§ Motion made, and Question proposed,
§ That it is expedient to amend the law with respect to the national debt and the public revenue and to make further provision in connection with finance, so, however, that this Resolution shall not extend to making amendments of the enactments relating to purchase tax so as to give relief from tax, other than amendments making the same provision for chargeable goods of whatever description or for all goods to which any of the several rates of tax at present applies.—[Mr. Maudling.]
§ 5.22 p.m.
§ Mr. Harold Wilson (Huyton)
It is traditional that the first speech after the moving of the Budget Resolutions should be devoted to the courtesy of congratulating the Chancellor on the manner in which he has presented his Budget to the Committee. I think I can certainly say today that this is no empty ceremony. 505 Quite apart from the contents, on which I shall have a word or two to say in a moment, the whole Committee will agree in complimenting the Chancellor on the very clear way in which he presented the Budget and held the attention of the Committee throughout.
I was perhaps in a better position than many to test him on this—if I may be permitted a personal note—having not been to bed all night and having had very little sleep. If the Chancellor's speech had been a little dull, even for a little time, while he was addressing us, I would have gone off to sleep, but I can say that I gave my full attention to the Chancellor and he held the full attention of everyone in the Committee.
I think the breach of precedent which he said he would make, the departure from traditional policy, was in general for the convenience of the Committee. Although we may want to think about it a little in future, I believe that in general the Committee preferred this to the lengthy exercise of putting time on until the markets had closed and then giving us all the real proposals the Chancellor is to make, all the guts of his proposals, in a mad rush at the end in a way in which the Committee cannot properly absorb. I think the change was right. Some of his minor tax reliefs obviously will be welcomed, and also his statement that we are to have a White Paper dealing with a new form of Budget accounts. I think the Chancellor is quite right to be doing that.
The Chancellor told us that the theme of his Budget is expansion. We welcome those words from him, that the theme is expansion. They were exactly the same words which were used exactly four years ago by one of his predecessors—not last year, not in 1961, emphatically not in 1961, not in 1960, when taxes were increased just after the last election, but four years ago, in 1959. The emphasis then was on expansion, and it is again today. Again it is the same theme, which we heard, not in 1958, 1957, and 1956 when the present Prime Minister was Chancellor, but in 1955. Then the theme of the right hon. Gentleman the present First Secretary of State was expansion, because, of course, expansion for hon. Members opposite is not a continuing philosophy. It is a quadrennial inspiration animated by factors other than purely economic ones.
506 I well remember in 1959 the then Chancellor of the Exchequer saying that not only he but the whole of the Treasury Bench were expansionists. We were deeply moved at the time; we welcomed it. I remember making some remarks about the technical character of the mass baptism we were witnessing. But where were these expansionists in 1960, in April, 1961, or in the "Little Budget" brought in by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) in July, 1961? The plain fact is that today the present level of unemployment, the fact that for three years our production has barely increased at all and the continuing failure to keep up with all our main trading rivals in the matter of industrial expansion, are the result of the Government's failure to follow expansion programmes and policies once the 1959 Budget had done its political work.
So our criticism is certainly not that the Government have been expansionist this year in the Budget—we welcome it. Our criticism is that for three years past they have held back expansion deliberately as part of their fiscal policy. It has been quite deliberate that an overcautious policy should be followed year after year so that the right hon. Gentleman should be able this year to hand out something in the Budget this afternoon. It is not merely that we can say this looking back. I think we can claim in every detail that we said this would happen. This was the theme of our debate on 18th July, 1961, when we said that this was the policy which would be followed and that the Budget of 1963 would bring in a glorious financial bonanza. I think we can claim that as long ago as May, 1958, this four-year electoral cycle was the policy of the Government.
If the Chancellor is right to do today what he has done, for example, for the unemployment areas, for example, for the general motive of stimulating the economy—I think he is right to do these things today—we might ask why it was not done last year? Can any lion. Member suggest a real reason why if the economy was so weak last year and is so strong this year that we can afford to do it this year but could not afford to do it last year? It will he obvious that if these Measures are as effective for dealing with unemployment as the right hon. 507 Gentleman hopes they would have been just as effective a year ago in preventing unemployment as in curing it.
Many hon. Members will not judge the Budget on detailed tax changes, to which I shall turn in a moment, but on the size of the hand-out. It might be interesting to show the Committee the way in which the pattern of hand-outs has been followed in the last ten years. In 1954 there was a net hand-out of £5.8 million. In 1955 the hand-out was £155½ million. That was the first Budget of 1955. After the election, of course, we had an autumn Budget, in which the hand-out was minus £113 million—£113 million was clawed back very largely—[An HON. MEMBER: "What about the 1951 Budget?"] No one could accuse us of having an election Budget in 1951. But in 1955, £113 million was clawed back from those who had the benefit in April. Then in 1956, the election over, and with a new Chancellor, the Budget was colourless. It was a total hand-out of only £1.6 million. That was about 100th of what it had been a year earlier. In 1957 theer was a hand-out of £11.7 million, mostly in respect of overseas trading corporations. In 1958 there was a hand-out of £9.7 million, and, of course in 1959 the tremendous hand-out of £320 million.
Of course, that was 1959, and some of my cynical hon. Friends thought that it had something to do with an election. But, of course, it had not. It was due to the conversion of the Government Front Bench to the principles of expansion, and in 1960 the Government showed how lasting was their conversion by having a hand-out of, again, minus £72 million. Six months after the election they took net £72 million off the taxpayer. In 1961, £110 million was taken away by the right hon. and learned Member for Wirral, and I am not dealing here with all that the right hon. and learned Gentleman did in the course of the following year. I think that in 1962 the figure was about £9 million taken away. It was nearly neutral last year. In 1963 we are having a net hand-out of £250 million. The quadrennial pattern is being preserved.
If we take all the Budgets for the years 1954 to 1962 we find that the net 508 reductions in tax liabilities in those nine Budgets amounted to £457 million. The whole of this was given in 1955 and 1959. Indeed, what was then given exceeded that figure. The Government gave in those two Budgets out of the nine in those years a net hand-out of £515 million and spent the other seven Budgets clawing it back. If we bring in the 1963 Budget, then for the ten years we have a net concession of £707 million, and the amounts given away in 1955, 1959 and 1963, the magic years, add up to £765 million. The remaining seven Budgets out of the ten in that period have produced net increases in taxation.
I thought this might help the Committee to understand the economic motivation that we have been having in these matters. Of course, the Chancellor is right to reflate. I think that should be said absolutely clearly. But, of course, he or his predecessor should never have deflated to the point where this amount of reflation was necessary. Last year, for example, my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) made as his main criticism of the Budget of 1962 the fact that it was too deflationary, and so it has proved. If we had had a steady expansion year by year this would have meant not only a higher standard of living and a bigger contribution to the under-developed areas, but a higher standing for us in the world. The stop-go economy has lost us not only a great deal of worth but a great deal of influence in the world.
The National Economic Development Council now recommends a 4 per cent. increase per annum. If the Government had made that their target twelve years ago, and stuck to it, we should have increased the national output by £3,400 million more than has actually been achieved. Because of the Government's failure to maintain a steady increase in production and because of this timid holding down of the economy for three years out of four, the nation's production today is £3,400 million a year less than it would have been if the N.E.D.C. target had been followed over that period.
Nevertheless, however late and however precarious some of us may regard the nature of the right hon. Gentleman's conversion, we welcome his support for the principle of expansion. May I say that I welcome the very heavy concentration in 509 the early part of his speech and in some of his proposals on measures to get industry moving again and to encourage investment in industry? As I say, we must ask the right hon. Gentleman why, if it is right this year to do this, it was not done last year so that the unemployment we are now having would not have developed into a great deal of hardship, and certainly unemployment areas would have been avoided.
I am glad the right hon. Gentleman said that expanding production and a strong £ go together. I am glad that he has come round to this view. Of course, the £ a year ago was at least as strong as it is today, and if it is safe to embark on this expansionist programme today in order to reduce unemployment, why was it not safe to do it a year ago? As I say, the £ was at least as strong then, and some say stronger than at present. However, I am very glad that the right hon. Gentleman has said that in his view expansion is the road to a strong £ and is not incompatible with it.
We on this side of the Committee have said that in the House year after year, and what we said on this point was rejected by Chancellor after Chancellor opposite. From the Prime Minister onwards, we were told that the £ would be endangered unless we cut down production and held it down, and that we were trying to do too much. That was the theme of every Chancellor until today's speech by the right hon. Gentleman. But I am not suggesting that the present Chancellor is of a different category from his predecessors, because I remember him arguing this in the most sophisticated manner in every financial and Budget debate which we had between 1955 and 1961, or even 1962.
It is clear—indeed I should have thought it obvious—at least to say that it is the restrictionist, the sluggish economy, the economy where we have factories and plants working below capacity, a situation such as that which puts up costs and endangers sterling. It is when we have a booming economy—not inflation—growing all the time that we have the factories necesary to produce the strong £. I am glad that the Chancellor agrees with that.
510 On what the right hon. Gentleman said about world liquidity, and I thank him for welcoming new allies to this campaign of his, if he will turn to HANSARD for 26th November, 1959—he had better check this; I have not had a chance to look it up, but I am willing to chance my arm on it—he will find that in the debate on the Radcliffe Report we on this side of the Committee put forward very much what he has put forward in the so-called "Maudling Plan"—and a great deal more—in our terms for world liquidity. As I say, we welcome these new allies and we also welcome the right hon. Gentleman's conversion to what we said two years and more ago on incomes policy.
The right hon. Gentleman says that we must always relate incomes policy to production, but two years ago the Government's policy was to restrict production and then to tailor the wages system to fit a contracting economy and to use some brutal means to enforce that policy. We welcome also the right hon. Gentleman's conversion—and I want the Committee to understand that I do not underrate at all the importance of all this—to proposals which we made long ago for linking aid to underdeveloped countries to the unemployment problems of this country, and also his conversion to—and it is wonderful what a couple of by-elections will do—and his acceptance of our view that the Local Employment Act was a dead loss, as my hon. Friends have been saying over the past two or three years.
We also very much welcome his acceptance of the principle of a discriminatory tax relief for industry going to development areas. We voted for it last year and in previous years. The Chancellor went into the Division Lobby against it. So did all hon. Members opposite, who cheered him when he made the announcement today, including the hon. Member for Esher (Sir W. Robson Brown), who, when he heard it, shouted "Brilliant". Obviously the hon. Member was so overcome by the novelty of the proposal that he has not come back to us.
I also welcome very much the Chancellor's idea of writing off the full extent of expenditure by a businessman in these development areas. This is the system 511 first introduced in Sweden, as the Chancellor knows. I think that with all modesty we can say that we have pressed for it year after year. That is on the record. I think that I know past Budget debates and speeches sufficiently well to be prepared to accept challenges on this. I would not make this statement unless I were prepared to have a substantial wager with the President of the Board of Trade about finding the necessary chapter and verse.
All these things we welcome, but I ask again, why were they not done before? If they are so essential for the unemployment areas—and we welcome them as a significant contribution—why were they not done in 1959? Why were they not done in 1962 so that the tragedy of the unemployment areas of the last year could have been avoided?
Before I sit down, I have a few comments to make on detailed items. The House would not expect me today to go over all the detailed proposals, and it would not be in accordance with the tradition of the House for me to do so. If he catches the eye of the Chair tomorrow, my hon. Friend the Member for Cardiff, South-East will spend a great deal more time dealing with these things. May I refer to one or two?
We support what the Chancellor announced today about Schedule A. We have often gone into the Division Lobby in support of this proposal, and we have had some rather odd company with us on some occasions. We have been there at any rate in support of a modified form of what the Chancellor has done.
We welcome the statement in his speech about the tapering of the child allowance. My hon. Friend tomorrow will deal with the restoration of allowances for Rolls-Royce cars and similar cars. I find it a little difficult so soon after the Chancellor's speech to see how this proposal fits into his incomes policy, because there is no doubt who will be cheering this concession. He suggested that it would be the Rolls-Royce workers. I admit that I have never known a Tory Chancellor lack a respectably sounding excuse for a piece of cheerful aid for a limited number of people. We had an example on the Surtax concession three years ago. It was said that it would produce incentives and increase production and exports. In 512 fact, production has not increased since then and exports have increased less than in almost any other country in the world. We always hear these respectable reasons.
But the Chancellor should recognise that restoring the full fiscal allowance means at the end, stripped of all hypocrisy, that more expensive cars will be running around the country at the Chancellor's expense for the benefit of individuals. This money comes out of the public purse, out of the taxpayer. Yet when my hon. Friends and I go to the Chancellor or the Minister of Health for an allocation of a few dozen invalid cars for paraplegic ex-miners or to extend the provision of cars to some disabled ex-Service men, we are told that the country would be bankrupt if this concession were made. But all the money comes out of the same national pool.
§ Mr. Grant-Ferris (Nantwich)
Does the right hon. Gentleman realise that this concession will bring a tremendous advantage to my constituents in Nantwich and also to those of his hon. and learned Friend the Member for Crewe (Mr. Scholefield Allen)? Is he aware that there will be great rejoicing in Crewe and Nantwich?
§ Mr. Wilson
I have dealt with that point. It was fully made two years ago, but I do not remember a substantial number of hon. Members voting against the proposal two years ago when exactly the same argument was put by hon. Members on both sides of the House.
§ The President of the Board of Trade (Mr. F. J. Erroll)
Why did not the right hon. Gentleman vote against it today?
§ Mr. Wilson
The right hon. Gentleman will not be disappointed when he sees the Amendments which we put down to the Finance Bill after we have had our usual quick consultation.
The right hon. Gentleman also referred to gambling. We note that he is to examine this matter further and that he feels that whatever is done would have to cover the rest of the gambling field. At the moment gambling taxation is somewhat selective. He might consider this point: if he were to go for gambling and speculation, why not make his predecessor's capital gains tax really effective 513 and make a proper job of the tax on gambling? If he did this there might be a lot of feeling in all parts of the House that if we were able to tax speculative deals effectively there might be a case for following up the good which the Chancellor has done today in getting rid of the Stamp Duties altogether. It would, I think, be possible to do that and to deal with the problem of investors, if at the same time we were able to deal much more adequately and effectively with the problem of capital gains.
The right hon. Gentleman has not come round to the T.V.A. turnover tax. It is a rather odd proposal to invite one accountant to go away and to think about it. After all, he has had about two years to be thinking about it himself. It seems rather odd to have spent two years since we mad: this proposal in the debate on 26th July, 1961 and then to tell us, after all this time, that he has turned it down but will ask some independent accountant to look at it. On his own argument there might have been a case for setting up a high-powered Committee representative of tax experts and industry, because the point which he left uncertain was what the reaction of industry would be to it. I do not think that a one-man inquiry is the way to do it, and I should have thought that the Chancellor would set up an appropriate departmental committee to find this out.
§ Mr. Maudling
He is a prominent merchant banker, one of the younger leading bankers, and he will have others to help him. I chose him because he will have knowledge of the reactions of business to a scheme of this kind.
§ Mr. Wilson
I thought that there would be a few people in the right hon. Gentleman's Department in the last few years who also knew a bit about it, just as does Mr. Gordon Richardson. If I am wrong about that, the Chancellor ought, I think, to have set up a full-dress departmental tax committee to look at the question.
Finally, I come to the Income Tax concessions announced by the Chancellor at the end of his speech. Not only do we welcome these proposals but I think that we can all claim that we forecast that they would be in the Budget. Anyone who read a report of my speech at Macclesfield a fortnight ago saw that I forecast that this is what the Chancellor would do. 514 We felt that it was right and we said so at the time. When the Chancellor has to decide in direct taxation between a cut in the standard rate, on the one hand, and handling it by means of these allowances, on the other hand, we remember that four years ago the Chancellor said that it was the turn of the standard rate. If that were so, than this was the turn of these allowances. We very much welcome the Chancellor's decision.
Once again we must ask why it was rejected last year. Every hon. Member who waved his Order Paper this afternoon when the Chancellor made this proposal voted against the same proposals last year when they were moved from this side of the House. If they want to be fair about it, the Committee will recollect that the central theme of the criticism of the Budget by my hon. Friend the Member for Cardiff, South-East a year ago, the central theme of the proposals which he pushed more than anything else in the Budget debate, the Finance Bill debate and the Amendments to the Finance Bill, was the suggestion that if we wanted to get production moving up and if we wanted to get justice in the fiscal system, we should make an attack on the problems of these allowances and exemptions and take about 3 million to 4 million people out of the field of Income Tax. That was put from this side of the Committee, and the Chancellor of the Exchequer, the Leader of the House, and all the rest of them who have been cheering this afternoon voted it down. Even though a year late, even though much good could have been done a year earlier, we welcome the proposals the Chancellor of the Exchequer has made.
In general, as I have said, we welcome the fact that the right hon. Gentleman has decided to have a reflationary, an expansionary, Budget. We only regret that he has been so long coming to it. We welcome the fact that a substantial part of the Budget deals with industrial expansion, aid for capital allowances, and things of that kind. In the field of direct taxation, we welcome what the Chancellor has done in the respects I have just discussed. Our criticism is that this ought to have been done before. Our criticism is that once again it bears all the marks of a cleverly planned and cleverly thought out election strategy.
§ 5.50 p.m.
§ Mr. Eric Johnson (Manchester, Blackley)
This is not the first time I have had the honour of being the first from this side of the Committee to congratulate the Chancellor of the Exchequer on the presentation of his Budget. I do this with particular pleasure, because I recall that the first debate on a Finance Bill that I ever heard was in 1952 and my right hon. Friend was then drafted from the office of Parliamentary Secretary to the Ministry of Civil Aviation, as it then was, to the Treasury to take part in the debates on the Finance Bill. I remember thinking at that time, as I expect many who heard him thought, that there spoke a future Chancellor of the Exchequer. I wish it was always as easy to make correct forecasts.
The new method of presenting the Budget is a good one. I must confess, as somebody who listened to what was, after all, a long speech, that it seemed to be a little more difficult to take it in when presented in the new way. Perhaps that is something we will get used to. I am sure that it is absolutely the right way to do it.
I found the content of it very difficult to quarrel with, as indeed did the Leader of the Opposition. Never before have I heard a Leader of the Opposition so complimentary about a speech by a Tory Chancellor of the Exchequer. I do not think that the Leader of the Opposition found any way in which he could criticise it, except that he seemed to think that it was rather too good, and he attributed this to the fact that he thought that there might be a General Election coming this year. I would only say to the right hon. Gentleman, if he were here, "You ain't seen nothing yet", because in my view there will not be a General Election until after one more Budget. If this is a good one and if we run true to the form which the right hon. Gentleman attributes to us, what are we going to get next time? It will be a very good one indeed.
Everyone would agree that the task facing the Chancellor of the Exchequer today was mainly how to increase our exports and deal with the problem of our having a great deal of under-utilised capacity in industry. If we can solve the problem of using that capacity, we 516 will go a long way to solving the problem of unemployment. Therefore, I do not think that any one would disagree with my right hon. Friend's statement that what we need is to expand both demand and production. The right aim is the one my right hon. Friend has set himself of a 4 per cent. increase without inflation.
I believe that in the past the Government have done a great deal more than they have been given credit for to deal with the unemployment areas. Today some splendid measures have been announced. We can look forward with a good deal of confidence to a very considerable improvement in the difficult areas. I was going to suggest to my right hon. Friend that prehaps it was not enough to build new factories and make loans to people to build factories in bad areas, unless they knew that when they went there they would be able to produce profitably. I thought that the Chancellor of the Exchequer might have to give some relief of taxation to make that possible. That is precisely what he has done. These other suggestions about public housing are excellent. As the right hon. Gentleman pointed out, the loans to underdeveloped countries to help them to buy from us are tremendously important.
There is one form of taxation to which I do not think my right hon. Friend referred. That is the Profits Tax. I have spoken about this tax on several occasions. I have had fairly lengthy correspondence with my hon. Friend the Financial Secretary to the Treasury on the desirability of taxing undistributed profits at a lower rate than those which are distributed in dividends. I know that my hon. Friend does not agree with me. I believe that many other people disagree with me.
I believe that a lower tax on undistributed profits would help our exports. Apart from anything else, industries hoping to compete successfully in the overseas market must be equipped with the best possible and the most up-to-date plant. The cost of new plant and its need obviously vary a great deal from one industry to another. In 1962 about half our exports consisted of iron and steel, machinery, road vehicles, and aircraft. These are all industries which use very expensive plant and in which there is a 517 great deal of competition, and the plant has to be kept up to date at a high cost. If the cost is high, it necessitates ploughing back a great deal of the profits to keep the plant in the best possible order. It seems to me to follow from this that a reduction in the rate of tax on undistributed profits would enable such industries to do more to finance themselves and keep themselves efficient. They would be able to use more of their own resources. The Committee will have noticed that the industries I have mentioned are those on which we rely to do so much of our export trade. They need most to keep up to date. I therefore believe that a reduction in the Profits Tax would help them and enable them to bring down prices. There is a strong case for this.
I had hoped that my right hon. Friend would see his way to reducing the tax on fuel oil used in industry. On the other hand, I accept his reasons for not doing so, at any rate at present. I still think that there is some case for abolishing the surcharge and perhaps going even further on the fuel oil used for road transport. The cost of fuel used in heavy goods vehicles is very heavy indeed. It is bound to have an effect on the delivered price of manufactured goods. It is not only the journey from the factory to the final sales point that the goods have to make by transport. Many classes of goods make many road journeys before they get to the final factory which makes them and from which they are delivered to the ultimate buyer, or to the port if they are for export. On each of those journeys tax must be paid at a heavy rate on the fuel used. If it could be reduced it would do much to bring down the cost of goods generally and help to reduce the cost of living.
Another important aspect of the tax on fuel is its serious effect on the cost of operating public service vehicles. If Dr. Beeching's recommendations on the railways are brought into effect it is clear that more bus routes will come into operation to replace the branch lines which are closed. This should lead to a greater demand for buses, including an increased demand on bus routes which are at present unremunerative. If the unremunerative services are to be operated the people operating them must be given the chance of making a profit or they 518 will not run them. One way of making this possible would be to reduce their costs by bringing down the tax on the fuel their vehicles consume. This would be much superior to giving a subsidy.
With the present high rate of fuel tax many rural bus routes are faced with diminishing receipts and, in some cases, gradual losses. This would have been an opportune time for my right hon. Friend to have reduced the tax on fuel used by public service vehicles. It is estimated that the cost of the tax adds about 10 per cent. to the cost of operating a bus. Manchester Corporation had to pay £581,488 in duty on fuel last year. In the last five years the Corporation has paid £2,783,000 in this form of taxation; a lot of money. If the tax were reduced it would make it easier to maintain the existing bus services and expand them where necessary in the thinly populated rural areas. Lower bus running costs would lead to lower fares and more passengers and in large cities it would mean some easement of the burden borne by the ratepayers.
Considering the Budget as a whole, I am perhaps most pleased at something my right hon. Friend has not done. I feared that he might have succumbed to the temptation to have a tax on gambling, and I congratulate him sincerely on the decision he has made. Not everyone may agree with me, but I can assure them that there are sound reasons for the decision my right hon. Friend has made. In this connection, he gave the figures more honestly than I have ever heard them given before and those figures clearly showed the amount of money that changes hands. My right hon. Friend pointed out the effects of such a tax.
After the 1960 Betting and Gaming Act, which made cash betting off-the-course legal and established betting offices, Parliament decided that it would be right to introduce a Betting Levy Act by which betting would make a contribution to horse racing. My right hon Friend the First Secretary, then the Home Secretary, said in his Second Reading Speech on that Measure, when commending the levy:The justification for it is the need to provide the machinery by which a great national sport and a national industry can be prevented from getting into trouble or declining.519 He said that if, as a result of the Measure, public support for horse racing could be maintained and increased, its purpose would succeed. He went on to speak of the importance of maintaining our position and said:… it is in the national interest that our prestige and, indeed, our pre-eminence in the breeding and racing of bloodstock should be maintained."—[OFFICIAL REPORT, 5th December, 1960; Vol. 631, c. 877–8.]My right hon. Friend might have added that the racing and horse-breeding industry provides a great deal of employment and earns a substantial amount in exports.
Had my right hon. Friend introduced a tax on bets on horse racing today it would have meant that less would have been available for the present levy which is designed to assist this industry; a levy which comes out of bookmakers' profits. I will not labour this point and I appreciate that the Chancellor said that he was guided to some extent by the experience of my right hon. Friend the Member for Woodford (Sir W. Churchill) when he introduced the 1926 betting tax and had to repeal it in 1929. It is worth noting that on that occasion my right hon. Friend the Member for Woodford said:… there is one of the new taxes for which I am responsible which has been a failure, which, indeed, has been a fiasco, and which obviously has caused more trouble than it is worth. I mean, of course, the duty on betting.I am glad that my right hon. Friend has seen the red light and has not followed the line taken by my right hon. Friend the Member for Woodford in 1926.
A gambling tax of this sort would have undone what was achieved by the Betting Act. It would have brought back the street bookmakers. Nobody need think that all betting offices are gold mines. I know that some of them are profitable, but a very large number of small bookmakers in Manchester who were street bookmakers before are finding it extremely difficult to make both ends meet. Had a new tax been placed on them they might not have been out of business but they certainly would have gone out of their betting shops. They would have gone underground again, as they were in the past. As my right hon. 520 Friend the Member for Woodford said of the honest bookmaker:The very fact that he has paid the tax has placed him at an invidious disadvantage compared with more slippery and unsubstantial rivals."—[OFFICIAL REPORT, 15th April, 1929; Vol. 227, c. 49.]
§ Mr. R. T. Paget (Northampton)
Is not the hon. Gentleman describing exactly the process we anticipated—that the big boys are swallowing up the little ones? Did we not say not so long ago that the big boys would make a packet out of it and would swallow up the little ones?
§ Mr. Johnson
I grant that many of the big bookmakers are doing well. Nevertheless, the little ones are not being swallowed up. They are struggling on, they know nothing else, because this is their livelihood and, as I said, they would go underground before being swallowed up should the occasion arise.
I am opposed to increasing the taxes on horse racing in any way. The bookmakers are already contributing about £10 million to the Exchequer in Profits Tax and Income Tax. This does not mean, however, that I am opposed to every form of tax on gambling. The Chancellor was absolutely right to undertake to go into the whole question of gambling taxation, because I consider that some of it is less desirable—I suppose that some people would say that all gambling is undesirable—and cannot be held in any way to be in the national interest.
Football pools already make a substantial contribution to the revenue and are paying enough. The dog tracks also contribute a great deal through the duty borne by the totalisator and bookmakers. But there are other forms of gaming, ranging from bingo to chemin de fer which appear to get away with it altogether. I have no information as to the amount the Treasury benefits from Income Tax and Profits Tax paid by those who operate clubs which run these entertainments. It may be a little difficult for the Treasury to make a lot of money out of them, but I cannot help thinking that the motives of those who run gambling clubs and so on are not wholly philanthropic.
I am not suggesting that it is wrong to indulge in these forms of gambling, but I do not think that anyone would claim that they are important in the 521 national interest. Nor do I think that anyone believes that the people concerned should not make a special contribution to the Revenue. As I understand the position now, it is perfectly legal to play any game of chance so long as it is carried on as an activity of a club and that if, apart from the annual subscription to the club, the only other payment made is a sum, agreed before the game, to take part in it. It might be worth my right hon. Friend's while to look at the possibility of registering and licensing these clubs, and it might also be possible to take a certain percentage of the charge made for taking part in the game. Obviously, we cannot tax the stake, but we could tax that charge.
If my right hon. Friend wants to fortify the Revenue at the expense of those who indulge in gambling—looking on it either as a rosy road to riches or merely as an existing pleasure—I would remind him of the saying, "If you can't lick 'em, join 'em." If he cannot get the money out of them in this way, he should go in for the business himself. I do not suggest that he should appear on the rails at Ascot with the Chief Secretary as his clerk—and my hon. Friend the Economic Secretary, judging from his rather inscrutable appearance, might make an admirable croupier. I do not go as far as to suggest that, but there are ways in which money might be made out of this tendency towards gambling.
Strictly speaking, the purchase of Premium Bonds is a form of gambling, the stake being represented by the interest foregone. If the prizes were increased, more bonds would be sold, and it might also be possible to allow a person to hold more than is permissible at present. That is a good way of getting in money, and it could be made more attractive.
Another means of raising revenue would be a State lottery. I know that this suggestion has been made before and has always been rejected, but a State lottery is far the least painful method of handing over one's money to the Treasury, because there is a reasonable chance of getting more back. I am sure that a State lottery would command widespread support. It would be a real money maker, especially if it were laid down that a percentage of the 522 proceeds had to be devoted to some cause of which everyone approved, such as the hospitals. People would flock to buy the lottery tickets.
These lotteries have an enormous success in other countries; Ireland's excellent hospitals benefit largely from the State lottery held there. Such a lottery would not only meet with a very favourable response here, but would attract vast sums of money from all over the world, and sonic of the proceeds could be used to reduce the burden of our own rates and taxes. I hope that when my right hon. Friend is reviewing the other aspects of gambling, he will give some thought to that suggestion.
My right hon. Friend said that his purpose is expansion without inflation, and his Budget will largely be judged by the extent to which it creates a climate favourable to the attainment of those two objectives. To me—and, evidently, to the Leader of the Opposition—it is a very hard Budget to fault. It is a very able and remarkable Budget. My right hon. Friend may not have done all that I should have liked done but, on the other hand, he has not done something that I greatly feared. He has provided the country with just about the right mixture for the present very difficult times, and we can look forward with some confidence to a great surge forward in our economy. I think that he will attain his objective of expansion at the rate of 4 per cent. without inflation this year and continue it in the years ahead.
§ 6.15 p.m.
§ Mr. Ellis Smith (Stoke-on-Trent, South)
The country's economic situation is such that I should be justified in making a denunciatory speech. Instead, I want to be analytically constructive, and to ask certain questions about our financial and economic situation.
This is the twenty-eighth Budget statement to which I have listened. It is still a financial and economic statement, and that is a fundamental mistake for which I believe some of my right hon. Friends were responsible. The issues are too fundamental, too great, to be considered in one debate: they justify two separate debates. We have listened to a closely-reasoned case, concisely stated and put in the most simple language. Those who are greatest use the most simple language. The Chancellor took approximately 110 523 minutes and, as my right hon. Friend the Leader of the Opposition has already said, it was so interesting that no one went to sleep.
The right hon. Gentleman said that the theme of this Budget is economic expansion without inflation; and that if we attain the national objective which is the basis of the Budget it will mean a 4 per cent. rate of growth. I welcome that theme, but, meantime, the people have been betrayed, and have paid a terrible price because in the past our national policy has not contained this theme.
The Chancellor spoke of the uncertainty resulting from investment in stocks, but why not control or regulate investment in stocks in order to minimise the uncertainty that all students of economic affairs agree that it produces? I contend very strongly that this has been one of the great causes in the past, especially at certain times, of our balance-of-payments problem. A number of proposals for dealing with this problem can be found in the Library.
The Chancellor spoke of the problem of exports and reduction of export prices. We readily agree with that. He then made a great admission about the need for proper provision for dealing with redundancy, about which I shall have something to say. The right hon. Gentleman also outlined a number of proposed changes to deal with regional unemployment. We welcome most of these proposals, although in my view, and in the view of large numbers of people outside this Chamber for whom I am speaking, there are other areas which are suffering just as much as those which the Chancellor mentioned. The right hon. Gentleman proposed a tax incentive for certain areas defined by the application of the Local Employment Act. We welcome that within the limits of the right hon. Gentleman's statement, but those limits should be widened. Later I shall produce concrete evidence to prove the need for that widening.
As one who, apart from membership of the House of Commons, has been employed entirely in the manufacturing industry, I welcome the Chancellor's proposals to improve its position. These proposals should have been made years ago. All political parties should have contributed towards this end, because we 524 know that the country depends on exports now more than ever before. It is the manufacturing industry that produces these exports, and the men and management in the industry make the greatest contribution towards keeping life going in the country. It was time that the manufacturing industry received more consideration of the kind which the Chancellor is now proposing to give it. The right hon. Gentleman also touched briefly on concessions made to encourage new industrial building. Those of us who live in industrial areas, like Lancashire and North Staffordshire, know the need for these and we welcome the proposals.
Each General Election has produced new promises, and in each new Parliament there have been betrayals of those promises. After having lived through two world wars, and after hearing these promises made during the wars, and as one who still lives among the men whose representatives marched last week to the Palace of Westminster, I welcome the Chancellor's new theme. I must remind him and the Committee, however, of how promises made during the two world wars, and especially during the last war, have been betrayed. If the Chancellor's present theme had been the theme of all Parliaments since the end of the last war, the country today would have been in a far stronger economic position.
I should like to put on record some considerations in support of the theme, while at the same time showing and emphasising that it has not been followed during the past seventeen years. We need to be reminded that throughout the last war the country committed itself to maintaining full employment when peace came. This became one of the war aims of the Coalition Government. It was reinforced in the Beveridge Report and it was accepted by all political parties. It was accepted also by the International Labour Office and by the United Nations, and it was applied for a few years by the Labour Government. Now we have about 700,000 unemployed, which means that if we include their wives and children there must be about 1½ million people now suffering the effects of unemployment. This is a terrible indictment of the mismanagement of our affairs during the past seventeen years. It is because I recognise that at last a fundamental change 525 has been made that I welcome the Chancellor's statement.
I hope that this will be the beginning of a new road which we shall travel towards the restoration of full employment. I hope that at the same time the Government will put the rest of their policies in harmony with the Chancellor's theme today. If we are to have the best out of this new theme it will mean that when our representatives attend the United Nations and the International Labour Office in Geneva they must support not the reactionary elements but proposals which will be in harmony with the Chancellor's aims. This is not Utopian. It is a very practical proposition. It is in the interest of the world, and of Britain in particular, because the interests of our country now coincide with the world's interests.
I was very pleased in listening to the Chancellor's speech to note this new thread running through it. As I listened I hoped that it was the beginning of a great change which we on this side of the Committee will have to watch minutely in view of the fact that the people are increasingly placing their confidence in the ideas represented on our side. The restoration of full employment and later its maintenance should now be our common objective. We ought now to make our contributions towards seeing that this policy is applied. Full employment is the national and natural heritage of our people. They saved our country twice in two world wars, and the country owes them a decent standard of living and the opportunity to use their capacities to earn that living.
When we have 700,000 unemployed there is an obligation on the Chancellor to see that every unemployed man is paid at least 30s. a week in addition to the unemployment benefit, that his wife is paid another 30s., and each child is paid a proportionate increase so that the unemployed shall not be expected to manage on National Insurance benefit only. Since all parties committed themselves during the war to the aim of maintaining full employment, those who are unemployed through no fault of their own should receive the sums I have mentioned as a right, in addition to National Insurance benefit, to enable them to live decently until full employment is restored.
526 I was very pleased with certain observations made by the Chancellor. They reminded me that what needs saying strongly is that there is no production Santa Klaus in Whitehall, or in offices or in any part of the City of London. It is on industry, and on manufacturing industry in particular, that the country must rely more than ever. This must be stressed in this Chamber in order not only that the Chancellor should do justice to it but that all hon. and right hon. Members should have their attention drawn to it.
I am fortified in the plea I make since I have in mind what has happened at the International Labour Office in Geneva. At conferences there, our representatives have, very often, not been associated with proposals for the advancement of humanity but have been associated with reactionary proposals. I hope that whoever is to represent us there in future will remember what they owe to our people and will keep all that they do in harmony with the new theme which the Chancellor introduced today and with the principle of restoring full employment. In this country, we shall need a policy of real planning. We shall need a national investment board in order that our financial resources may be investel in industry and wherever the best benefits from the national point of view can be obtained.
Several times, the Chancellor rightly stressed the need for the Government to give a lead, and he asked for the co-operation of the whole country in achieving his objective. I wholeheartedly support that, but the logic of what he said is that we now need a Ministry of Production and Economic Development in order that the right hon. Gentleman's new theme can find expression in the country in an organised way. I readily accept the proposal made by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) last weekend that there should be a Commonwealth economic development and trading corporation, or something of that kind. I do not know why we have left it so long. This is something on which we all ought to be united if we want, as we do, to obtain the best results for our country in particular and for the Commonwealth in general.
One thing to emerge from the Second World War has been the international 527 expression of our desire for the advancement of mankind and the improvement of standards of life. The first United Nations trade and employment conference was held in London, and a later United Nations conference in Havana laid the ground for the eventual coming of the G.A.T.T. In Torquay, in one of the most beautiful parts of this country, there are trees planted in the name of all the countries attending the international conference there where the G.A.T.T. was born.
Yet, in spite of the pursuit of a progressive policy at the United Nations and at the International Labour Office, we have, very often, sat back and not taken the initiative. For this reason, too, I welcome the Chancellor's initiative today. However, as I have said, if the logic of it is to be followed, it must find expression also at the International Labour Office and the United Nations.
Under the inspiration of the International Labour Office, the United Nations Havana Charter declared that national trade and employment targets should be set so thatEach nation shall take action designed to achieve and maintain full and productive employment and large and steadily growing demand within its own territory through measures appropriate to its political, economic and social institutions;Member nations shall seek to avoid measures which would have the effect of creating balance of payments difficulties for other countries.This is a theme which we should have been applying since that conference, which was held, if I remember aright, about fifteen years ago. Today, the Chancellor, who is responsible not only for financial affairs but for basic economic policy in Britain, has at last shown that we can put ourselves in harmony with the proposals of the United Nations.
It seems that in war, when every one of us is wanted, these great aims can be considered, but that when the danger is over there can be 700,000 unemployed. This is why I am making the kind of speech I am today. I could easily have been one of them. I have been fortunate in life. I have had an opportunity to represent my fellows and maintain their confidence. As a result, after many years, I am still able to sit in the House of Commons, privileged to represent the 528 people to whom I belong. I cannot sit here with a smirk on my face like some hon. Members. These are matters which affect our people deeply. This is why I was associated with the 7,000 who marched down here last Tuesday.
The International Labour Office at Geneva, with this country represented, issued in 1944 the following statement which has been reaffirmed at Geneva conferences each year since:All human beings, irrespective of race, creed or sex, have the right to pursue both their material well-being and their spiritual development in conditions of freedom and dignity, of economic security and equal opportunity;the attainment of the conditions in which this shall be possible must constitute the central aim of national and international policy;all national and international policies and measures, in particular those of an economic and financial character, should be judged in this light and accepted only in so far as they may be held to promote and not to hinder this fundamental objective.In the light of those aims expressed at the International Labour Office, I welcome the new theme outlined by the Chancellor. It does not go anywhere near as far as I should like, but I am sufficiently a realist to know that, if only a short step is taken, it should be encouraged in the hope that one's fellow countrymen will demand more.
In 1940, the Conservatives were completely discredited in this country. It was obvious, with the way things were going, that we should lose the war. As a result, the most constructive and progressive element in the British community began to express its will. There was growing uneasiness among the trade union movement outside and a popular demand that action should be taken. The Conservatives had kept out of office for more than ten years the giant who used to sit in the corner seat of the Front Bench below the gangway and had to be satisfied with making critical speeches.
§ Mr. Ellis Smith
Yes, he still sits there. He was a giant. His record is that of a giant. But the Tories kept him out of office for ten years.
As a result of the organised working class outside reflecting itself in the House of Commons and in Committees upstairs and behind the scenes, a situation was produced which brought about a change 529 from a Conservative Government to a win-the-war Coalition Government, and the giant, the right hon. Member for Woodford (Sir W. Churchill), was made Prime Minister. It was we who made him Prime Minister, who sustained him for some time, and who cheered him when he came in. The Conservative benches looked like a cemetery; one would have thought that all was dead.
As a result of that policy, we can use our democratic rights and we can all make our contributions in this Committee. Just as we nearly lost the war because of the way in which it was being conducted, over the past few years there was a danger of losing our economic future unless there was a fundamental change. I have paid tribute to the concise manner in which the Chancellor of the Exchequer spoke for 110 minutes. He held the Committee right to the end, and that is a great tribute to him. It is not only an intellectual strain but a physical strain for a man to do that, and he deserves credit for the competent manner in which he did it.
I therefore hope that this is the beginning of a change which, much though we are opposed to the Conservative Party politically, will gradually reflect itself in improvements in the country. I hope that when we have the opportunity of forming the Government our relatively young men who become Ministers will bear in mind that it is no easy course to row for Labour Ministers to act as real Labour Ministers. I hope that they will remember who has given them their confidence. I hope that they will remember what they owe to the people who built up this party and will remember all the promises which they have made. I trust that they will use their courage, understanding and capabilities in order to save this country and to enable it to make a greater contribution in world affairs and towards improving the standard of living of our people. If they can do that, we shall see the beginning of a change which will be in harmony with the theme running through the Chancellor's speech this afternoon.
§ 6.42 p.m.
§ Mr. Dudley Smith (Brentford and Chiswick)
It is always a pleasure to follow in debate the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) who is my namesake, because he speaks 530 with such sincerity, moderation and good sense. I subscribe to many of the feelings which he has expressed this afternoon. I am afraid that I am not in his position of having had experience of over 20 Budgets.
§ Mr. Smith
In my limited experience, this is the fourth Budget which I have had the pleasure of hearing, and it is by far the best that I have heard. I believe that it is an expansionist and able Budget and is extremely realistic.
I welcome this Budget particularly, because I think that it will help the young married person who is making his way in the world and will provide him with an incentive. This applies particularly to the young married person who is fulfilling his duty to society by founding a family. In my constituency, as in many others, there is a great proportion of young professional people who are on low salary incomes but who are making their way in the world, are founding their families and have very great financial responsibilities. I am sure that they will be pleased at the news that my right hon. Friend gave this afternoon.
I think that a change in allowances is so much fairer than a change in the standard rate of tax. Many of these people will also benefit from the abolition of Schedule A via their pay packets in July, because at present they pay Schedule A via P.A.Y.E. My right hon. Friend's announcement this afternoon will give them an additional boost in due course.
As one who has campaigned about it consistently, both before coming to the House of Commons and since, I do not disguise my pleasure about the abolition of Schedule A at one fell swoop. I am not alone in this. Many of my hon. Friends have campaigned for its end for many years. I have always felt that it was an unfair and iniquitous tax, and I am pleased to see it go, particularly as it affects owner-occupiers. My party has stood for the owner-occupier over the years, and I believe that the abolition of this tax will be of material help to him. It is in the interests of the country that owner-occupation should be encouraged.
I think that it is a realistic step, too, to raise the Estate Duty limit to £5,000, 531 because this will aid the family of limited means which is often left in difficult circumstances through the death of the breadwinner. It does not require much effort today to accumulate an estate of £5,000, if one is earning any money at all. Therefore, what my right hon. Friend has proposed is a step in the right direction.
In addition, younger married people and those who propose to get married will benefit considerably from the exemption of Stamp Duty on houses up to £4,500. Again, this is a very good move in the right direction.
At the other end of the scale, elderly people will benefit from the raising of the exemption level. Elderly people recently have had a tremendous boost in their pensions—for the fifth time running under this Government—and my right hon. Friend's proposal will aid them over the earnings rule.
As my right hon. Friend said in his very fine statement this afternoon, the Budget will give relief to all taxpayers but chiefly to those on the lower levels. Despite the somewhat carping criticism of the Leader of the Opposition, I should have thought that it was well in line with the progressive reduction of direct taxation which has been going on in the lifetime of this Government over the last 11 or 12 years. No one could fault the Government's record in what they have done with regard to direct taxation.
The criticisms which I should like to make are necessarily somewhat muted because of the general excellence of the Budget, but I must say that I am sorry that my right hon. Friend has not tapped the rather rich vein of gambling, and I remain somewhat unconvinced by his 'arguments about it. I should have thought that this was a lucrative source of additional revenue. A gambling tax would not hurt anyone in particular and certainly would not be penal. I would not for a moment seek to challenge the figures which my right hon. Friend produced about the net amount remaining after winnings are paid, but one has only to go by any betting shop—and I speak as a non-gambler—and see the people packed to the doors every time that there is a race meeting on, to realise that tremendous sums of money must be changing hands. I was amazed to hear the 532 figures which my right hon. Friend gave this afternoon. I am pleased that he will consider this matter further. I hope that in due course we shall have a tax on gambling. It is desirable, fair and just.
I should have used the revenue to be obtained from a betting tax for the relief of fuel duty. This would have made a very material contribution to stabilising the cost of living. Here is another possibility which my right hon. Friend has missed, although I subscribe to the overall pattern of the Budget. Fuel tax is very high, and there is scope for reducing it. The cost of petrol is particularly high. There may well be another Budget in the lifetime of this Parliament, despite what was said by the right hon. Member for Huyton (Mr. H. Wilson). If there is, and if my right hon. Friend manages to keep the economy on an even keel, which I am sure he will do, perhaps he will consider both the question of a betting tax and the relief of fuel tax.
Undoubtedly, as time goes on, my right hon. Friend will bear more and more in mind the need for expansionist measures. In doing this, I urge him very much to consider a particular hobby-horse of mine and of many of my hon. Friends and about which we are very worried. I refer to the question of raising the Exchequer contribution to local revenue. I am sorry that in his admirable speech my right hon. Friend made only one oblique reference to the rising cost of local government services. He mentioned the education service, which is, of course, by far the most costly of them all. I believe that a general move could be made to transfer more of the burden of education to the national Exchequer.
In 1950 we were spending between £200 million to £300 million per year on education. Today, as we heard from the Chancellor, this expenditure is approaching £1,300 million a year. This creates a tremendous imbalance, and it must eventually be corrected. This is not a political matter. It is something which would affect any political party which happened to be in power. In many cases local authorities are spending about two-thirds of all their revenue purely on education services.
I beg a progressive and enlightened Chancellor, such as the one we have, to look at the matter before local taxation—that is really what local rates amount 533 to—gets right out of hand. We must all agree that local authority expenditure will continue to climb as the years go by. My right hon. Friend should encourage the Government to have an inquiry into additional and alternative sources of revenue, and he could also well consider a fairer distribution of the general rate burden. The Government are not to blame for the situation which has arisen. There have been vastly expanded services over the last 10 years, and as a result of the improvements the rating system has become somewhat overburdened.
It would be churlish of me, however, to make more than a passing criticism of this more than good Budget. The lessons to be learnt from the statement that we heard today are that we must bear in mind the figure of 4 per cent. the whole time, which is the growth target—and is realistic; we must also watch continuously the inflationary trends which are likely to come in an economy like ours which is always running along a knife edge; and we must organise competition and provide incentives to expansion.
I am sure that in the country as a whole the Budget will be welcomed because it provides incentives, because it provides an opportunity for industry to get on the move again particularly in the areas which have been seriously affected, and because it provides a boost for a very valuable and important sector of the community, namely, those young people who are beginning to make their way in the world and desperately need help at perhaps the most expensive period of their lives—when they have young children.
Last weekend a Sunday newspaper said in a headline "Has Reg the Edge?". Having heard the Chancellor this afternoon, I would say that he has not only the edge but also the vision and the determination to carry through his Budget and conduct the Government's financial policy in a satisfactory and admirable way.
§ 6.53 p.m.
§ Mr. Ron Ledger (Romford)
I do not want to delay the Committee too long because I think that the way in which the Chancellor has presented the Budget suggests that, as most of us would want him to do it, he has considered the general position with regard to unemployment to 534 the satisfaction of most of us. We have our own constituency problems, but I think we should all have preferred him to deal with the matter in the way he did.
Many congratulations have been offered to the Chancellor upon the way he presented the Budget, but I cannot believe that hon. Members opposite or, indeed, my hon. Friends are really surprised at the sort of Budget which he presented. The Leader of the Opposition made the strong point that this is, after all, the fourth year in which successive Chancellors have presented very good Budgets. In any case, I think that a great deal of what has been said about the value of the Budget to young people is not quite as good as it sounds. After all, we have recently had announced some increases in Post Office charges which are not inconsiderable, there have been increases in National Health contributions, and, if Dr. Beeching has his way, there will be a considerable increase in fares. Therefore, all the announcements made in the past few weeks tend to balance to some degree any benefits the Chancellor has given. Nevertheless, I welcome what he has done and the way in which he has distuributed what has been available.
That brings me to the constituency point that I want to raise. During the past few years it has become the habit in Budgets to give help to selected industries. Recently the motor car industry gained considerably from concessions made by the Chancellor. In my constituency I have really very little industry; what there is is mostly light industry and it is varied. But one of the largest industries there is furniture, and during the past year two factories have been closed.
I should have thought that the Chancellor would have given some thought to this industry in which a considerable amount of short-time working is occurring in the country. Nearly a quarter of the factories are working only two or three days a week and while they are working the employees are underemployed. A survey made of the facts in the London area by the National Union of Furniture Trade Operatives showed that half the factories producing furniture in the London area are working with considerably reduced personnel and 535 almost all the remainder are working on short-time. I should have thought that in this respect it might have been possible to give even greater help to young people starting out in married life. They might have had not only tax concessions but very considerable help from the Chancellor in furnishing their homes, which is in any case difficult enough today because of the cost.
I would point out to the hon. Member for Brentford and Chiswick (Mr. D. Smith) that the major part of the increase in the cost of new houses today has been the result of Government policies during the past years, and I think that the Chancellor might have given a little thought to people who are purchasing houses. Consequently, I do not think it would be right to say that everybody will jump for joy at the Chancellor's proposals. Certainly I, as one of the Chancellor's constituents, am not convinced that I ought to change my Opinion and vote for him at the next General Election.
I have a very strong feeling that the Chancellor has been very genuine in the way he has distributed the money available, but the whole thing is spoilt by the fact that there is nothing that he has done today which was not necessary a year or two ago. Had he introduced these measures then, we should have given him far greater support and—although we shall no doubt support the proposals he made today—with a great deal more enthusiasm. We should then have been able to avoid the unemployment which has come about during the past two years.
My final point is on light hydrocarbon oil used in manufacturing. The Chancellor said that he would ask the Customs and Excise to look into the matter, presumably to see how these oils could be distinguished from other fuel oils in order to exempt them from some or all of the tax. It is rather strange for the Chancellor to say this, because Amendments have been tabled to Finance Bills during the past few years on this subject and the matter has been discussed at length, and normally Chancellors have replied that the concession could not be afforded because it would amount to about £9 million a year. I wonder whether on this occasion the Chancellor has simply given another excuse because 536 he does not want again to say that we cannot afford it, for that would be difficult in view of the fact that he has decided to distribute so much money. It may be because of that that he now says that he will ask the Customs and Excise to look into the matter. I believe that the Customs and Excise has been the stumbling block previously in suggesting that it was difficult to distinguish between the oils used in manufacturing and those used for transport purposes.
All I say is that it is grossly unfair to our manufacturers who use these oils that countries which are in competition with us have the advantage that they can produce their goods with a much cheaper raw material. In this respect we are at a disadvantage. We are also at a considerable disadvantage in exporting. I had an opportunity of visiting a factory in my constituency where they produce polish, and I was astonished to find that 70 per cent. of the content of polish of any kind is made up of light hydrocarbon oil. So it is a considerable cost in the production of polish and, of course, the duty would make a considerable difference to the production costs and to the competitiveness of such firms.
§ The Economic Secretary to the Treasury (Mr. Edward du Cann)
I just want to reassure the hon. Gentleman on this point. He may know that I myself saw the deputation from the industry on this very point and the argument he is making is most certainly accepted. Particularly I want to reassure him that it is definitely our intention to abolish this duty, but it is a complicated matter, as he knows from his experience, and that is the only reason why it cannot be done at once.
§ Mr. Ledger
If I have done nothing else I have at least got this reassurance which will, in turn, reassure the industry. I feel it must be raised again in Committee on the Finance Bill. This will give considerable benefit to the industry and will add considerably to its ability to export.
I say frankly that it was rather extraordinary to find that polish, which we do not think of as all that important, was exported last year to the value, I believe, of nearly £3 million. It seems incredible, but it shows that the industry is making its contribution to our 537 export drive, and I feel that relief from duty will enable it to compete even more.
Having raised these points, which, as I say, are constituency points, I must say again that if the Budget speech was a very interesting one, and very well put by the Chancellor, I hope that during the debates which follow we can be convinced just a little that it is not a prelude to a big election fight but that this is a genuine move to try to put the country back on its feet. We shall need a lot of convincing that what it is necessary to do today was not just as necessary two years ago. We feel very strongly that the Government had all the power they needed and just the same majority to put these proposals through two years ago and could have done so had they wished.
§ 7.2 p.m.
§ Mr. A. E. Cooper (Ilford, South)
I do not intend to go into all the economic arguments about why the Government did not do two years ago what is being done today. I know it is a revolutionary thought, but times do change, and circumstances two years ago were really quite different from those which obtain in the country, and, indeed, internationally, today.
Two years ago we had a situation of not only full employment but over-full employment in practically every part of the country with the possible exception of parts of Scotland. I think that two years ago unemployment in this country was running at round about 2 per cent., and if what is being done today had been done then it surely would have caused a most inflationary situation which would have made the unemployment we have unfortunately suffered this winter pale into insignificance.
Hon. and right hon. Gentlemen opposite must really remember all the time that it does not matter what party is in power, this country depends for its very livelihood on one raw material only-coal. Everything else we have to bring into this country. We can feed ourselves for only half the year, and if we pep up domestic consumption in this country beyond reasonable limits we shall increase our import bill and if it is not matched by substantial increases in 538 exports we shall run into very serious balance of payments problems. In this day and age, after ail that has gone on before the war, during the war and since the war, that any hon. Member of this Committee should have to state these basic facts seems an extraordinary thing, when they really should be the ABC of the political life of this country. It is high time that we stopped trying to make political capital out of something which it is in all our interests to try to understand.
Many things which have happened in these last few years have themselves brought about some of the problems which we have today. Hon. and right hon. Gentlemen opposite for years have been pressing for more and more industrial investment in all spheres of activity in this country. All right. So that is exactly what we have had. Many thousands of millions of pounds of investment in industry has taken place over the last few years.
§ Mr. Cooper
This investment has resulted in more up-to-date machinery, greater automation and mechanisation, meaning less actual manpower to use those machines, and these are some of the problems we have to work through. It is no use the right hon. Gentleman the Leader of the Opposition coming back from America and making the sort of speech which he made today, complaining that he did not sleep last night. Frankly, from what he said today, we should have benefited much more if he had had a few hours' sleep. He certainly did not make any sort of positive contribution to our affairs.
Unfortunately, it is all in pattern with hon. and right hon. Gentlemen opposite at the present time. Take, for example, last evening in this Chamber. The hon. Member for Fulham (Mr. M. Stewart), no doubt on the authority of the right hon. Gentleman, said, "If we get back to power at the next election within a year we will reform local government in London." He did not say how. He did not make any positive proposals. No doubt he says to himself, "Well, we will think of something on the day, but at the moment we have not got any proposals to offer, but we will reform all local government."
539 The day before the hon. Member for Coventry, East (Mr. Crossman) and the right hon. Member for Belper (Mr. G. Brown) introduced a great insurance scheme which is going to remove poverty from the people. Was there any suggestion how that is to be paid for, any suggestion of the cost? Not one iota. What does the hon. Member for Coventry, East say when he talks about this? To quote his own words, he said:The last time I introduced a scheme like this the Tories shot it to pieces and we are not going to let that happen again.There again, no doubt, some time in the future, just about the time of an election, the Labour Party will come up with some sort of vague plan which it will hope will get the party by the electorate. It failed last time and it will fail again.
§ Mr. Cooper
Take the National Health Service. I can remember people in the Labour Party telling the electors, "Of course, we brought in the National Health Service. We thought this up. We started the thing going and our estimates were first-class. We told the country when we introduced the scheme it would cost £150 million." To show how accurate were their estimates, today it costs £1,000 million. So we are told that is because of the way the wicked Tories have destroyed the National Health Scheme. This is the sort of nonsense which we get from the right hon. Gentleman and his hon. Friends day after day and month after month and that is the way in which they hope they will govern the affairs of this country—if they are given the opportunity.
The right hon. Gentleman this afternoon twitted my right hon. Friend the Chancellor with this "sudden" concession to under-developed countries and said, "Two years ago we in the Labour Party enjoined this sort of thing upon the Chancellor." One or two hon. Gentlemen, I notice, are nodding their heads sagely. I made the first speech on this subject three years ago in a Whitsun Adjournment debate, which was replied to by the then Economic Secretary to the Treasury. I am very glad to see that there are hon. Gentlemen opposite who have suddenly become converted to the idea that we ought to do something for the under-developed territories.
540 I compliment my right hon. Friend on his Budget which, without wishing to use exaggerated language, I think was the most imaginative Budget that we have had for many years, especially in its particularisation of areas for special tax concessions. I do not recall this being done before except with regard to individual industries such as the shipping industry, but here we have whole areas which are to be considered for special reliefs. This is a remarkable transformation in our approach to taxation, and I think that my right hon. Friend ought to be congratulated on it.
Very much of what is happening today would not have been possible had it not been for the firm approach to our economic problems which was adopted by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). There is no doubt that forcing on the country the fact that an incomes policy was essential, that some sort of development programme was vital and that we could only have increased incomes out of what we earned, brought a great deal of unpopularity to the Government. But this was, nevertheless, the right policy to pursue, and it is because we now have the situation in which the trade unions and members of the community recognise these basic facts that my right hon. Friend is able to do what he has done. We have set up N.E.D.C. and N.I.C. and I am convinced that one day the Labour Party, who criticise and laugh at this Development Council, will be forced to accept that it, or some refinement of it, is vital if we are to get together and work together to bring our country through the difficulties which face us.
I thank my right hon. Friend for his promise with regard to light oils, and here I must declare an interest. This is something for which I have been working for many years. This tax has been a great burden to the chemical industry ever since it was introduced. I assure the hon. Member for Romford (Mr. Ledger) that there are technical problems which make it difficult to deal with this in one fell swoop. These technical difficulties are concerned with the specific gravity of the material and its flashpoint.
These difficulties arose because of the way in which the tax was originally introduced, but it should be possible very 541 quickly for the Customs and the Treasury to bring in some relief, because we have reached the farcical position that British industry, because of this tax, cannot compete in this country with imported goods. I repeat that this is a farcical situation, and my only criticism of my right hon. Friend and his predecessors is that this position has not been appreciated before now, and that action has not been taken to deal with it.
Although I understand the reasons for it, I am sorry that it has not been possible to make any concession with regard to fuel oil. I should have thought that it would have been possible to make a reduction in the tax on oil used for transport. My right hon. Friend this afternoon used the argument that he did not wish to interfere with the development of the coal industry—and, of course, everybody subscribes to that as a policy—but however much one develops the coal industry, one cannot drive buses on coal, and surely it would have been possible to have a differential tax which would have given public transport the benefit of fuel oil at a lower cost? This would have helped to lower the cost of transporting goods by road and to stabilise bus fares, without being in any way inflationary.
I come next to the question of exports, and I suppose we must recognise that in the long term the Budget will be judged by its effect on our efforts in the export trade, because only by increasing our exports can we provide the wherewithal to buy raw materials and thus increase domestic consumption. My right hon. Friend has made some useful concessions, but it is not only to tax concessions that we should look for assistance in our export trade. I am severely critical of the Board of Trade and its assistance, or, as I like to think, lack of assistance, to exporters.
There does not seem to be sufficient dynamism in the Board of Trade. I have asked many Questions on this subject, and I have never been satisfied about the general standard of ability of commercial councillors or trade commissioners who are under the control of the Foreign Office. That is not to say that the gentlemen who undertake these duties are men of below average ability. They are not, but, whether we like it or not, the fact is that the average commercial 542 councillor or trade commissioner regards this job as the first or second step in the ladder to a diplomatic career, and I have always believed that the men for these jobs should be chosen from the higher levels of industry and paid a substantial salary to do them. They should be responsible for looking after the interests of British industry in the countries to which they are posted. They should be responsible to the ambassador or whoever is our representative there only from the point of view of discipline. Let us not be under any illusion. It is only by the development of our export trade that we shall live and prosper, and it is only by getting an adequate service from our officials overseas that British industry can be properly served.
Secondly, I am not happy about the statistics which we receive either from the Treasury or from the Board of Trade. Generally speaking, they are behind time to the extent of several months, and often industry is given information which has been so overtaken by events that wrong policies are pursued. Although I agreed with the Budget presented by my right hon. and learned Friend the Member for Wirral last year, it could be said that had he had really up-to-date statistical information some of the policies which he carried through would not have been carried through, that other policies would have been produced and that we might have found ourselves in a different position towards the middle of last year. I should therefore like my right hon. Friend to consider the whole question of Government statistics, particularly in so far as they relate to industry.
I have three substantial companies in my constituency—the Plessey Company Ltd., Ilford Ltd. and Howards of Ilford Ltd. They all have great achievements to their credit in the export field. They have achieved great things in the face of the most energetic competition from companies all over the world. One of these companies is exceedingly prosperous and is doing more and more trade each year. This expansion can be carried out if management and unions work together in an effort to achieve the results which we all know can be obtained.
The future for this country is great. The indecision of the last eighteen months, arising from the Common Market discussions, is now behind us. We 543 have to stand on our own two feet to earn our living in a hard world, and I believe that the brains and skill in this country will enable us to do that. I think that my right hon. Friend has introduced a Budget which will go down as one of the great turning points in the economic and social history of this country, and the interesting thing is that the speeches which we have heard from the other side of the Committee have been favourable to my right hon. Friend.
§ 7.21 p.m.
§ Mr. R. E. Winterbottom (Sheffield, Brightside)
The hon. Member for Ilford, South (Mr. Cooper) is right when he argues that Britain's future lies in the success of her export trade. There is a future for Great Britain. I cannot see it under the present Government, but nevertheless I believe that to be the case. It is only when the hon. Gentleman starts criticising the Labour Party—which seems to be a characteristic of most of his speeches—and says that the Labour Party will come out with some great plan presumably to "kid" the public that I part company from him.
If I wanted to argue about the Chancellor's speech today along those lines, I could say that hardly a newspaper in the country has not prophesied that in this Budget there would be something in the nature of a big "give-away" by the Tory Party to check its waning fortunes. But I am not going to do that. I am going to congratulate the Chancellor on an excellent Budget statement. I think that it is the best statement that I have heard from a Chancellor of the Exchequer since I first came to the House, and there are certain things which I particularly like.
In common with many of my hon. Friends, I like the reduction in Income Tax. I like the abolition of the Schedule A tax. I like what the Chancellor has done in regard to Stamp Duty. But, having said that, I want to add that liking all these things does not mean that I think they are right. It is possible to like something that has been done and yet question the wisdom of doing it. This question may be asked of a Budget that gives away practically the whole of last year's surplus. It can be fairly said that that is not a wise Budget in view of our present economic condition.
544 The Chancellor must realise that this country is losing in the export race, referred to by the hon. Member for Ilford, South. Over the past few years we have not reached the average increase in production that the Chancellor referred to as being the basis of his Budget statement today. We are losing to almost every one of the heavily industrialised countries in the world. It is questionable whether it is wise to use the previous surplus as a "give-away" when future circumstances may prove that it was not warranted. Although I must admit that the Chancellor's statement is probably the best that I have ever heard from a Chancellor, I do not think that it is possible to put a new patch on an old coat. The problem with which the Chancellor has been dealing in this Budget is exactly the same as that which, over the past few years, has caused grievous unemployment. He has been co-responsible for the contraction policy of the Government that has created heavy unemployment in some parts of the country. He has been a member of a Government who have pursued a policy of dear money, to the detriment of industrial development in the depressed areas.
In some ways I welcome the Chancellor's statement, but if it is put in its proper perspective I must question whether it is a wise Budget for these days, especially with heavy unemployment. The tax concessions really do nothing to narrow the gap between the rich and the poor—an operation which should be a cardinal principle of British economic justice.
I now want to refer to some of the specific items in the Budget. One of the main proposals of the Chancellor is to allow certain percentages for capital development and new plant and machinery in the depressed areas. I agree with the Chancellor that many districts not yet scheduled as depressed areas are almost cheek by jowl with depressed areas. They will not be affected by this capital depreciation concession. In Lancashire, for example, Liverpool is scheduled as a depressed area. Any industry in Liverpool will benefit from this concession, but other districts in Lancashire which are almost as hard-hit as Liverpool and are not yet scheduled as depressed areas will not 545 benefit. Difficulties may arise between districts which, although similarly affected by unemployment, are given different treatment under the proposals of the Chancellor.
Many of my hon. Friends will welcome this concession by the Chancellor. It must be remembered that capital depreciation is a business asset. Considering the matter from that angle, I cannot criticise the proposal. In the long run it is possible that it will do some good, if only a limited amount, to depressed areas. I question whether this concession has come quickly enough to correct the imbalance that is now existing between the depressed areas of the North and the more prosperous areas of the South.
I do not object to capital depreciation allowances, but I question whether this concession now will be as valuable to industry as it would have been had it been made just over twelve months ago. It would have been better for the Chancellor to have corrected the imbalance between the North and the South which has been responsible for employers seeking location for new industries in the South.
What attracts a man to bring industry to the South-East when there is land available in the North, Lancashire, Yorkshire, Durham, Tyneside, Tees-side, Scotland, and Northern Ireland? Why does he come to the South? In almost everything that matters to the man who is deciding whether his business will prosper in the South as against the North, the advantages are in the South. There are cultural values in the south-east area. There are good theatres and the best actors and actresses who will not go to the North because the people there cannot afford to pay for them. The subsidies which the Chancellor gives to the South are £900,000 as against £300,000 in total to the Midlands, Scotland, the North, Northern Ireland and Wales. Every hospital bed in the north of England costs less, and has to cost less, than every bed in London. I could go through the whole list of amenities and provisions in the South that ultimately make an attractive picture to the man who is planning his industry.
If the Chancellor tackled this problem from that point of view, results might be much better than they will be by 546 giving this concession to capital development, valuable though it may be in the course of time. I would tell the Chancellor, who argues that the basis of his Budget is one of expansion, that expansion is not always achieved by providing new machinery for capital development. This country at present could make 30 million tons of crude steel. The factories are there and the machines are there. It has the most modern and up-to-date machinery in the world.
Steel is now the best barometer of the economic prosperity or failure of Britain. Once it was coal; now it is steel. What are we doing with that capacity to make 30 million tons of steel? We have the machines and the men. The machines are partially unemployed and some of the men are totally unemployed. Last year we used 20.6 million tons of crude steel when we could have produced 28 million tons. That was less than it was the year before. It was less than it was in the year when the present Prime Minister came to office. It is true to say that if steel is the barometer of the success or failure of the British economy there has been a diminution in the British economy ever since the Prime Minister took office.
It is not always a case of subsidising new machines but rather of so regulating and influencing the affairs of the country that work is found for its people and directing industry to the places where there is absence of work. In this way we can build up industry that not only provides for the home trade but which can, with the encouragement of tad Government, cater for the export trade of which the hon. Member for Ilford, spoke.
This is the paradox of the situation. It is the great service industries of this country that we nationalised and which we want to be the basis for the development of goods both for the home market and the overseas market—those industries that we thought would be able to supply all industries, whether private or public in this country, in order to build up the prosperity on which we base our conception of full employment—that are today being so denuded of Government help, and, indeed, so directed by Government decree that out of the ordinary yearly revenue received by way of the goods that they sell an abnormal 547 amount has to be given to capital development.
In the case of electricity, it is 58½ per cent., and in the case of the Post Office something over 60 per cent. Those industries, with Government help, run as many hon. Members opposite run their own industries, with a proper balance between revenue and Government loans at cheap rates, could have done much to provide the necessary work in the depressed areas.
Although I appreciate the rather wonderful speech made by the Chancellor and the challenge that was contained in almost everything he said, I do not believe that his proposals will provide the prosperity that will place Britain one again in the forefront of the industrial nations of the world, help us to meet world competition in terms of equality and give employment to our people.
§ 7.40 p.m.
§ Mr. Stratton Mills (Belfast, North)
The hon. Member for Sheffield, Bright-side (Mr. Winterbottom) dealt vividly with the problems in the areas of unemployment in the north of England similar to those we have had in Northern Ireland for many years. I do not agree with much that the hon. Gentleman said, but there are several points on which one might find common ground with him. Later in my speech I propose to discuss the problems of areas of unemployment and, with the permission of the Committee, I will deal with the hon. Member's points then.
The atmosphere in the Chamber after the Chancellor has made his speech is always very special. There is a tremendous build-up to the speech and then after he has departed, hon. Members who are left find that the experience of speaking in an almost empty Chamber is quite unique. There are many days in the year when there are few hon. Members in the Chamber at a given time. But after the Budget speech there is a special atmosphere. There is the advantage that if an hon. Member mislays his notes other hon. Members tend to be tolerant because they realise that the hon. Member who is speaking has been constructing his speech as he sat listening to the Budget statement.
548 I was glad to note that all hon. Members opposite who have spoken have, in broad terms, given a welcome to the Budget statement and have said that they regard it as a necessary Budget at this time. I wonder how rare have been the occasions in the last 18 years when there has not been a Division on one of the Resolutions put to the Committee after the Chancellor's statement. I welcome the Budget, but I will not bore the Committee by detailing all the points to which I extend a specific welcome. I certainly welcome the tone of my right hon. Friend's statement. I consider that it was the tone of his statement rather than any specific item which commended it to most hon. Members.
The theme of growth without inflation will be widely welcomed. It is easy to use that phrase, but is it possible to achieve that aim? What will be the annual rate of inflation from following such a policy? How soon will it be before we have a balance of payments crisis? I do not wish to be unduly pessimistic, but these matters represent a definite risk which any Chancellor has to take in pursuing a policy such as has been advocated. I am convinced that it is worth taking that risk and certainly those in the areas where the rate of unemployment is high believe strongly that the risk is worth taking.
One problem with which I wish to deal, and which concerns our whole approach as a country, is the future of the sterling area. I am not an economist, but I am passing on to the Committee the views which have been expressed by Mr. Andrew Shonfield in an excellent book on British economic policy since the war. Mr. Shonfield puts the point forcibly and convincingly that the rôle of the sterling area has changed since the war. Formerly we were a deposit bank. Now we have become an investment bank. Generally speaking, the old Commonwealth countries are debtors and the fast-developing countries in the Commonwealth are creditors. It may be argued that those countries should spend more of their accumulated wealth on developing themselves. This is gradually taking place and the new developing Commonwealth countries are starting to abandon the practice of leaving large sterling balances in London. Thus, the whole rôle of the sterling area will be altered.
549 The considerable potential strain put upon our balance of payments by the withdrawal of funds from the sterling area has been one of the main causes of the economic crises since the war. One hears the argument that on balance the City of London benefits from our rôle as banker for the sterling area. I wish to quote to the Committee what Mr. Shonfield says about this. He argues that what was in the past a substantial benefit to the City of London from our rôle as banker for the sterling area has now become marginal. He writes:All told, the loss might, therefore, be of the order of £40 million. But that would still leave over two-thirds of the total estimated £125 million of foreign exchange earnings of the City of London intact. The amount lost in the course of putting some armour on the pound sterling and withdrawing the country from a number of activities, which render its economic life intolerably exposed to international pressures, is about 1 per cent. of Britain's annual income from the export of goods and services.As I said earlier I do not claim to be dogmatic on the subject. I am merely putting to the Committee views in this book and which appeared to me convincing. I do not believe that it would be possible for us to have a policy of growth without inflation, and without balance of payments crises, unless and until there is a radical reform of the whole rôle of the sterling area; though this is one of the ideas in politics, like deflation, which is almost a dirty word. I feel there is a strong case for a study to be made by the Treasury of the whole rôle of the sterling area.
I wish to turn now to a subject which has nothing to do with the rôle of the sterling area but relates to the effect of the Budget proposals on young married people. I cannot help feeling that, from the point of view of young married people, there is something a little disappointing in the speech of the Chancellor. In the first year of marriage young people experience considerable financial strain, and particularly now that they are marrying at a younger age. They are faced with the expense of putting a deposit on a house and meeting the cost of furniture and carpets. Many people have argued the case for a reduction in Purchase Tax and similar schemes, but I should like to see a scheme which would provide, in addition to those reliefs that a certain amount of the income of 550 the couple would be exempt from tax for the first year of their married life, or perhaps for the first and second years, as a form of additional marriage allowance. This scheme might be an inducement to matrimonial happiness if it could be granted only in the first year of the first marriage.
§ Mr. Stratton Mills
The hon. Gentleman asks why only the first year. The idea would be that it was a special allowance to help people getting married and it might be given for the first and second years, but my point is that it would be a special help to those young people getting married.
§ Mr. T. H. H. Skeet (Willesden, East)
Marriage allowances have gone up very substantially, not only for the first year but for all succeeding years.
§ Mr. Stratton Mills
I appreciate that, but my point is that there is something to be said for having a special allowance of which one could get the benefit in the first and second year of marriage especially to help to meet these extra expenses.
I turn to what the Chancellor said about areas of high unemployment. I wish to emphasise that what he said will be widely welcomed in all areas of high unemployment in Britain. Every bit as important as the special measures he announced was his statement of his aim to provide growth and get the economy moving. Both those things will be widely felt. Above all, it has been shown by the Chancellor's speech that there is substantial new thinking on the Treasury Bench about how to help areas of high unemployment. The approach goes beyond the Distribution of Industry Act into a more positive sphere and I certainly welcome that advance.
It was said some months ago that £10 million aid to undeveloped areas will be tied to products from areas of high unemployment. That is to be welcomed, but I have not yet heard an announcement of any products from Northern Ireland being included in the scheme. I hope that it will be possible for the Treasury to say that products from Northern Ireland are to be included. Not only from the employment point of view should we like to be associated, but we think this a very worthy idea and we should like 551 to be linked with the scheme on those grounds also.
The central part of what the Chancellor said in this field was the free depreciation scheme for writing off equipment and fixed plant at the will of a company. This will be a very complicated scheme, and I confess that the detailed difficulties and advantages will be such that most of us who are not accountants will be able to appreciate only when we see the Economist at the weekend or the Financial Times tomorrow. Looking at the proposals for the first time, it seems from the point of view of Northern Ireland to be a most welcome and imaginative measure, probably much more imaginative than anything which has been put forward by the Government to deal with areas of high unemployment since the time when I entered the House in 1959. I have long been convinced that we have gone as far as possible with inducements under the Distribution of Industry Act and corresponding measures in Northern Ireland, and if we are to make further progress it was essential that there should be some form of taxation incentive.
My colleagues for Northern Ireland constituencies and I put forward a similar scheme to the Prime Minister when we saw him in January and to the Chancellor when we saw him before Christmas. We put it in a memorandum which I had the honour of preparing on behalf of my colleagues to the Hall Committee on Northern Ireland's economy. In that Report, dealing with the whole field of tax differentials between areas, the Treasury experts argued most convincingly that there were great problems and administrative difficulties in giving special tax incentives to areas of high unemployment. I am glad that those have been overcome. This is a revolutionary break through. It is the first time that the principle of tax relief for special areas has been conceded. I can assure my right hon. Friend that it will be widely welcomed and much appreciated.
§ Mr. Cyril Bence (Dunbartonshire, East)
We have enunciated that principle from this side of the Committee for years.
§ Mr. Stratton Mills
I believe that it will be an effective measure and, spread over the years, it will do much to help areas of unemployment in getting their economy moving once again.
552 This is a well-balanced Budget. The right emphasis has been put on incentives. Above all, it is a fair Budget. It is fair between areas of high unemployment and areas of prosperity. It is fair between high income groups and low income groups. It shows a way ahead which I think our party can follow and which will be widely welcomed throughout the country.
§ 7.56 p.m.
§ Mr. Dan Jones (Burnley)
I do not join with other right hon. and hon. Members in congratulating the Chancellor of the Exchequer today. I want to say precisely why. During the years I have admired his ability—that was evident today when he produced his Budget—but I feel entitled to say that there is a difference between ability and a degree of social and political morality.
In December last year I heard the Chancellor say in the debate on un-employment that if he had to choose between inflation and expansion, which we on this side of the Committee then advocated, he would come down against inflation. For that reason he did not support the measures we advanced at that time. That was only a few months ago. As a consequence, one is driven to ask why the Chancellor has come forward today with a completely different line of thinking.
Can we accept that this is because there is a new morality in the Tory Party, or is it because hon. Members opposite want to boost their own party fortunes? One is entitled to pose that question. I have such a regard for the Chancellor's undoubted ability that I choose the latter and suggest that he was seeking to boost the morale of his party rather than the economy of the nation. I cannot subscribe to the thinking that what he clearly wishes to do today he did not see in December last year could be done then. The Chancellor is far too wise a man ever to make a faux pas of that description.
Like all other hon. Members, I should like to sit back and think this Budget out in more precise terms, but there are certain aspects of it which even now appear to be such that the Chancellor ought to think about them again. I believe I am right in saying that he said this was an expansionist Budget—we all agree with him that it is—and this expansion was based on the co-operation 553 of employers and trade unions. We ought to note his words very closely. He did not say "the continued co-operation of the trade unions". He left the impression—certainly in my mind—that what he is seeking now has not been forthcoming from the trade unions. By making that inference he was most un-kind to British work people.
I have a set of figures which the Chancellor might well study. Incidentally, they are drawn from The Times. They are quite relevant to this period for they were published on 5th January. The Times article, referring to the effort and efficiency of United Kingdom and European workers, said that the average Briton produces goods worth £506 per annum, the average West German produces goods worth £493 per annum, the average Belgian produces goods worth £504 per annum, the average Frenchman produces goods worth £489 per annum, the average Dutchman produces goods worth £378 per annum and the average Italian produces goods worth £253 per annum.
Because of these figures and because of this source—The Times is a most reputable and dependable journal—one comes to the conclusion that the British workers are playing a full part and that it might have been better had the Chancellor given these people a pat on the back rather than say that his plans now depend on their co-operation. The truth is that that co-operation has already been forthcoming.
Nevertheless, I was particularly pleased with the Chancellor's apparent desire, which I assume will be supported by the Government, to expand our technical training. This appeals to me very much because in the end it does not matter how we juggle with figures; unless we produce goods at the right price at the right time, of the right quality and with the right selling agency, all the figures will fall into disrepute. For that reason I say that I heartily subscribe to the Chancellor's plans in this respect.
But, again, I find myself at variance with the Chancellor. It was in 1958 that I led a deputation to the Chancellor asking him to reconsider the closing of a factory in Wales. He was then President of the Board of Trade. The factory pro- 554 duced machine tools. I was particularly attracted to it because, apart from a sprinkling of good, skilled engineers, a large proportion of the staff were disabled miners who were earning a good living and making a fair contribution to the nation's economy. That factory closed down, and the present Chancellor said that it had closed down because there had been no demand in the country for the machine tools which these people produced.
I want to draw the Committee's attention to what happened, because the figures disturb me. In 1959 we were importing 351,671 cwt. of machine tools at a cost of £16,526,441. This was about the time that I was told that there was no demand for the goods produced by these people—men who were sound economic units and were making a solid contribution to the nation's economy—and at a time when the Chancellor, as President of the Board of Trade, told me that the factory must close down because the demand did not exist.
I ask you, Mr. Thomas, to keep those figures in mind and to come with me to 1962. We find that the import of machine tools has risen to 573,539 cwt.
§ Mr. Jones
If the hon. Member permits me to continue I will come to that point. Having spent some twenty years in the engineering industry, I claim to know the relevance of these figures.
The hon. Member was not quite fair. I wanted to quote the increase in the cost to the nation, and if he thinks about these things he will be as interested in the figures as I am. The increase was from £16,526,441 to £32,257,385. This was almost double, and it was after a time at which I had been clearly told by the man who will undoubtedly earn the plaudits of the nation, both for his ability and for his social and political morality, that there was no demand for these machine tools. Is it to be wondered that, with this experience in mind, I cannot altogether join in the hallelujahs. While I still say that the man undoubtedly has considerable ability, I cannot possibly associate myself with all these hallelujahs.
555 The unemployment position in the North worries us and is apparently now worrying the Government. If I heard the Chancellor correctly, he spoke of the removal of old buildings and used the term "dereliction". I heartily applaud the removal of old buildings, which is certainly necessary. He said that the benefit from this much overdue reform would be felt by Scotland, the North-East, Northern Ireland and other areas which are scheduled as development areas. I want to put in a word for the north-east Lancashire belt. These areas have a very high level of unemployment. Heaven knows, they have enough ugly buildings which need to be removed in order to make way for much better social as well as industrial facilities in order to attract new industries.
If I understood the Chancellor correctly, we shall not be included in his proposal. I therefore hope that he will think this out again and will include areas of high unemployment whether scheduled or not. If he does not, I am afraid that these areas will suffer an injustice. I hope that he will remember that it is not only a question of removing ugly buildings and that he will spend more millions on roads and hospitals in the North, for both are vital in the belt to which I have referred.
May I ask the Economic Secretary seriously to consider a point concerning the spending of perhaps £200,000 to great social and economic advantage? In the area to which I have referred, Questions to Ministers have revealed that there is a greater number of disabled people than in many areas. I therefore ask the Economic Secretary to see whether it is possible for us to have an industrial rehabilitation unit placed in the belt. I can assure him that information which I have obtained from Questions shows that the nearest unit is Aintree, in Liverpool This does not serve the area in question because the distance is too great. In most cases these people are very seriously disabled, but they would respond to the provision of facilities in this area if they had to travel up to a few miles. There are those who have said that one judges a nation by the way in which the nation treats its old people. This might be a fair yardstick to apply in this respect. I ask the Chancellor seriously to con- 556 sider this point when he is cringing under the hallelujahs which will be poured on him for his Herculean effort today.
The Chancellor of the Exchequer—quite correctly in my view—placed great emphasis on exports. Anyone who did not agree with the right hon. Gentleman on this point would be extremely foolish. We are nothing if we are not a manufacturing nation. Our ability to manufacture depends entirely on our ability to buy raw materials in the world market. We must always remember that raw materials have to be paid for. In short, we earn our living in the world.
In addition, could not the Chancellor of the Exchequer consider selective imports? Again I speak for my own part of the country—Lancashire. I do not apologise for doing so. I have said these things before, and I shall continue to say them as long as I am privileged to come here. There is a vitally important industry there which since 1959 has been almost desolated by what I describe as the foolish economic policies of the present Government, who carried out a vast amount of rationalisation, spent millions of pounds of public money, and as a consequence allowed the industry to stagnate. The owners of some factories lent themselves to this scheme and spent hundreds of thousands of pounds on machines, but today they are idle. If that is sound economics, I am a Dutchman. These are the economics of a madhouse. The Government encourage people to buy machines and then let them remain idle.
If the Government are sincere in their concern for the North-East, of which Lancashire is an integral part, they should consider selective imports of cotton textile goods. Anyone who is prepared to study the matter knows that this country buys about 30 per cent. of its consumption from abroad. In this respect we are dissimilar from the United States and any European country which is, like ourselves, dependent to some degree upon the cotton and textile industry. The United States imports only about 6 per cent. For Europe the figure is 2½ per cent. to 3 per cent. I do not advocate that we get down to those levels.
After all, we have our Commonwealth arrangements which we should be prepared to honour. However, a cut of 10 557 per cent. would be permissible and would be a tremendous help. I am inspired to make these remarks because at the Commonwealth Parliamentary Association annual meeting at Lagos in October of last year I raised with Commonwealth Members of Parliament and Commonwealth Ministers the question of the Lancashire textile industry. I speak the truth to the Committee when I say that when I told these friends that as a result of our imports one of Lancashire's industries was rapidly stagnating they would not believe me. They thought that I was guilty of exaggeration. They told me definitely that that was more than they would expect from anyone.
I am keen for Commonwealth trade. However, if charity is a fine human trait, it is no less fine in economics and industry than it is in human relations. We take a very dim view of the fact that a man can be solicitous to the woman next door and beat his own wife.
I cannot bring myself to join in these hallelujahs, because there are certain defects in the Budget. I hope that as a result of my brief contribution some of the defects which affect the people I am proud to represent will be put right.
§ 8.15 p.m.
§ Mr. T. H. H. Skeet (Willesden, East)
The hon. Member for Burnley (Mr. D. Jones) always makes a very genuine speech and speaks with considerable feeling. As he said, my right hon. Friend the Chancellor of the Exchequer said that he wanted the active co-operation of all sides of industry, including the trade unions. This is absolutely indispensable. Unless we have the support of the trade unions and every side of industry, this country's future, whether chartered or otherwise, will go by the board, as the hon. Member appreciates.
This is an expansionist Budget based on the assumption that all parts of the country will co-operate. I have one anxiety. This Budget will obviously be a very popular one in the country, but will it be construed by the public as in fact a stimulus, as denoting a need to get down to hard work to ensure that the country comes out on top of its very great difficulties?
The Report of the National Economic Development Council lays down the 558 prospects for us between now and 1966. There is a certain amount of crystal gazing in this, because paragraph 321 contains this rather unique assessment:Any temporary worsening of the balance of payments for these or other reasons should prove manageable provided the rise in money incomes and prices can be sufficiently restrained and our competitive position improved, and provided economic and political developments in the rest of the world are not unfavourable.Nothing could be filled with more provisos. The statement really is that, if all goes well, we will be in a satisfactory position in the United Kingdom.
My right hon. Friend the Chancellor of the Exchequer recognised that the position of sterling is sound. We have been through some very trying times. In the correspondence columns of The Times, the Financial Times, and elsewhere, some writers have indicated that the £ should be devalued. I think we should say here and now that that would lead to a breach of faith. It would not be the right course for this country to take. The right hon. Member for Huyton (Mr. H. Wilson) stood at the Dispatch Box and said that this is the Government which gave money away. In the period when his party formed the Government up to 1951, they gave little money away. In fact, they called money in and devalued the £ in September, 1949 Then the Labour Party gave way to the Conservatives to take over in 1951.
§ Mr. D. Jones rose—
§ Several Hon. Members rose—
§ Mr. Skeet
I will give way as soon as I have finished my little assault on this point.
We have been brought into the situation following a particular set of circumstances. Certain restrictions were imposed and the £ was devalued in September, 1949—which I am not advocating; and I will explain why later. Thereupon, the reins of Government had to be handed over to the Conservatives. In the course of the years while the Conservatives have been in power they have faced up to an important principle. Money has been allowed to fruitify in the pockets of the people. This year's Budget, therefore, is 559 catered to meet a situation which, as the right hon. Member for Huyton indicated earlier, calls for a reflationary Budget.
§ Mr. D. Jones
The hon. Member has referred to the Labour Government of 1945 to 1951 and the fact that we devalued the £ at that time. The hon. Member, like so many of his hon. Friends, will not remember what the right hon. Gentleman the Member for Woodford (Sir W. Churchill) said in 1945 about us being a bankrupt nation. It is much more difficult to adjust the economy in those conditions compared with the situation which exists today. I hope that the hon. Member will bear that in mind.
§ Mr. Bence
The hon. Member is making an interesting point and he rightly says that the Conservative Government of 1951 pursued a policy of allowing money to fructify in the pockets of the people. Would he care to say what the value of the £ was in 1951, while the money was fructifying, and what it is today?
§ Mr. Skeet
I can only guess, but I think that it has gone down in value progressively since 1945. If the hon. Member studies the diagrams provided by The Times each year he will see that it has been going down progressively.
The average man has been receiving more all the time. The man in industry is much better off today than he was in years gone by, even with the present value of the £, and there has been a general redistribution in this context. I agree that people on fixed incomes have perhaps not been as well off as the average man in the street—the steel worker and those employed in the manufacturing industries.
As to devaluing the £, no policy could be more ill-advised for the United Kingdom than to follow such a course. It has been recommended by several writers in the national Press. While it might temporarily assist our exports it would make our imports much more expensive and, as we know from previous experience, we would be much 560 worse off in five or six years' time. The repayment of international loans would become more onerous, and for all these reasons such a policy must be considered extremely carefully.
I appreciate that my right hon. Friend usually has difficulties over sterling later in the year. He faces a certain amount of speculative activity now. The movement of short-term currency over the European and New York exchanges is causing the trouble. Nevertheless, Government machinery for dealing with these matters is much more satisfactory today than it was 10 or 15 years ago. Today we have the right to call upon a standby-credit of 1,000 million dollars from the International Monetary Fund. There is also the Basle machinery whereby the central bankers of Europe agree to stockpile sterling which may be funded against I.M.F. loans. There are other devices, including the bilateral "swap" arrangements between a number of countries and this, too, can be utilised to support our currency.
For all these reasons we can afford to move ahead, with adequate backing to our currency. Devaluation is not requisite—on the assumption, that is, that we are prepared to work hard and increase our exports in the time available to us. It would be extremely ill-advised if we did not utilise the effect of the Budget to get ahead.
I have one criticism at this stage. My right hon. Friend said that he had studied turnover taxes but was not convinced that they would provide a stimulus for exports. For this reason, he said, he intends to refer the matters to Gordon Richardson, who is, I believe, a merchant banker. This means that others will be considering this important matter. I gather that my right hon. Friend has indicated that he would like an urgent answer.
I should have thought that we have already had quite a lot of correspondence in City journals on this topic. If the main emphasis of the Budget is expansion—and we can only get that if we expand our exports—it is one thing to provide incentives on the home front and to our industries, but it is quite another to persuade them to export. It is worth bearing in mind that the TVA tax is one of the many turnover taxes at present used in Europe. Western 561 Germany, Italy, France, Holland and Belgium all have their own variants of the turnover tax, and one would have thought that with all this experience my right hon. Friend would be convinced of its value.
I dare say that my hon. Friend the Economic Secretary, who has had a great deal of experience in the City, may already be persuaded that this system could be brought into being, although he may have difficulties with the Treasury, which does not appreciate change. The Treasury may say, "We would have to get rid of Profits Tax", but the N.E.D.C., which investigated this tax and issued a number of reports—only some of which have been published—indicated that we would need a TVA tax of about 2 per cent. to replace the present Profits Tax, and that if we were to replace Purchase Tax we would need a TVA tax of about 5 per cent.
The whole question is, does it provide any incentive to the exporter? The French, Italian or German exporter will tell us that, quite apart from the psychological impact, this tax provides that spur because he knows that when he exports his goods he will get a rebate from his Government of the accumulated tax paid. In Western Germany there is a fixed rate of rebate, namely, 6.68 per cent., and the actual turnover tax imposed is a variable figure ranging up to about 4 per cent. In France, the exporter will get back a great deal of the added value tax that is accumulated over the period of production, which other people pay; he, at the end, will receive it. In Italy, he will receive back about 3½ per cent. or 4 per cent.
When we have the turnover tax operating in at least four or five European countries in which exporters find it a particular incentive, it is difficult to understand the Chancellor of the Exchequer saying today that he wants a little more experience of this matter. Further, when we find that the Common Market countries have decided to harmonise turnover taxes on France's TVA system, I should have thought that the evidence was overwhelming.
Hon. Members will appreciate that it is one thing to have a Budget and to provide an incentive, but the next thing is to try to get the country off the ground and persuade people that it is important 562 to export. My right hon. Friend has said that foreign investment is important. In this connection we should recognise that United States firms in the United Kingdom account for over 24 per cent. of our exports to the United States of America. American companies resident here also account for a very large proportion of our manufacturing exports. These are material factors, and I am very glad that the Chancellor is doing his utmost to attract investors to the United Kingdom, and to make full use of this facility in the plan to 1966.
How delighted I am to hear of the cancellation of Schedule A—that will help the man who has just got married—and whatever hon. Members opposite may say of my right hon. Friend's proposals, all they have to do is to examine the Financial Statement. From that they will learn that before the Budget a married couple with one child and an earned income of £800 per annum paid tax of £54 1s. 4d., which will now fall to £39 11s. 4d.—
§ Mr. Skeet
But it is only right that the nation should read them, and it is right, too, that I should draw attention to one or two very significant points.
Hon. Members are prepared to say that there is a General Election in the offing when there is not, but they are not prepared to say that this is a good Budget —[Interruption.] The hon. Member for Burnley was rather doubtful about its value.
§ Mr. Skeet
In the case of a married couple with three children not over 11 years of age the amount of tax paid on £1,000 earnings was £40. Now it has fallen to £18 3s. 1d. In other words, throughout England, Scotland and Wales people will be better off, and because of the increased social insurance payments which will be made many others also will be better off as a result of the consideration shown by the Government.
As for the major problem of unemployment which we have to face, the Chancellor has introduced proposals which are novel, radical and, in certain ways, particularly modest.
§ Mr. Skeet
My right hon. Friend, as I was about to say, has introduced proposals to enable an industrialist to write off at his own choice almost 100 per cent. of plant before he starts to pay tax. All that hon. Members opposite can say is, "It is too late", but at no time did they suggest a proposal of this kind.
§ Mr. Skeet
We have been hearing this afternoon that the party opposite has been at this for a long time—since 1066, I presume.
Two things are to be considered. First, we must get the unemployment rate down. We have every confidence that we shall bring it down to below 500,000 by the end of the year.
§ Mr. Skeet
We do not succeed in our purposes simply because we get the unemployment rate down. We must also get our export rate up. Therefore, we must have the machinery and tackle to do that. Fortunately, the Government have contrived the N.E.D.C., and I dare say that hon. Members opposite will say that that was thought of many moons ago, but it is not the case. The Government have brought the N.E.D.C. into operation. I hope that it will be supported throughout the country.
§ Mr. John Biffen (Oswestry)
It was under my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) rather than the present Chancellor of the Exchequer that the N.E.D.C. came into being.
§ Mr. Skeet
The Council has indicated 17 important industries which are likely to lead to expansion, among them machine tools, chemicals and motor car manufacture. The first thing for the public to realise is the course which we have to 564 take. The second is the importance of going in that direction, and the third the necessity of having an incentive to move in the right direction. I think that the Chancellor, therefore, is to be congratulated on the timing of his operations, on the method of putting them into effect, and on the moderation which he has shown at all times.
§ 8.37 p.m.
§ Mr. Harold Davies (Leek)
I am hungry. I have been sitting here for a long time. I do not want to quote figures which everybody can read tomorrow morning. I want to proceed by the Socratic method. First, was this a good Budget? Secondly, was it delivered ably? We know the Chancellor of the Exchequer, and, of course, it was ably delivered. If it were not, the right hon. Gentleman should not be Chancellor.
How was the right hon. Gentleman able to give away this money? It was because the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) got sacked for accumulating it at a time when the party opposite did not know whether it wanted a "stop" policy or a "go" policy. Now we have the elementary and puerile statement made that we want to reduce unemployment. As my hon. Friend the Member for Dunbartonshire, East (Mr. Bence) asked, who got it up?
§ Mr. Davies
Look, my hon. Friend, is this a duet? A tenor and baritone duet, as I think somebody is suggesting?
Let us get a bit of commonsense into the discussion. The Tories are now claiming that they are wonderful people because they are solving the problem of unemployment. They have been in power for twelve years. They have been giving us the facts all mixed up. We heard another misrepresentation a little while ago. As the right hon. Member for Woodford (Sir W. Churchill) said, this nation emerged bankrupt from the greatest war in the history of mankind. Yet still the childish accusation is made that we on this side did not do miracles after that ghastly war.
§ Mr. Skeet rose—565
§ Mr. Davies
No. I am giving way to nobody. I did not interrupt anyone tonight. I want to speak for only about ten minutes, but I want my speech to be effective.
Now, the next question. Is this a Budget full of genius? Of course not. Every newspaper, every financial paper, national and international, from the Wall Street Journal to the Financial Times and the Economist, has been talking about these things and making suggestions.
We are grateful, of course, for some of the Chancellor's proposals, but how will the young married couple be helped because Schedule A has gone? Ninety per cent. of young married couples cannot afford the capital to buy a house at all; they cannot afford the deposit. A Chancellor preparing a really constructive and imaginative Budget might have put aside in the pockets of the Treasury £25 million or so to help young people who want to be property-owning democrats.
§ Mr. Davies
I shall not give way because I know the kind of questions the hon. Gentleman will ask.
The whole point is that if some such sum as £25 million—call it £X—were put aside to help young people, they could be encouraged to become property-owning democrats. The right hon. and learned Member for Wirral found the money. This would have been a stimulus to the building industry and would have given a proper sense of dignity to young married people who are now waiting without homes of their own because of the Rent Act and because local authorities cannot build, first, because of the Rent Act and, second, because of high interest rates.
This is where we could have had both realism and imaginative approach in the Budget. The Chancellor talks about helping society. One of the most dastardly 566 sins against society today is the extortionate, crippling, thieving robbery of land values. Yet nothing has been done.
I cannot understand what is the matter with half of my party, saying that it was a brilliant speech by the Chancellor of the Exchequer. The right hon. Gentleman could not do anything else with the money on the eve of a General Election but give some of it away. If he really wanted to help society, he could do something about site values, because this is one of the greatest evils today. Yet nothing whatever is done or suggested.
Now, another question. We have had a brilliant dissertation on aid to underdeveloped countries. Then we had a pompous declaration from the hon. Member for Ilford, South (Mr. Cooper)—I could not interrupt him because it was so childish—who said that he was the first in the House to talk about it. Good heavens! I remember studying Professor McMahon Ball's article on aid to the under-developed areas and making speeches in the House fifteen or sixteen years ago on the problem of economic aid.
Let us have the facts right. I will repeat them again. We were scoffed at for stressing them years ago. What is the crucial economic fact about aid to the under-developed areas? If we lend £5 million to Malaya, and on the London market tomorrow night the price of rubber drops by ld. a lb., that £5 million will be wiped out in a moment. The point is that unless there is stability in the price of under-privileged man's raw materials, such as rubber, cocoa, tin, copra and other things, economic aid from America and the Western world, or from anybody else, does not mean a thing. I will not develop that any more. One could speak for hours on it.
May I bore the Committee for a moment by making a short quotation? The National Institute of Economic and Social Research interviewed 140 companies in December, and the result of that is this—and the House and my party should mark it:The most significant conclusion to emerge from the inquiry is the small extent to which unemployment among workers from the industries covered is likely to be alleviated by any growth in output. The engineering companies estimate that they could increase production by 10 per cent. before they would need to recruit any more workers, while a 567 25 per cent. rise in production could be achieved if the labour force were increased by only 10 per cent.That is a point which my hon. Friend the Member for Burnley (Mr. D. Jones) touched on. It goes on:Among the vehicle companies interviewed, the potential for increased productivity is even greater, Output could … be expanded by 15 per cent, with the present labour force and by as much as 40 per cent. with only a 7 per cent.increase in the labour force. Those figures illustrate my point.
Man is suddenly confronted with a fact which was beginning to emerge in the early days of the Industrial Revolution. With the present magnificent automative methods of production, we are confronted with the fact that we have to plan. This is why I am a Socialist. It is not possible under the old competitive system to have full employment in the age of electronics and automation without some form of central planning. Today's Budget was a planner's Budget, and that is why I pay tribute to parts of it.
§ Mr. Davies
Hon. Members opposite are forced to accept things which they have scoffed at for the last thirty years. We were scoffed at for saying that there had to be some public ownership. The social furniture of the railways is absolutely necessary. The fact is emerging that private enterprise cannot work without coming to the Government with the begging bowl and saying, "If you want us to support the North-East Coast, give us £50 million". They squirm about subsidies to council house dwellers, the under-privileged, and then smile when it is proposed to give £130 million towards manufacturers and industrialists. I do not begrudge it, because we are forced to do it. Industry today is not big enough to stand capital development without the Government being behind it. Why do not the Government admit it? [Laughter.] The hon. Member for Willesden, East (Mr. Skeet) must be a complete ignoramus for scoffing at that.
§ Mr. Davies
The hon. Gentleman should not make such silly remarks. This is a fact of our history—that it is not possible to make private enterprise work today without the taxpayer putting money into the capital investment bowl.
§ Mr. Davies
The paradox is this. The Chancellor of the Exchequer admitted today that £150 million paid out to keep the railways going was a terrible price to pay; he would have to cut it. He is not prepared to pay £150 million for the social furniture which we call the railways—and they are not Beeching's railways but the nation's railways. He told us what he proposed to give to industry to encourage it to provide employment in certain areas. Yet the railways will have 70,000 men out of work or redundant in a couple of years' time and maybe 150,000 in a few years' time. That is the idiocy of it. It is absolutely crazy. If we are to take industry to these places, are we to run their goods on the roads? How are places to be developed in the North-East when north of Leeds there are no railways?
It is time the Labour Party took over. If we do not do so quickly, the greatness that was Britain will be finished. The only way the Conservative Party can hope to gain a General Election now is by admitting that industry must be planned and that the old acquisitive society and the rough winds of competition do not work in this twentieth century world.
No Government today, unless there is international co-operation, can control such things as the value of the £ and the sterling balances, which at one time I spent a long while trying to study and understand. All these questions are outside the control of any British Government or any one Government. This brings me to the point made by the Leader of the Opposition. What we want is a world economic conference to look at the problems of the raw materials of under-privileged man in relation to the automated production of technological man. I hope that the Government—all credit to them if they do—will take the initiative in the coming year of calling together a world conference to study the massive problems facing man in the twentieth century automation age.
569 It seems that we have a good "horse" now. An outsider won the Grand National. Perhaps our "outsider" will be the next Prime Minister on his performance. Maybe his performance was on the back of the right hon. and learned Member for Wirral, but if it has done Britain good, we do not mind. The people must come before politics or party.
§ 8.48 p.m.
§ Mr. John Howard (Southampton, Test)
I shall not follow the hon. Member for Leek (Mr. Harold Davies) too closely. At the outset I want to say that I regarded my right hon. Friend's Budget as one which certainly rose to the occasion, and judging by the speeches made since, that seems to have been generally accepted. It was also a workmanlike Budget in its approach to the problems which had to be accepted as its framework.
We have heard a number of criticisms. Some hon. Members opposite have said that there has been a big "give-away", and the right hon. Member for Huyton (Mr. H. Wilson) referred to a "bonanza" Budget. I do not think either term really describes the Budget. Certainly, Schedule A has been abolished. It was a hang-over from the old days of easy tax collection by levying an artificial rental on any piece of property. Both sides of the House have for some time been pressing for its abolition, and we are now very pleased to bury it in this Budget. There has been an incentive to property owning. I do not agree with what has been said about young married people. I feel that many young married people who are buying their houses today will be encouraged by the abolition of Schedule A, which will reduce their annual outgoings.
The "give-away", if such it is, covers a very wide field. No particular income group has had a very large reduction in overall taxation. In fact, I feel that my right hon. Friend has spread the reliefs extraordinarily fairly. I was delighted to see that he gave further relief to the aged both by means of increasing the allowances for single and married people over 65 and by increasing the limit of age relief so as to allow income from savings up to £900 to be regarded as earned income. Another incentive to someone 570 buying a house or intending to save is the reduction in Stamp Duty from 2 per cent. to 1 per cent. and the raising of the level of the house purchase price below which there is exemption from the duty.
In my view, the Budget was set against the problem of increasing our exports and the problem of reducing unemployment. Those two objectives march hand in hand. To conquer unemployment and to increase exports we need further expansion, and hitherto one of the barriers to economic growth has been the unrealistically high level of taxes. My right hon. Friend this afternoon was at some pains to point out that although 53¾ per cent. was the nominal rate of taxation, in fact, when investment allowances were taken into account—and most heavy industry is able to make full use of those investment allowances—the rate had been effectively reduced to something around 48 per cent., a point which I think is well worth noting by industry, and, indeed, by the general public, when viewing taxes as a whole. After all, it also underlines the fact that the State has a share in profits to the tune of very nearly half and collects its share through taxation.
We possibly looked for some positive help for exports through reducing costs, and the duty on light oils has been mentioned by a number of speakers. I should like to have seen some reduction there, but I take my right hon. Friend's point about the coal industry. It would be a great pity at this time when the coal industry is making such enormous efforts to get into the black, having earned a small profit this year, if we were to set it back and make it less competitive by encouraging the use of oil fuel at this moment.
I am sorry, of course, that the tax on diesel oils was not reduced. This is something of a burden on those who travel by passenger transport, and the feeling is that perhaps bus fares might have been reduced had the tax on fuel oil come down in this Budget, but, again, I can appreciate that there are difficulties in segregating oil which is used for one purpose from similar oil used in another industry for a different purpose. I hope efforts will be made to devise some watertight scheme for making an allowance against fuel duty in appropriate cases.
§ Mr. Charles Loughlin (Gloucestershire, West)
I want to ask only one simple question, for I am going to touch upon this matter if I catch the eye of the Chair. Is there not a difference in the type of oil which is used in diesel transport and other oils used for industrial purposes?
§ Mr. Howard
Oh, yes, I quite agree, but there is this overall picture of oil, particularly of the light hydrocarbon oil which, I gather, is rather difficult to isolate for one industry in particular. Earlier somebody—I think the hon. Member for Romford (Mr. Ledger)— referred to the use of light oils in the manufacture of polish, and, as I understood it, my hon. Friend the Economic Secretary intervened to say that in this instance efforts were being made to isolate this oil so that an allowance could be contemplated as soon as possible.
The possibility of introducing a turnover tax should give us an incentive in the export field since that tax clearly would not apply to any product which was sent abroad. I cannot help remarking that the collection of a turnover tax will present something of a problem, and we must avoid burdening the small shopkeeper and the small trader with the provision of information which he is not geared to supply.
Unless all retail sales are subject to a turnover tax, one can visualise the problem which will arise in a village store which sells everything from bread to fuel oil and whose only method of recording sales is ringing up the till as each customer comes in to pay his account. This type of trader will find it very difficult to analyse his sales and I hope that a burden of this sort will not be placed on him.
§ Mr. Howard
I am talking of a turnover tax at the retail outlet.
Dealing with unemployment, the hon. Member for Leek was critical of the allowances which my right hon. Friend announced this afternoon. The allowances, in fact, cover a wider range than those referred to by the hon. Gentleman, and to which he attributed an allowance of £150 million.
Quite clearly some incentive is needed if industry is to move into the areas of 572 high unemployment and if industries already there are to expand in the way we hope they will. The two allowances proposed for the purchase of new plant or new buildings should be a decisive factor when firms are weighing up a site for any expansionist plan. A grant of 25 per cent. towards the cost of buildings, and 10 per cent. towards the cost of machinery, are material items in financing a new factory or new venture, and obviously the areas of high unemployment must be examined very closely before these allowances are waived aside in favour of building a factory or expanding existing works in the South-East.
In this connection—and I hope that I understood my right hon. Friend correctly—one should make clear that the tax allowances on plant which are to be given in addition to these grants, the equivalent to about 30 per cent., also mean that anyone moving into these areas of high unemployment can write off the capital cost at any rate of depreciation he wishes. This, too, is a great advantage. If a new development is being taken up one never knows for how long it will be successful. The ability to write off the cost of an asset against the initial profits is valuable incentive. If businessmen have a new venture about whose ability to sustain its profitability they may have some doubts there is every good reason now why they should go into an area of high unemployment.
The other week I asked a Question of my right hon. Friend in relation to an allowance against rates for those industries which moved into areas of high unemployment. I received a very curt answer, "No, Sir." It was thought not to be a very good idea. I am therefore pleased to see that a substitute for a rates allowance has been incorporated in the Budget, thus demonstrating that there is need to give positive financial encouragement if firms are to be persuaded to move into areas of high unemployment.
Another point that was canvassed before the Budget was the question of stimulating consumer spending. The Chancellor is reasonably satisfied that this is already running at a sufficient level, and that the small concessions given in the Budget should provide the added spending power—and saving 573 power, for that matter—which is necessary.
One item was of special interest to my constituency. I was pleased to hear my right hon. Friend's reference to the Rochdale Report, and his determination to press ahead with the modernisation and development of docks and ports. Southampton figures prominently in the Rochdale Report, which envisages a big future for it, based not only on the industrial area available within the perimeter of the town but also on its good fortune in having a deep-water port and nature's double tides, which give it a considerable advantage over ports elsewhere.
The increase in the allowance for industrial structures should also benefit the shipbuilding industry. At present dry docks are subject only to a 2 per cent. flat allowance. For some years dry-dock owners have pressed successive Chancellors to give an increase in this allowance. The point is that no plant allowance attaches to the enormous hole that has to be dug in the ground to accommodate the dock, or to the concrete and brickwork which goes into the construction of a watertight Jock. The normal rate of machinery allowance is attributed only to machinery operating the dock gates, and so on. This increase from 2 per cent, to 4 per cent. in the allowance on the dock structure is a step in the right direction. It does not go as far as the ports which wish to attract dry docks desire, but it shows that the Chancellor realises the problem.
In my constituency there are several firms interested in the extractive industries. If I understood my right hon. Friend's reference to these industries correctly, I gather that it is his intention to treat as stock-in-trade the cost of acquiring deposits relating only to minerals and not sand or gravel.
§ The Financial Secretary to the Treasury (Mr. Anthony Barber)
It includes sand and gravel.
§ Mr. Howard
I am glad to hear my hon. Friend give that assurance. It will be a matter of some interest to operators in my constituency.
Before the Budget, most professional bodies—certainly the accountancy bodies—submitted to the Chancellor 574 proposals relating to the reforms they would like to see included in the Finance Bill. In particular, they referred to the streamlining of administration and the ironing out of a number of inequalities. My right hon. Friend has gone some way towards meeting these proposals, but in most cases he has done no more than acknowledge the fact that various problems exist. He has expressed the need to set up a committee, perhaps even a one-man committee, to inquire into the way in which these problems should be dealt with.
I have in mind particularly the amalgamation of Income Tax and Surtax. This seems to be an extraordinary relic from the days when the taxpayer did not wish the local inspector of taxes to know w hat his income was. He therefore exercised his right to send his return to the Special Commissioners, who also dealt with his income from the Surtax angle. Nowadays people are not shy about filling in their Income Tax returns. By proliferating these bodies there is a grave danger of errors occurring between the office of the Special Commissioners and the office of the inspector of taxes. In my Surtax assessments last year no less than eight errors emerged—nearly all resulting from information being slow to reach the Special Commissioners; but in one or two cases even emanating from simple errors in arithmetic which were perpetrated between the two departments.
The question of Surtax directions in respect of profits of private companies needs attention, and hope that my right hon. Friend will give it urgent consideration. It is difficult for a private company to decide upon its future unless it makes applications for Surtax clearances every year. If there were a more general instruction that the Surtax Commissioners would have power to decide what was a reasonable distribution of profits, industry would be far happier. At present it matter of all or nothing. Either the whole of the profits assessable are subject to direction if not distributed or, alternatively, if the Revenue fails in its efforts to assess the whole of the profits then none of them is assessed. This seems to ignore the facts of the situation.
The professional accountancy bodies have referred to capital allowances on motor cars. Arguments that the limit of motor car allowances should be abolished are not particularly popular 575 with hon. Members opposite. But it was rather ridiculous that there should be an artificial limit of £2,000 on the purchase price of a car. When my right hon. and learned Friend the Member for Wirral introduced this limit, he may have had in mind other considerations, but I think that most people who have to deal with the working of the tax system will agree that this limit is artificial and that it is as well to get rid of this fiction that a motor car should not cost more than £2,000.
In common with most hon. Members, I received a call from the local bookmakers before the Budget. The burden of their problem was that they did not see how this tax could be fairly collected without putting registered and licensed bookmakers in a difficult position compared with unofficial bookmakers, who might be prepared not only to flout the betting laws but also to dodge any tax that my right hon. Friend might seek to obtain from them. Clearly, it is more difficult to collect the tax than was originally proposed. My own feeling is that we should endeavour to devise a method of collecting tax from all forms of gambling. But it is essential that the tax should be easy to collect and if the tax law cannot be enforced there is no point in trying to introduce it.
In conclusion, let me refer to the regional unemployment problem. I think that everyone in the Committee is gravely disturbed about the level of unemployment in certain parts of the country and we are pleased to see that determined efforts are to be made to grapple with the problem by, for example, the clearance of sites. An amount of 85 per cent. to 95 per cent. is to be granted on tenders that are placed within the next nine months. I think that is an excellent way not only of dealing with decay in the centres of towns in some of the areas of the North-East but also of stimulating employment in those areas.
The aid to certain countries of the Commonwealth, in Ghana, India and Pakistan, for example, should give a fillip to the expansion of exports, particularly in the areas which are heavily hit. We have heard of the two ships being built in the North-East for Ghana. That is a step in the right direction. 576 After all, £2 million is involved and this, in my view, is the right way to deal with aid to Commonwealth countries. Let us link the aid to the import of particular heavy industrial commodities which we can produce so admirably and which, moreover, are produced in the areas where unemployment is high.
I hope that my right hon. Friend will consider tying loans of this sort to other types of expenditure. It is no use providing plant and machinery for countries such as Pakistan or India, or possibly East Africa, unless these countries are capable of handling it. I hope that fees for management consultants, consultant engineers and so on who are able to train people in these countries to use the capital goods imported from Britain will be covered under this system. It is so much more beneficial for the countries concerned if their own people can be trained by British management consultants or production engineers to develop their local skills and thus make the greatest use of capital equipment.
I think that I have said enough to indicate that I regard this as an excellent and workmanlike Budget which will enable us to grapple with the twin problems of exports and unemployment.
§ 9.11 p.m.
§ Mr. John Rankin (Glasgow, Govan)
The Chancellor of the Exchequer has received so much praise that I feel it may not be good for him. We can overpraise politicians, particularly Front Bench politicians, and, in his own interests, I wish to qualify some of the things which have been said about the right hon. Gentleman.
I can understand the reaction of the members of the Tory Party. Their reputation in the country at the moment is at its lowest. Their performance at elections has been disastrous. The deposits of Tory candidates have been endangered and even lost at recent by-elections, so that, naturally, when hon. Members opposite hear a Budget statement such as was made today in present political conditions, they spring from the depths of despair almost to the highest heights of optimism. I was reminded of the old saying:The devil was sick, the devil a monk would be;The devil was well, the devil a monk he'd be".577 That is not untrue of a great deal of the contents of promising Budgets which have been announced from the party opposite during the last twelve years. I am sure all hon. Members recall the Budget of 1955. Perhaps it was not quite so good as this one. But, nevertheless, it was promising. In the spring of that year the Budget gifts were announced. In the autumn, when those Budget proposals had served their purpose, the gifts were taken back, even down to the allowances on pots and pans, by means of another Budget. I hope that the same thing will not happen in respect of this Budget which has been introduced at just about the same date as the 1955 Budget. It went through the House with remarkable rapidity. The Finance Bill was almost rushed and the General Election followed in the month of May. One wonders if we are to see a similar performance on this occasion.
I do not want to take up many of the points which have been made in this debate, but at least one was rather remarkable. It was made by an hon. Member opposite who said that one of the purposes of the Budget was to "get the country off the ground". I have never before heard an hon. Member opposite telling us so clearly that that is where the party opposite has brought Great Britain. As a result of twelve years of Tory rule we are right down on the ground.
§ Mr. Rankin
This Budget, which has inspired hon. Members opposite so much, is the instrument which is to lift us from the depth to which the Tory Party has reduced us. I have been thinking of a famous remark which Macbeth delivered as he walked that famous castle in Inverness on a notable occasion. I agree that this is an adaptation to bring it up to date. I do not know whether or not he was thinking of the Tories or whether there were Tories in those days, but "Their promises are void of substance." That has been true of many of the promises we have heard from this Government in the past.
The Chancellor said that his purpose today was to cover the whole economy. That is not my purpose tonight because at least two of my lion. Friends would like to get into the debate after I have finished. The Chancellor also declared 578 his theme as being expansion without inflation. I am certain he realised when he said it that, if he manages this, it will be a considerable achievement. In order to achieve what his Budget proposes, he places two demands on those who are to benefit. They have first to spend in order to create the demand at purchasing level which will start the machine moving more rapidly than it has done over the twelve years in which the party opposite has been in power. At the same time they must save to enable the Chancellor to borrow to pay for the benefits which are to come from the Budget. Those two aims are in some respects contradictory. It will be interesting to see how they work out during the year, assuming that the year is worked out under the present Government.
The Chancellor went on to say that it will also be the purpose of this Budget to increase our invisibles. With that aim, of course, I do not disagree, but it is remarkable because from 1952 up to 1961 our invisibles steadily declined from £443 million to £61 minion. During all those years the Tory Government produced only one Budget which had a current balance. But when invisible earnings were taken into consideration, they produced Budgets which had an overall balance. I take it that one of their big purposes is to arrest the decline in invisible earnings and then to build them up.
Having made those general observations, I want to deal with a matter which concerns not only my own division but also every shipbuilding area in Great Britain. I had hoped that we should hear a little more about shipbuilding in view of the fact that the Chancellor emphasised the need for exports. He referred to the two ships from Ghana, but I think that he might have indicated his own attitude a little more dearly on shipbuilding. I accept that he is to take some expert into consultation before he reaches a decision, but in shipbuilding we have waited a long time to see an increase in the numbers employed and in the output of ships. It is a pity, I feel, that this matter should be referred to consultation with an expert—of whom I know nothing.
I was arrested by a passage in yesterday's Glasgow Herald which referred to the fact that the launching output for the first quarter of the year is the lowest in Scotland since the war. The 579 Clyde yards have launched only nine ships of 42,000 tons and the east of Scotland yards have launched three ships of about 2,300 tons. Last year at this time the combined output was 91,500 tons. This is only one year in twelve years of decline, and within that one year there has been a distressing slump in production. As a consequence, six Clyde shipyards or ships engine works have either become casualties of the present recession in the industry or have merged with other firms. For example, this week—I think on Monday—we saw the launching of the last ship under the flag of William Hamilton and Co., at Port Glasgow; shipbuilders for over seventy years on Clydeside.
Much the same is going on all over the shipbuilding areas of the country. On Clydeside closures are taking place, as well as streamlining, integration, rationalisation or whatever hon. Members call it, together with modernisation in production which keeps this country in line with the best shipyards in the world. Despite these changes there has been a decline, arid unemployment remains. Mr. James Lenaghan, the managing director of Fairfield Shipbuilding Company in my division, points out in the Steel Review that the British merchant fleet of over 5,000 ships, totalling 21,500,000 tons, includes 1,280 ships of 2,380,000 tons which are 20 years old or more. He goes on to make this proposal:This seems to be an opportune time seriously to consider a national scrap and build policy and the replacement of older types of naval ships.Then he makes this other interesting suggestion, to which I hope that the Financial Secretary will pay very serious attention:Shipowners too should be discouraged in their own interests from selling their old ships abroad for continued trading,because that is detrimental to the best interests of shipping and shipbuilding in Great Britain. These are the words of a very distinguished shipbuilder, one who has risen from the bench to the top level in the industry.
I welcome what he says, because when I suggested a policy of scrap and build five years ago it received a somewhat cool welcome. Nowadays it appears to be widely accepted as a policy which, if 580 applied, would revive an industry which badly needs to be stimulated and encouraged. It should be remembered that the building of passenger ships is not merely a case of building ships. Shipbuilding means stimulation to the furniture and furnishing industry. It means equipment of all kinds for bedrooms, dining rooms, recreation rooms, and so on, all on a large scale.
I quote from the leading article in The Times of 3rd January of this year:The shipbuilding order book has shrunk since the boom years from £7 million to £2 million and the labour force has shrunk from 125,000 to about 85,000.The Times goes on to say:The short-term outlook for the yards is grim.I hope that the Financial Secretary will impress this on his right hon. Friend. Indeed, in Scotland it has been found necessary to continue industrial derating for shipbuilding yards, and indeed, for all industry, until 1966.
Nobody quarrels with the main reason which has been given for the decline in shipbuilding. It is accepted. We recognise the problem which has been created by surplus world capacity, but that is not a reason for inaction on the part of the Government. Much of the expansion abroad has been due to subsidies and the other forms of State aid given to shipbuilding in countries which never before had a shipbuilding industry; not that we grudge them that. They are entitled to have a shipbuilding industry. I suppose it is the whole process of capitalism, the system in which right hon. and hon. Members opposite believe, that our consumers are continually turning into competitors. As Tory hon. Members believe in that system, it is they who should provide the remedy.
A notable but unfortunate development for Britain in the last two or three months has been the disappearance from the order books, for the first time in many years, of orders for passenger liners. The commissioning of the "Northern Star" last summer left our shipbuilding industry without a single contract for a major passenger liner. As we know, the contract which preceded that, for the Norske Amerika liner, was snatched from us because the French Government intervened at the last moment and gave £500,000 in aid to the French industry. Because of that we lost an order worth £7 million.
581 We are told that the shipbuilding industry is dependent on British shipowners for 80 per cent. of its ouptut. We should note, however, that the industry is well equipped to undertake export work. One wonders, in this connection, what help the industry has been receiving from British Government sources abroad in seeking these orders. If time permitted I would like to have developed another aspect of this problem of trade with other countries. I would have gone into the question of the amount of assistance given by the Government to other industry in its endeavour to conduct business overseas, since this sort of help is not very evident. The fact that the Government have not formulated any definite policy for the shipbuilding industry is a serious condemnation of their apathetic attitude.
If the Government do not have a policy for the industry, one has been put before them now. The industry is declining each year, despite its own efforts, and the idea of scrapping ships over a certain age and replacing them by modern, up-to-date liners has been suggested. If the Government are in an economically expansive mood they should provide the money to carry out a policy to expand the British shipbuilding industry. If they did this it would help our export drive, and, in the long run, I believe that the success of the Budget will depend on the success of our export drive.
§ Mr. Loughlin
While appreciating that my hon. Friend is entitled to speak for as long as he likes, has he forgotten the comment he made at the beginning of his remarks when he said that be intended to be generous to his hon. Friends and make a short speech?
§ Mr. Rankin
Those who want to be helped must first help themselves, and the most helpful contribution my hon. Friend could have made to my speech would have been to remain in his place and let me finish, as I propose to do.
I was saying to the Economic Secretary that we must sell more, and we must get into markets that so far have been ignored. The hon. Gentleman 582 knows the markets to which I refer. We must rule out political pressures in the export trade—and such political pressures have been put upon us. And the sooner the Government get down to providing a clearly-formulated policy for shipbuilding, the better it will be for Great Britain.
§ 9.36 p.m.
§ Mrs. Eveline Hill (Manchester, Wythenshawe)
It would be remiss of me not to congratulate my right hon. Friend the Chancellor on his very businesslike Budget, presented in what I thought to be a very businesslike and straightforward way. It was clear that he had given an enormous amount of thought to helping as many people as he possibly could. Not even those of us who live in areas where unemployment figures are not so high could quarrel at all with the steps he has taken, or is taking, to help areas of high unemployment. It is right that it should be so, for the very simple reason that we live by industry and, if industry is not in good shape, none of the other benefits we would like, none of the other benefits of the Welfare State, are possible.
I know that many of my constituents will be delighted that Schedule A has been abolished. I have received many complaints from them about it—they have all felt it to be an iniquitous imposition. Its abolition will please many people. I am glad, too, that allowances have been raised, as a result of which many people with children, and even with quite high incomes, will perhaps pay no tax at all, or very little. These are things that will help many people who are not receiving any other tax benefit.
One thing that occurs to me is that this is not what one might call a housewife's Budget. There is no mention in it of the housewife, as such, but I hope that husbands will pass on some part of these helpful additional allowances so that the housewife, too, may participate in what is being meted out.
If I have one very great regret it is that the fuel oil tax has not been done away with, or reduced. That would indeed help the housewife, and I am quite certain that my own local authority, running its big transport department, will be very disappointed that my right hon. Friend has not been able to do something about this tax. Perhaps, however, all is 583 not lost, and that we may in a fairly short time be able to look for help in this direction.
It is usual for people when everything is not just going to their liking to say that "they" should do something. If "they" happen to be the Government, they are doing something with this Budget. The Government can but try to make the climate right for everything to progress; after that it is up to all of us—hon. Members, managements, workers, trade unionists, everyone down to the office boy—to play our part. If we all pull our weight with the measures presented today, I do not think that we can fail to progress. I do not think that I need answer the scorn of some hon. Members opposite for the Chancellor's motives, because I do not think that with this Budget there need be a General Election.
§ 9.40 p.m.
§ Mr. Cyril Bence (Dunbartonshire, East)
I agree with much of what the hon. Lady the Member for Manchester, Wythenshawe (Mrs. Hill) said about everything being dependent upon the cooperation of all sections of society. We on this side of the Committee have been saying this for many years, and I am sure that many hon. Members opposite expect co-operation from all members of society, whatever party is in power. It is the duty of everyone to co-operate as far as is reasonable in decisions made by the Government. If people do not like those decisions, they must try to get rid of the Government by voting for the party of their choice at the next election.
I was disappointed with the Budget speech. It was good to hear the Chancellor say that he was concerned not only with the planning of the economy and the redistribution of industry, which are both desirable objects, but also to give taxation relief with justice to all sections of the community. It has always been the proud boast of my party that we use the taxation system to redress discrepancies in the purchasing power of the people, but today 7 million taxpayers get no relief at all from the Budget. They are the people on the lowest incomes. It is true that they pay no Income Tax, but every time they go shopping they pay tax. These are the sick, the maimed, the unemployed, the low-income groups, the labouring classes, the 7 million to 8 million good honest working people who pay 584 no Income Tax. Many of them have large families. It is true that those receive family allowances, but they pay tax on everything they buy with the exception of children's clothing.
§ Mr. Geoffrey Wilson (Truro)
Did not my right hon. Friend the Chancellor of the Exchequer point out that a section of this class have received recent relief by reason of increases in pensions and National Assistance?
§ Mr. Bence
Let us get this perfectly clear. The increases given in the last review were justified by the Minister of Pensions as bringing pensions to the same relationship that had existed earlier, in the last two or three years. The increases did not improve the relative position of the average income level and the pensions. They were simple increases, because these figures had slipped behind. Surely that argument cannot be used twice over.
§ Mr. Barber
If the hon. Member will look it up, he will find that the last increase was an increase greater than the increase in average industrial earnings, and greater than the increase in the cost of living.
§ Mr. Bence
The Financial Secretary says that these increases were greater than the increase in average net incomes during the same period. This may be true in certain cases, but I do not think that it is true throughout, because the 2 million to 3 million people who are on National Assistance have their award from the Board reduced by the amount of the increase so that on average their income, I believe, is only 2s. higher than it was before. If the increase results in an overall improvement, this is not true for the 2 million people for whom National Assistance has been reduced. There are several sets of figures. In one case what the hon. Gentleman suggests is true, but it may not be true in others.
But let us not forget indirect taxation. We often hear loose talk about there being millions of people who pay no taxes. It is just not true. They may not pay Income Tax, but they pay indirect taxes.
585 I was surprised to hear the Chancellor say that this is an expansionist Budget and then go on to explain some of the things he may have to do as a result of it. One thing he told us—I do not quarrel with it, but I think that it should be on record because there is nothing in the evening papers about it—was that he has taken the necessary measures to arrange through the International Monetary Fund and the central banks so that, if we get into trouble with the £ as a result of expansion, we shall be able to borrow all over the world to support the £. Furthermore, if he finds that the £400 million being given away is too much, he will set up an inquiry into the impact of a turnover tax. This, I presume, will be with a view to clawing back the money, as has been done before. That is what it looks like to me. The ground is being prepared by the right hon. Gentleman in case he has made a mistake. If the Government are successful at the next election, there will be the inquiry under Mr. Gordon Richardson into the system of a turnover tax so that they can get the money back.
We are to have an inquiry into a possible tax on gambling. I am very worried about this. When the Postmaster-General introduced his proposals a few days ago, I thought it shocking that the economy of the Post Office could suddenly be upset and almost completely shattered by two months of cold weather and the suspension of football. If everyone becomes conscious of the dangers of smoking and the temperance movement is more successful in its campaign against alcoholic drink so that everyone stops smoking and drinking, the Chancellor will be in such a precarious position that there will only be suicide, resignation or emigration for him. I really do not know what has happened to our country's finances. When I hear talk of a gambling tax and think of what happened after a bit of cold weather and its terrible consequences for the Post Office, I am very alarmed about the state of our economy.
Here is something else not mentioned in any of the evening papers today. The National Debt has increased during the past 12 months at the rate of £3 million a day. It has gone up by £1,182 million. This is a staggering thought. It is now £29,856 million. We cannot do all kinds of things for the sick, the injured and 586 people with the lowest incomes, yet we have a National Debt like that. It is quite beyond me. We shall have to have a new set of arithmetical symbols because the figures are becoming so astronomical. When I was a boy, I little dreamt that I should live to see the day when the National Debt would be £29,856 million. One cannot imagine such a sum of money. How much is it? The situation is fantastic, and I wonder where it is to end. The Chancellor says that he has had a successful year. He is able to give away £400 million. Yet in the past year the National Debt has increased by £1,182 million. This seems to me to be peculiar economics or I must be very old-fashioned. It is disgraceful for the Chancellor of the Exchequer to talk about a very successful year in these circumstances.
§ Mr. Bence
That is right. I am sorry. The figure is £269 million in taxation relief. However, as one of my hon. Friends says, what is a couple of hundred million in a National Debt of £29,856 million? This could have made a nice gift for the unemployed of the country.
I conclude by supporting what my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) said about shipbuilding. I am surprised that there is nothing in the Budget to give any encouragement to the shipbuilding industry or to merchant shipping. If any industry in this country has suffered from all sorts of international injustices, it is the British shipbuilding and merchant shipping industry. If ever an industry deserves something from its Government and its people it is the British Mercantile Marine and shipbuilding. There are very few shipyards in Britain which are below the standards of shipyards abroad.
British seamanship and British ships are as good as ever they were, yet the shipping industry suffers from the prestige nationalism of other countries which must have their own yards and build their own ships. This' is a status symbol, like the Rolls-Royce of the board of directors. The same thing applies to aircraft. The jet aircraft has become a status symbol. Unless a country has its air service, shipbuilding yards and merchant vessels it is non-U. 587 The British shipbuilding industry has suffered badly from this state of affairs. It has to face the competition of subsidised airlines and subsidised research.
§ Mr. Peter Walker (Worcester)
I am following the hon. Gentleman's argument with interest, but I hope that he has noticed that my right hon. Friend the Chancellor of the Exchequer has taken advantage of the feeling in other countries by saying that loans would be made available to, for example, Ghana, to purchase ships in this country, thus assisting the shibuilding industry.
§ Mr. Bence
That is right, and it is very desirable. It is in keeping with the campaign of my hon. Friend the Member for West Lothian (Mr. Dalyell). Since he was returned to the House of Commons, he has waged an intensive campaign by putting Questions to the Prime Minister and others to link the scheduled areas with the development areas. His intensive work seems to have borne fruit. We should be very grateful to my hon. Friend, because he has fought a lone, long and strong battle. I am sure that the hon. Member for Worcester (Mr. Walker) realises what a grand job my hon. Friend has done in the short time he has been a Member of Parliament. This shows how desirable it is to have young, energetic men with creative ideas like my hon. Friend in the House of Commons. I am glad that the hon. Gentleman has mentioned that point because the Clyde could benefit from my hon. Friend's initiative.
I am very disappointed that certain industries in Scotland have not received some Purchase Tax relief in order to encourage them and to help young married couples. I refer to industries like the furniture industry and the floor covering industry. A linoleum factory in Kirkcaldy is to close and will not make any more linoleum. The furniture industry in Dundee is in a very sorry plight.
In my constituency there is a sewing machine industry, and it would have been greatly helped if Purchase Tax could have been removed from sewing machines. This would have helped not only the high income groups, although I do not suppose that people with £10,000 a year would bother to buy sewing machines, and I suppose that the 588 Purchase Tax on furniture would not mean anything to them either. But this sort of thing means a great deal to people on low incomes. A sewing machine is a great asset to a young married couple on a low income scale. Also, Purchase Tax removal would have been very desirable.
§ Mr. Loughlin
Is my hon. Friend aware that the furniture trade at the moment is in a very parlous state? There is serious concern whether there is not likely to be a rapid deterioration in its employment situation.
§ Mr. Bence
I am grateful to my hon. Friend, and I am sure the Committee is, for bringing into the discussion such a fact about the furniture trade. I believe that the same thing is true in English constituencies. There is a winding down of the industry through sales difficulties. In Scotland the effect has been very bad.
In the small burgh of Milngavie in my constituency soft drinks are manufactured. The Parliamentary Secretary to the Ministry of Labour knows the place very well. These are first-class soft drinks, far better than the hard drinks sold around the country, but there is a tax on them, which is very bad. In such a small place such an industry provides very pleasant employment for 60 or 70 or perhaps 100 persons in a small factory. Much of the labour is female, and it is useful employment, with good wages and good conditions, near the homes of the workers. It is very desirable and healthy employment. It is a pity that such an industry should be affected by the imposition of Purchase Tax.
The Chancellor had here a glorious opportunity in that he felt that he could safely reduce taxation. It is unfortunate that he could not have made some gesture to the seven or eight million families whose income is so low that they pay no Income Tax. It was highly desirable that he should have given some relief from Purchase Tax.
I congratulate the Chancellor on at last coming to the conclusion that we must have different fiscal policies for different parts of the country. I always thought it was nonsense to have a fixed investment charge for all parts of the country while one area might be prosperous and another depressed. We in 589 Scotland are delighted that the Chancellor has introduced a new fiscal policy which vie have advocated for ten years. The Chancellor has seen that we were right in our approach.
The only thing I am sorry about is the danger that if the Conservative Party gets back to power it may use the turnover tax investigation to claw all this back, bringing in a little deflation because of the new stimulating pressure in the Midlands and the South. As a result of that pressure, it may apply a universal tax on the country again to draw back the purchasing power, which will affect Scotland in common with other parts. We shall then start to slide back again. I am worried that the people, after the experience of the last ten years, accepting the Budget as an expansion Budget, will feel secure that expansion will continue, and will not return to power the party which will be determined to maintain the impetus of the expansion and not use the turnover tax or gambling tax to claw it all back again.
§ Whereupon Motion made, and Question, That the Chairman do report Progress and ask leave to sit again.—[Mr. Peel]—put and agreed to.
§ Report of Resolutions to be received Tomorrow.
§ Committee also report Progress; to sit again Tomorrow.