiff, South-East (Mr. Callaghan) was not too discouraged when at one stage in Committee my hon. Friend the Financial Secretary resorted to the argument that, as both the hon. Member for Cardiff, South-East and the hon. Member for Worcester were in agreement, this proved that the Treasury was right.

I support the Bill both in its broad application and in detail. In its broad application I consider that it has probably hit the right balance and will assist the economy to remain competitive in world markets. We are all encouraged by the news of the increased exports which have taken place and the improvement in our competitive power in foreign markets.

I applaud the fact that my right hon. and learned Friend has not taken note of the demands of the Opposition not to make the Surtax reductions which he introduced last year. It would be completely wrong in the present conditions of world markets to have a situation in this country where the higher levels of taxation were higher than those imposed by our main competitors. In spite of the present reduction in the Surtax rates, the rates here are higher than those obtaining either in the United States or in West Germany.

In detail, I very strongly welcome the new Clause concerning blind persons. I have the privilege to have in my constituency an incredible organisation called the Worcester College for the Blind. Any person who comes into close contact with such an institution will appreciate the long overdue need for the introduction of such a Clause.

I want to make two comments upon the provisions of the Bill appertaining, to the speculative gains tax. I still maintain that Clause 14 is completely unworkable in regard to companies with Stock Exchange quotations. I am a little alarmed that the Treasury could produce drafting which in practice will not be able to be administered. I query whether within the Treasury there are persons with sufficient knowledge of the intricacies of the City and the Stock Exchange to draft such a Clause. I hope that, if there is a lack of such persons within the Treasury, people will be recruited with a life-long experience of the workings of the Stock Exchange to administer this type of tax in the future.

If the Stock Exchange points out that the result of the speculative gains tax has been a decline in the turnover of the Stock Exchange, I hope that my right hon. and learned Friend will point out to the Stock Exchange that there is one remedy for this position. That is the remedy of the Stock Exchange doing a little more to go out and attract new investment. If there has been, as one hon. Member has suggested, a decline of about 20 per cent. in the transactions taking place, which will undermine the whole jobbing system, perhaps this will act as an incentive for the Stock Exchange to go out and attract the small investor and make its services far more available throughout the country, instead of concentrating on London.

I look upon the Bill as one of a series of Finance Bills for which my right hon. and learned Friend has been responsible. If at the end of this series my right hon. and learned Friend has been successful in reorganising the position of Income Tax and Surtax, in creating a corporation tax instead of the two taxes which apply to companies at present, and in doing away with the burden of Schedule A, we shall look upon him as having been one of the most outstanding Chancellors of the Exchequer in the history of this country. It is in that spirit that I support the Third Reading.

12.26 p.m.

Mr. Bruce Millan (Glasgow, Craigton)

It is always very difficult to know what to say on the Third Reading of any Bill. This is particularly so in the case of the Finance Bill because of the many long hours that we spend discussing it in Committee and at other stages. There has been a certain amount of talk this morning about the desirability of having some of the discussion taken off the Floor of the House and transferring it to a Committee of some sort, by having two Finance Bills, one dealing with taxation and the other deaing with tax management. I have a good deal of sympathy with this suggestion, although at the same time I have a certain amount of difficulty in understanding precisely how we could make this distinction on so many points that come up in a normal Finance Bill between taxation prob- lems, on the one hand, and tax management, on the other.

The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) mentioned the interesting discussion we had the other evening, or rather the early hours of the morning, regarding the position of solicitors who are asked for information about speculative capital gains. I see that one of the hon. Members who led the fight at that time, the hon. Member for Crosby (Mr. Graham Page), has just entered the Chamber, which has effectively, precluded me from making the slightly cynical observation that none of the hon. Members who then spoke so feelingly about the damage that this would do to the legal profession seems to think it worth while to attend here this morning and carry on the fight up to the last minute.

Mr. Graham Page (Crosby)

The hon. Gentleman should know that within the rules of order one can discuss on Third Reading only what is in the Bill and not what is not in the Bill. I wanted to get something into the Bill. It is not there, so I could not discuss it today.

Mr. Millan

I would not suggest that the hon. Member transgresses the rules of order, although other hon. Members seem to have a facility for making their points within the rules of order. However, I am very glad that the hon. Gentleman is here to carry on the fight right up to the last minute. At least, I hope that that is why he has come this afternoon.

I was rather puzzled by what the Chancellor said about the regulator. I do not quote his exact words, but their effect was that he hoped that it would not be necessary to use the regulator again this year but that, if he had to use it, he would be perfectly willing to do so. I am concerned with the implication of the word "hope" in that context, which is that he hopes that he will not have to use it in an upward direction this year. When the Financial Secretary reads in the OFFICIAL REPORT tomorrow what the Chancellor said, I think that he will agree that I am not putting too much emphasis on this when I say that by using that form of words the Chancellor betrays that he is thinking of the regulator as one that can be moved only in an upward direction.

We on this side welcomed the regulator when it was introduced last year, because we wanted any Chancellor—the present incumbent of the office or any other—to have the flexibility that it would give him, but if it is to be thought of only in terms of putting taxes up we are simply giving any Chancellor the opportunity, surreptitiously, or almost surreptitiously, to take a second bite at increasing taxation at some time between Budgets.

I do not look on the regulator in that way at all. Many would say that if it were to be used again this year it should be used, not in an upward but in a downward direction. The fact that the Government consolidated the regulator in this year's Budget, and that the Chancellor used those words this morning, makes one very suspicious of exactly what the Government have in mind about it. I hope that the Financial Secretary will assure us that there are circumstances in which the Government would think it right to reduce taxes, and not to increase them. That would appeal to hon. Members opposite as well as to those of us on this side.

It is unnecessary to demolish the Government's arguments on the speculative capital gains tax, because they were pretty effectively demolished during the Committee stage. It is very difficult to see exactly what the Government hope to gain from this tax. The Financial Secretary may have noted a certain lack of enthusiasm on this side to put down detailed Amendments to the relevant provision in the Finance Bill. It was a complicated provision in the first place, and the Government had second thoughts on many of its aspects.

I must tell the hon. Gentleman that we did not put down detailed Amendments to it because we did not think it was worth while. We do not think that the tax is sufficiently worth while to merit detailed consideration of that sort. It will not raise much revenue, it does not deal with the fundamental problem of capital gains, and it will have to be replaced if we are to tackle the real problem, and satisfy the electors and the ordinary taxpayers that we are really serious about getting a fair and equitable system of taxation.

On Income Tax, we made our points about personal allowances while we were in Committee and, again, I think that our case was completely unanswered by the Government. Naturally, we were very pleased about the concession to blind persons. I hope that it is merely the first step towards making similar concessions to disabled people and to those in particularly unfavourable circumstances of one sort or another.

I know that the Inland Revenue and the Government can easily produce purist arguments to show that we cannot make such concessions without breaking well-established principles and creating precedents; and that to do so will make it very difficult for any Government to resist further concessions. Despite all those arguments, I believe that there is a general sense in the House that people who are disabled, blind, or otherwise in difficulty should get some sort of discriminatory tax treatment. I am very glad that the Government have made this concession to blind persons and, as I say, I hope that we shall get something for other categories of disabled people.

I very much agree with the right hon. Member for Orkney and Shetland (Mr. Grimond) about the Government's complete failure to do anything to encourage company investment by adjustments of investment allowances, rationalisation of the whole structure of capital allowances, or anything else. It is one of the most damning criticisms of the Chancellor that he seems to be willing to accept that manufacturing investment figures will show a decrease over this year, rather than the increase that everyone would hope for, without doing anything at all by way of taxation adjustments to try to counteract that tendency. It is extremely disturbing, and one is very disappointed that the right hon. and learned Gentleman has not seen fit to do anything about it.

I share the regret of the right hon. Member for Orkney and Shetland that in the realm of indirect taxation the Chancellor has not done something to lift some of the burden on industry and public transport imposed by the present hydrocarbon oils duty. There has been a complete neglect to do anything about so many aspects of our taxation system that cry out for reform at present, and one finds a great deal of difficulty in relating the Finance Bill to the existing economic situation at all.

The most that can be said about the Bill is that, in some respects, it does not do a great deal of harm, although in others we think that, economically, it does a considerable amount of harm. It gives no incentive to economic expansion and growth. It does not create that feeling among ordinary people that there is some fairness and equity in our taxation system that produces a psychological or personal stimulus to improve economic performance. It does none of those things, so we cannot give it any welcome at all.

12.37 p.m.

Mr. Charles Doughty (Surrey, East)

I am sorry that the hon. Member for Glasgow, Craigton (Mr. Millan) spoke so gloomily about this Finance Bill, because I support it. He has criticised, as have other hon. Members opposite, the concession given to Surtax payers in the last Budget, but none of them has mentioned that the Surtax payers have come last in the queue. They have failed to point out that in previous Budgets it has been those with lower incomes who got relief first. Nobody complains about that, but it is a little hard that the Government should be criticised for granting a rather overdue relief to those last in the queue—the Surtax payers.

I thank both Front Benches for the clarity of their contributions to our debates. I do not propose to refer to the rules of snooker, because my hon. Friend the Member for Southend, East (Sir S. McAdden) has quite clearly a far greater knowledge of them than I have. Our debates in Committee are always long and, to be frank, sometimes tedious, but they are justified, because one of the duties of all hon. Members is to examine our taxation system very carefully. After all, we congratulate both Front Benches, and the back benches as well, but those whom we should really congratulate are the people who pay the taxes we impose, and it is on their behalf that we have to say whether the Government have done right or wrong.

In this Budget, I believe that the Government have done right. There are very few hon. Members who would propose additional taxes that the Government should impose. It is for the Government to impose the taxes because, with their specialised knowledge, it is they who know what the year's expenditure will be. If, therefore, the Government put a fresh tax, as they have, on soft drinks and sweets, that is because they know that the money is required.

Incidentally, I support that tax. I see no reason why these articles, the consumption of which has gone up enormously in the last few years, should not pay a due proportion of taxes, as many other things must do.

There are two matters to which I particularly wish to refer. I do not think that the first has been referred to today. It concerns Clause 2 of the Bill; lower rates of Customs duties on E.F.T.A. goods. The amount of money involved in this does not represent anything startling, but if we are to enter the Common Market—on which I express no view since I have no greater information on this than any other hon. Member and, in any case, if I digressed on to that subject I would be out of order—it is clear that Finance Bills of the future will require a considerable number of Clauses to deal with the reduction of duties which will follow any treaty we shall sign before our entry. It would be interesting to know whether that would affect the revenue of this country to any great extent. Incidentally, if we do not enter the Common Market, we shall have to continue to reduce duties in accordance with the start we have made in Clause 2.

The second matter to which I wish to refer is the tax which is referred to by various names, generally and erroneously as the "speculative gains tax." It is nothing of the sort and I prefer to describe it as the "charge on gains from acquisition and disposal of assets", as referred to in Chapter II of the Bill. This is dealt with in Clauses 10 to 16. The Treasury has made a valiant effort to try to draft the necessary Clauses, always remembering that it is a new tax and that the Treasury does not have experience of its enforcement or possible attempts at evasion.

When imposing taxes one must realise—and this can be said of every tax—that one is putting a brake on someone else. Undoubtedly this tax puts a brake on the Stock Exchange and, naturally, that must represent a loss to the Revenue because there is a 2 per cent. Stamp Duty on Stock Exchange deals. If fewer deals take place there will be less revenue. Whether the 2 per cent. duty is or is not right is a matter open to doubt. It makes transactions in this country more expensive than in others and, particularly should we enter some form of European organisation, its continuance is a matter to be considered at a future date.

I wonder what the Treasury would say should the administration of the new tax be found not to result in a gain for the Revenue? If the greet deal of work involved in making the necessary assessments and inquiries results in only a trifling increase, I hope that the Treasury will be frank with the House and say that the tax has meant so much hard work and has produced such a small return that it is proposed to scrap it. I do not want hon. Members to think that because of these remarks I am against people paying taxes on the gains they make from deals, whether in shares or land. In any case, these are already covered by our present financial system, apart from the provisions of Chapter II of the Bill.

If a person makes an odd transaction and escapes the tax I do not think that anyone would particularly object. But where regular transactions are conducted involving buying and selling on the Stock Exchange or in land deals those should not escape the provisions of Chapter II. However, as I have said, if the Treasury discovers that it has meant a lot of hard work for accountants, solicitors and others, I hope that the Department will admit this and revert to the old system by which people pay taxes on ordinary trading deals.

Apart from that, I think that this is a fair Bill. It makes no other very sweeping changes in the law and while it is always easy to say when a tax is increased that it increases the cost of living, that sort of statement is obviously true. Purchase Tax and the duty on hydrocarbon oils does precisely that. Many of us would like to see these reduced and I suppose that the real solution is to reduce expenditure. However, I welcome the Bill and willingly support its Third Reading.

12.44 p.m.

Mr. Jasper More (Ludlow)

I add my congratulations to my right hon. and learned Friend the Chancellor and express my regret that they must be rather second-hand because during some of the most important discussions that took place on the Bill I was kept, rather against my will, in a Committee room upstairs. It is in this context that I must express some astonishment at the speech of my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) in which he seemed to assume that upstairs one deliberates only during the hours of daylight.

On the night to which my hon. Friend referred, when the question of lawyers was debated on the Floor of the House, we were summoned from upstairs on a number of occasions. It is a matter of no little difficulty, when coming down the stairs, to weigh up all the arguments for and against a subject and to decide in which Lobby to go. I am sorry that on that occasion I was rather a traitor to my own legal profession and went into the wrong Lobby.

I was interested to hear the references made by the right hon. Member for Orkney and Shetland (Mr. Grimond) and a number of hon. Members to the possibilities of altering the method of dealing with Finance Bills. I do not share the optimism that one could divorce the Clauses which deal with the imposition of taxes from what might be called the procedural and managerial Clauses. In this year's Bill, for example, I do not think that it would have been possible to have made an arbitrary decision to take the Clauses dealing with the speculative gains tax in the main part of the Bill on the Floor of the House while dealing with the Schedules upstairs.

I suggest, however, that with an entirely new tax which is self-contained, as we have this year, the House could consider lifting the whole of the provisions dealing with it out of the Bill so that they could be discussed in Standing Committee. This would eliminate the difficulty of having to have all taxes discussed on the Floor of the House and might help to answer the real objection raised by my hon. Friend the Member for Worcester (Mr. Walker) about the drafting of the speculative gains tax.

About a year ago I expressed the hope that my right hon. and learned Friend would try to address his mind to simplifying our taxation system with the object of reducing its bulk. We cannot claim that that has happened in this year's Bill. I expressed that hope in a Question, and while I will readily agree that this would not be an easy thing to do—as was made clear to me in the reply I received from the Chancellor—I believe that the Treasury should consider whether our tax system could be simplified without violating our longstanding tax principles. I have in mind the introduction of a greater measure of discretionary powers in taxation.

The present method of our drafting of Finance Bills must involve the country in an appalling waste of professional talent and also brings the whole of our taxation system still further from the ideal, to which we all pay lip-service, that it should be intelligible to the ordinary taxpayer.

12.49 p.m.

Mr. Douglas Houghton (Sowerby)

This is the day and hour on which it is customary for hon. Members to express their weariness with the proceedings on the Finance Bill and to say how glad they are to be getting rid of it. I do not share that view. During the 16 days on the Bill there has not been a dull moment for me—and it is the thirteenth Finance Bill on which I have spoken. I think that it is a most fascinating exercise, and I was very distressed to hear my hon. Friend the Member for Caridff, South-East (Mr. Callaghan) say that he was glad to get rid of it. I know that he coupled getting rid of the Finance Bill with getting rid of the Government, but I see no reason to throw out the Bill with the Government.

After all, my hon. Friend started working life, as I did, as a tax gatherer. We were both tax gatherers. I stuck to it mostly, but he wandered off. He came into the House and took an interest in transport. Then he went into the affairs of the Colonies. Now he has come back to his first chosen vocation. He must not be bored by it.

Mr. Callaghan

I must say that I got out of the Inland Revenue only just before I was thrown out.

Mr. Houghton

Oh no, the Inland Revenue would have kept my hon. Friend to this day had he wished to stay.

My hon. Friend the Member for Fife, West (Mr. W. Hamilton) was particularly scathing about the tedium and boredom of the Bill. I share the general disappointment that one can work so hard on the Finance Bill for so little immediate result. But here again, on Finance Bills one has to be philosophical and content to cast bread upon the waters and see the results after many days.

After all, the small incomes relief and the extension of age exemption in Clause 8 were mainly the result of vigorous discussion of these two matters last year. The relief for blind persons has been discussed in this House almost every year since the second Interim Report of the Royal Commission in 1954. I am not going to join in any scramble to get the credit for this one additional relief that we have got in this Bill. I envy the hon. Lady the Member for Plymouth, Devonport (Miss Vickers) on having moved her new Clause on this matter at a favourable moment and on having got a concession from the Chancellor. I moved a similar Clause in past years without meeting with favourable results. This is an achievement for the House of Commons, and we should rejoice that we have at last been able to bring some additional tax relief for gravely afflicted persons.

I do not share the view that has been so frequently expressed by Ministers on this matter, that the proper way to deal with grave affliction is through the social services and not through tax reliefs. One might as well say that the way to deal with the expense of children on a domestic budget is through family allowances and not through child reliefs in Income Tax. In that case, both the social services and taxation combine to give the parent some relief from the additional expenses of a larger family. So it is with relief to blind persons. I hope that in due course the Government—any Government—will accept the broad principle put forward by the Royal Commission that grave affliction can so alter the pattern of a person's life that it is proper that tax relief should be given to meet exceptional conditions.

On age exemption, although the change in the Bill is very welcome—it is something for which we pressed twelve months ago—I still feel that further consideration should be given to small incomes relief and age exemption. One can go through long debates on these matters and still miss a material point. Only yesterday I received a letter from a widower who said that his wife had died recently. He is retired and living on a pension. The immediate consequence of becoming a widower is that he has Income Tax to pay. On £400 a year as a married man, and being a pensioner, he got the benefit of age exemption. Now that his wife is dead, on the same income he now has to pay 11s. a week tax.

That comes hard on an ageing man who has lost his wife and who says, "I must now get some help in the home. I must even get someone to come and live with me because I cannot manage alone." But there may be no housekeeper relief and no domestic expenses relief in his case. I think that the gap between the single person and the married person is still too wide in respect of age exemption.

My hon. Friend the Member for Cardiff, South-East has been most persistent throughout the debates on the Bill in referring to the disproportion between the level of taxation on earnings and the level of taxation on other sources of taxable income. What went wrong about this was that in 1955 there was an intention of adjusting the tax burden over the course of years, but economic conditions interrupted the pattern of development which the Chancellor then had in mind. This was coupled with the rise in money incomes which is bringing many more people into the higher rates of tax under the reduced rate arrangements.

In 1955, the standard rate was reduced, the personal allowances were increased, but the reduced rate bands were tightened up and people came into this second hand of tax more quickly than previously. Then, in 1959, the then Chancellor said that he thought it was the turn of the standard rate, and it has been nobody else's turn since, except for the change in Surtax last year.

So there is no doubt that some adjustment here is overdue as soon as circumstances permit. My hon. Friend has been saying and repeating that there is no doubt that what is needed next is consideration of the personal allowances and reduced rate arrangements because people are coming into the 4s. 3d. and 6s. 3d. rates far too quickly now that money incomes have been increased.

The Chancellor, in his opening remarks, referred to the differences of opinion which have been expressed about the use of the regulator. I have reacted unfavourably from the beginning to what the Chancellor is doing in the Bill. I am surprised that hon. Members opposite did not feel equally keenly about it. When emergency taxation is introduced I think that it is desirable that when the emergency is over it should be abandoned. While the emergency is on it should remain emergency taxation. It is wrong to impose emergency taxation, then to consolidate it in the general structure of taxation and give oneself the same latitude as before to raise or lower the level of emergency taxation. I have had far too much to do with the Minister of Pensions and National Insurance not to recognise sleight of hand when I see it. Nobody can have gone through 22 meetings of the Standing Committee which dealt with the graduated pensions scheme without recognising some very dubious devices indeed, and I think that this is of a similar order.

I do not want to go over again all our arguments about the Purchase Tax and the tax on confectionery. In my view, the general question of the relationship between direct and indirect taxation will become of growing importance in the future. The hon. Member for Southend, East (Sir S. McAdden) said, as other hon. Members have said, that taxation must be seen to be fair. I think that he will agree that about half the taxation levied upon the people of this country is not to be seen at all. At one and the same time, this is a great advantage to the Chancellor and a great disadvantage to those who bear the taxes. People ought to know when they are being taxed. They ought to see it all the time they are being taxed. Taxation should not be hidden in the price ticket as it is at present.

Sometimes, the imposition of additional or new taxes on commodities presents manufacturers with a considerable dilemma in the matter of prices. I was astonished to learn recently from representatives of the ice cream industry that none of them had heard a word or hint about the new tax before the Chancellor announced it in his Budget statement. I understand the difficulties the Chancellor has in having discussions with industry about a possible additional or new tax, but to plunge a new tax upon industry without any warning at all can give rise to some serious disturbances of the rhythm and the economy of its affairs.

Recently, the chairman of the Rowntree company spoke of the tens of thousands, if not millions, of wrappers which became immediately obsolete because they all had the price printed on them. The ice cream industry had its automated factories geared to products of a particular size, and it was not easy to adjust the size to give a satisfactory adjusted price for the product.

There was the question whether half-pennies should be introduced into the price of ice cream, which the retailers said they did not want, and then we blame the manufacturers for going to the penny above. These are serious difficulties for industry when taxation is thrust upon manufacturers unawares. There are problems here which the House and Chancellors will always have to consider when imposing additional indirect taxation.

It seems to me that such prejudice is being built up against Income Tax that Chancellors will be tempted more and more to take refuge in indirect taxation. In my view, this will be a bad thing from the point of view of public awareness of the level of taxation and interest in public expenditure.

The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) made some interesting comments on an article written by Sir Frank Bower in the current number of Lloyds Bank Review, an article which I read with great interest. An ex-inspector of taxes always has something interesting to say about taxation, even though he may have spent many years with Unilever in between. I think that the idea of a Tax Management Bill ought to receive serious consideration. At one time, I thought that it was receiving serious consideration.

I heard some funny noises coming out of the windows of Somerset House a few years ago and I thought that I caught the words "Tax Management Bill" and I had an idea that the Chancellor was showing some interest in the matter. I do not know how much of the Finance Bill would be taken by a Tax Management Bill. Perhaps quite a bit of Chapter III would be taken, but, more important, perhaps, is that quite a lot of other overdue reforms in tax administration could be brought in. I suggest that the Chancellor should give very close study to this matter.

We are awaiting—with considerable scepticism, Sir Frank Bower says—the result of the Chancellor's consideration of a corporation tax. I agree with what has been said already this morning, that there is no necessary relationship between the level of company taxation and the level of personal taxation. Personal taxation is related to the ability of individuals to pay based upon domestic circumstances and a reasonable range of income. Company taxation is not levied on the same sort of principle of ability to pay. The basis is a combination of the requirement of the Exchequer that industry shall make its contribution to the revenue with the desire that industry shall be able to build up sufficient resources to enable it to expand and prosper. We shall look forward with much interest to the result of the Chancellor's consideration.

The Bill as a whole does not make a positive contribution to the economic circumstances of today. It is a holding Bill. The Chancellor spoke of this in his Budget. There is an interesting article, "Government Policy and Growth", in the Bulletin for Industry in which there is information and candour and useful reflections on the problems now confronting the Government and the nation. The rôle assigned to this Bill by the Chancellor in his general economic strategy was not a positive one. He was just holding back consumption by retaining the general level of taxation at last year's figures plus the additional revenue to come from expanding purchasing power and also from particular directions where he thought he could get extra money.

I have been unhappy about two matters which have arisen in our discussions. I was distressed at the dispute which arose the other night about the right of the Inland Revenue to require solicitors to render certain information about transactions conducted by them as agents for their clients. I am always distressed when my hon. and learned Friend the Member for Kettering (Mr. Mitchison) and I go into different Lobbies, because we agree on so many things in this sphere, and I began to question my own judgment about the decision I took to vote with the Government. Earlier in our discussions on the Bill, I made a speech which some of my hon. Friends thought went a little too far. They are not as enthusiastic as I am for the security of the Revenue. Perhaps I am strongly biassed in favour of the Revenue having all the powers it needs within reason to see that the Chancellor is not cheated.

Reflecting on the matter since, I still think that the amended Clause is the right one. I think that the closer and narrower definition of the field of inquiry to be permitted under the Bill justified requiring solicitors, when acting as agents for their clients in these transactions, to give information to the Inland Revenue when called upon to do so.

I well remember the debates on a similar matter in 1951, regarding disclosure by banks. Previous discussion on this question went on for thirty years, from the Report of the Royal Commission of 1921 until 1951. Every Government and every Chancellor had demurred at doing anything which would breach the confidentiality of relationships between banker and client. But it was done in the end, and it was done in a way which went further than the recommendations of the Royal Commission. It is true that it was done by a Labour Chancellor who might, on the whole, be more willing to do this kind of thing than a Conservative Chancellor, but there has been no demand since the Conservative Government came into office to repeal that provision of the 1951 Act. The Chancellor knows full well the millions of pounds of revenue which disclosures by banks have brought him. They have brought him not only millions in direct payment on bank interest, but have disclosed affairs which have led to innumerable back duty cases. This provision proved to be a necessary safeguard to the Revenue, however distasteful and however much it was thought by hon. Members at the time to breach the longstanding confidentiality between banker and client.

The other worrying thing in the Bill is the whole apparatus of the taxation of speculative gains. I feel very strongly that there will be an enormous amount of work in this for comparatively little return. Had this been part of the definition of income for years past, as in the case of the United States, it would have been taken in the stride of Income Tax administration. But we have delayed so long in introducing a measure of this kind. The Chancellor of the Exchequer said in his Budget statement: The new Case VII Income Tax, without affecting growth, will meet a long-felt and widely-held grievance and sense of unfair treatment as between taxpayers."—[OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 994.] It had got to that stage. This was something designed, not to broaden the base of income taxation, but to remove a long-felt and widely-held grievance". When we do that, it is not much good erecting an elaborate but unimpressive structure to tax this form of income.

The hon. Member for Surrey, East (Mr. Doughty) said a moment ago that he hoped that the working of this new tax would be carefully watched and that, if it turned out to be not worth the candle, the Chancellor would come to the House and say that it was no good, that it was not worth going on with and should be scrapped. I hope that that will not ever be done. A Chancellor of the Exchequer confronted with that situation would, I hope, seriously consider converting a tax on short-term speculative gains into a tax on longer term capital gains.

Sir Frank Bower rather suggests that this pioneering work which the Chancellor has undertaken in connection with Case VII Income Tax may provide the basis for converting the tax into a different tax by extending the period over Which capital gains should accrue and still be taxable and by removing a considerable number of exemptions. Sir Frank Bower's catalogue of things which the new tax does not do is very interesting. There is quite a lot of things which this tax does not do which I think another tax would do.

I shall not keep the House any longer, although I still feel enthusiastic enough about the Bill to comment further on it. However, my feelings are not shared by my hon. Friends, apparently. I exempt from that observation my hon. and learned Friend the Member for Kettering, because he not only wrote most of the Notice Paper of Amendments to the Bill, but spoke to a great deal of it, too, and to great effect. I am sure that had it not been for the restraining hand of my hon. Friend the Member for Cardiff, South-East at three o'clock the other morning, he would not have allowed anything to go on trust, even at that hour. The more obscure, complex and unintelligible the proposal which the Government wanted the Committee to pass, the keener my hon. and learned Friend was to deal with it and the simpler he would have made it sound.

However, before we come to the end of the Bill, I wish to say this about the people who will be affected by it and about those who will have to administer it. I sincerely hope that the Chancellor—I hope that I shall be forgiven this last word—is taking particular care to ensure that his machinery is equipped to discharge the task which he is imposing on it. That is most important. There are many complaints about overwork in the Inland Revenue at present, but what is much worse is that I have never known a time when Inland Revenue officials have been so discontented at their inability to do the work to their own satisfaction. Overwork is one thing, but dissatisfaction with the discharge of one's duties is a mortifying experience which is most depressing to the morale of the Department.

In addition, it means that a good deal of skimped work goes out of the Department. I am shocked at times to see what can go to a taxpayer in the way of routine and rather perfunctory administration on matters about which he is entitled to feel most keenly. They are personal to him. Inland Revenue officials must realise that in many cases they are demanding money. They are not just sending out a chit as a matter of interest, something to be read in between looking at the television. These matters affect the taxpayer very keenly and personally.

It is essential and in the interests of sound administration that the work not only of the Inland Revenue, but of all Departments which have contact with the public and intrude on people's personal and financial affairs or on the rights to which they are entitled, should be discharged efficiently and in a proper spirit. It cannot be done unless there are adequate numbers of staff, properly trained and encouraged to be enthusiastic about the work which they have to do. I hope that the Chancellor will ensure that that position prevails in the Inland Revenue in the months to come.

1.18 p.m.

The Financial Secretary to the Treasury (Sir Edward Boyle)

I hope that the hon. Member for Sowerby (Mr. Houghton) did not feel that the occasion made it necessary for him to abbreviate his remarks too much or not to do sufficient justice to his very real enthusiasm. Listening to him on the subject of taxation, I was reminded of the stanza of Dr. Johnson, which I suspect the whole House knows: His virtues walk'd their narrow round, Nor made a pause, nor left a void; And sure th' Eternal Master found His single talent well employ'd. I do not say that the hon. Gentleman is a person of only one talent, but there is certainly a single talent which he employs very ably in the House and with great enthusiasm.

I think that there would be complete agreement with the congratulations of the hon. Member for Cardiff, South-East (Mr. Callaghan) to the hon. and learned Member for Kettering (Mr. Mitchison) on his skill in drafting Amendments to successive Finance Bills—a most necessary part of our proceedings on such Bills. Perhaps you will not think me impertinent, Mr. Deputy-Speaker, and will not rule me out of order if I offer further one word of congratulation. I think that this year our proceedings have been assisted very much by the early notice which hon. Members have had of the selection of Amendments and by the helpfulness which hon. Members on both sides of the House have had from the Chair throughout the debates.

The hon. Member for Cardiff, South-East, at the start of his speech, said that the Finance Bill this year raises substantially more in taxation than last year's Finance Bill, which is, of course, perfectly true. But I think that the House ought to remember something else, and that is that the state of the balance of payments today and the state of sterling is very much stronger than it was at the time we were debating the Third Reading of last year's Finance Bill.

I shall say something later about the general economic situation in relation to the Bill, but when considering the background to it the House ought to remember that the external monetary position was extremely favourable in the first quarter of this year. The trade figures suggest that the visible balance has improved since the first quarter. I have said on many occasions in the House that we should not ever forget the importance of the Budget and the Finance Bill in helping to keep supply and demand in balance and leave room for the expansion in exports which we need.

It is worth remembering that the rising trend of exports continued in May. Making the seasonal adjustment, United Kingdom exports rose by 4 per cent. between the three months December to February and the three months March to May. There was a strong increase in exports to Western Europe during this period, an increase of about 6 per cent., and exports to the sterling area, my hon. Friend the Member for Worcester (Mr. Walker) will be glad to hear. were 5 per cent. higher in March to May, mainly due to the recovery in exports to Australia and New Zealand. A fall in exports to America was wholly due to reduced exports to Canada. There was a small increase in exports to the United States.

The hon. Member for Cardiff, South-East said that the economy had been clamped down too hard and that the time had come to let up. But do not let us underrate the letting up which has been done by my right hon. and learned Friend during recent months. We have had the successive reductions in the Bank Rate; we have had the reductions in special deposits; and we have had the important reduction in hire-purchase terms. I do not want to arouse unnecessary controversy at this point in our proceedings, but it would be a very new line for hon. Members and right hon. Members opposite if they said that reductions on the budgetary side, the fiscal side, ought to take priority over reductions on the monetary side.

It was always the view of the right hon. Member for Huyton (Mr. H. Wilson), when he spoke on these matters for the Opposition, that my hon. Friends expected monetary policy to do too much, that they relied on it excessively. I claim that we have been absolutely right, considering the needs of our economy, to start by reducing on the monetary side. When I hear hon. Members opposite say that we should have given greater priority to reductions on the fiscal side, I bear in mind that there may be other applications of the remark by the hon. Member for Cardiff, South-East—that economic problems and solutions should not be decided just by electoral considerations. I agree with him about that.

The hon. Member referred to the importance of fairness in our budgetary policy. I agree with him about this, too, but fairness does not relate only to the raising of taxes. It must also extend to the question of where the money which we raise by taxes goes and for whom it is used. In that context, I remind the House of what I thought was the very striking figure which I gave the other night, namely, that in 1951–52 the total proportion of Supply expenditure going on social and communal services was about 33 per cent., whereas the total proportion now is about 43½ per cent.

When we are considering fairness, and I agree that it is important, we ought to bear in mind the very substantial increases in Government expenditure during the last two or three years and where those increases have gone, because the standards today of both the National Health Service and the education service are higher than ever before, and we have only just announced the intention of the Government to make a further increase in National Assistance.

My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) made a number of interesting suggestions, first, on the subject of whether we should have separate taxation and tax management Bills. The difficulty would always be the borderline cases, for the decision on which side of the line a particular proposal should be drawn would be arbitrary on a number of occasions. I can see a good deal of difficulty arising over that.

I do not have as much experience as some hon. Members of Standing Committees, but I have a certain amount. The other night we debated the Clause on solicitors and information for about 1½ hours. I think that that was a fair length of time for a Finance Bill debate, but it would have been a rather long debate for a Standing Committee. Do not let us forget that the length of a normal day in Committee of the whole House from half-past three to half-past eleven—not a day with an all-night sitting—is more than three times the length of a normal Standing Committee sitting. In fact, I believe that we get a proportionately more careful discussion under the present system.

It is true that Standing Committees can sit in the afternoon, but my experience is that when a Standing Committee sits in the afternoon there is at least as much impatience at half-past seven in the evening upstairs in Standing Committee as there is downstairs in the Chamber at half-past eleven. We had a coherent discussion the other night and I doubt whether, simply from the point of view of getting more time for discussion of Clauses, there is quite as much in the Standing Committee suggestion as some hon. Members think.

Mr. Callaghan

But will the hon. Gentleman also consider the other point, that if the Bill is sent upstairs there is released more time in the Chamber for other debates?

Sir E. Boyle

I see that. I am merely putting my point of view because it is one which we should consider. There is the further point that many of these discussions would probably have to take place at a later stage of the Bill, which, again, would take some time on the Floor of the Chamber.

I want, finally, to say a few words about the Finance Bill in relation to the economic situation, bearing in mind the situation today and that when the Budget was introduced three months ago. When my right hon. and learned Friend introduced his Budget, his theme was the maintenance of a firm base for sound expansion, that is to say, not a sudden expansion which could last for perhaps one year and which might then cause us again to take measures to correct the economy, but a soundly based rate of growth based on a really fine competitive performance in world markets. My right hon. and learned Friend wanted to lay the base for a steady increase in production and consumption throughout the year ahead without a renewal of the balance of payments difficulty.

It is untrue that the Budget was too deflationary. It is quite true that it did nothing to expand demand, but it also did nothing to prevent demand from increasing. My right hon. and learned Friend took the view, and still takes the view, that there was likely to be a substantial increase in total demand over the financial year without deliberate reinforcement through the Budget, though, as I have said, he has taken certain important steps outside the Budget in other ways.

My right hon. and learned Friend also made it quite clear that if he turned out to be wrong he had means at his disposal to stimulate or restrain, and that, by pursuing a neutral budgetary policy, he had greater freedom to reduce interest rates and to relax credit restrictions which had to be imposed last July. Total demand has risen since the beginning of this year, although this increase has not as yet been reflected in any substantial increase in production.

This is due largely to two factors which must be temporary. The first is the shortage of vegetables over the last few months, which has raised food prices and checked personal consumption; but this check has already passed its peak. At the same time—and this is part of the answer to the right hon. Member for Orkney and Shetland (Mr. Grimond)—manufacturers have met rising demand by very heavy withdrawals from stock. The hon. Member for Middlesbrough, West (Dr. Bray), who made such an interesting maiden speech the other night, was right to raise this question of stocks because, as I said at the time, they are a more important short-term factor in our economic life than is always realised.

Stock building rose sharply from £12 million at 1958 prices in the third quarter of last year to £78 million in the fourth quarter, and stock building at that time was an important factor in sustaining output when other kinds of demand were still falling. I think that at the beginning of this year the reverse was true. While other kinds of demand had risen, stock building had fallen back. The actual figure for the first quarter on the same basis would be minus £40 million, and provisional indictions are that destocking continued into the second quarter.

In the first quarter of this year stocks were reduced at a higher rate than at any time since 1955, when quarterly figures first became available. We do not believe that this is likely to persist for long, and as soon as it stops production will be considerably stimulated. Later, we must expect traders to be adding to stocks in the normal way, and, of course, the swing from stock reduction to stock building could be a matter of hundreds of millions of pounds a year. What went wrong with the calculation in 1959 was precisely this. We expected there to be some rise in consumption. We expected there to be some rise in fixed investment, but in the early months of 1959 nobody realised just exactly how much stock building might add to all the other expansionary forces at that time.

My right hon. and learned Friend based his Budget not just on a view over the first few months, but over the year ahead, and I do not believe that there is any reason to make significantly different assessments of our prospects because of what has happened during the last two or three months. The elements of expansion which my right hon. and learned Friend emphasised in April are still operating strongly. Exports have been climbing, public expenditure is certainly rising at least as strongly as my right hon. and learned Friend forecast in April, and consumer spending also shows signs of increasing. I see no reason at all to go back on the forecast which my right hon. and learned Friend gave in his Budget for consumer spending over the financial year.

In any case, the Government have not just sat idly by over the last two or three months. We have taken the opportunity to make some relaxations on the monetary side. We have brought down the Bank Rate. We have reduced special deposits and lowered the minimum down-payment on all consumer durables other than motor cars, and the aggregate effect on the level of demand of all these relaxations is likely to prove considerable. My right hon. and learned Friend is quite confident that the economy will expand at a satisfactory rate over the present financial year.

I hope that I have not detained the House too long. As I see it, our policy with regard to the Budget, our monetary policy, in fact all our policies designed to regulate supply and demand, must be taken alongside the perhaps more controversial policy of the Government in other fields. I end by quoting a valuable passage in the thirty-second Annual Report of the Bank for International Settlements. The article as a whole, like the Motion of my hon. Friend the Member for Tynemouth (Dame Irene Ward) the other night, is moderately and reasonably critical of the Government, but its general tenor seems to be entirely in line with my hon. Friend's Motion, which began with the words: That this House congratulates Her Majesty's Government on initiating a policy designed to control inflation and to stabilise prices but calls on the Government to expound the policy with greater clarity … The Government are happy to vote for any Motion of congratulation, and are not very worried if some reasonable criticisms are made while discussing it.

Mr. Grimond

I thought that it was the congratulatory part of the Motion which was so damaging.

Sir E. Boyle

My hon. Friend's speech was a shade long, but I thought that the evening as a whole was a happy one.

To return to what I was saying, the Bank for International Settlements said: In the 1962 Budget the authorities showed their intention to maintain restraint in the fiscal sphere in the immediate future; some useful reforms in taxes were introduced but the overall impact of Government finances will be neutral. This policy was again criticised for not being expansionist, even by some who have not advocated import controls. While the authorities have no need, and presumably no intention, to let economic activity drift downwards, a premature expansion to recapture the situation of a year ago would certainly not make sense. In setting their standard on a firm wages policy, if they hold to it, and in looking for exports to give the next real impetus to expansion, if they wait for it, the Government has chosen the only road to future vigour for the British economy. I believe that those words are absolutely true, and it is in that spirit that I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time and passed.