BUDGET RESOLUTIONS AND ECONOMIC SITUATION

HC Deb 08 April 1963 vol 675 cc921-1051

3.34 p.m.

The Minister of Labour (Mr. John Hare)

I think that it is unusual for the Minister of Labour to intervene in a Budget debate, but I want to take this opportunity to concentrate on some of the human problems involved in securing the object of this Budget. This, as my right hon. Friend the Chancellor of the Exchequer has explained, quite simply is to secure expansion without inflation. Critics so far seem to be divided into two schools. One group says that this is an electioneering Budget and the other group says that it is too cautious. These criticisms obviously cancel one another out.

In fact, this is a bold and imaginative Budget. It also constitutes an act of faith. It can only fully succeed if the nation takes full advantage of the opportunities which it offers. To secure the target of a 4 per cent. growth, my right hon. Friend has readily admitted that it must be for the Government to give a lead, and in the measures which he has both already taken and now proposes in the Budget the Government are giving this lead. But its success must depend on the preparedness of management and unions to make their own contribution.

The human problems which I want to refer to are: first, the present high levels of regional unemployment; secondly, the need to provide more far reaching provision to deal with the problems of redundancy; and, thirdly, the need not only to provide more opportunities for the retraining of adults but to revolutionise our existing training measures to fit the requirements of a modernised industrial Britain.

A major factor in causing high regional unemployment has been the contraction of some of our older industries—coalmining and shipbuilding, in particular. There is no short cut to the solution of this problem. The only answer is greater diversification by the attraction of new firms and industries to the development districts. These districts must get a larger share of the growth industries which, in the main, have been concentrating themselves in the Midlands and the South.

The March unemployment figures show this only too clearly. In the London and south eastern region, the rate of unemployment is 1.8 per cent. In the Northern Region it is 6 per cent. In Scotland, it is 5.7 per cent. In Northern Ireland, it is 9.3 per cent. In Great Britain, the percentage rate of unemployment for all development districts is 7.7 per cent. as against 3.1 per cent. for the whole country.

We are determined to alleviate, on the one hand, the frustration, human misery and social injustice of unemployment which the figures show, and, on the other, to achieve a proper, and far fuller, use of our available manpower.

When we consider how the Government are tackling this, the Budget must be looked at together with the already extensive measures which the Chancellor has taken to stimulate the economy. Together, all this should add up to well over £400 million in the current financial year.

First, there are the broad, economic measures to take up the slack in the economy as a whole. These have been enumerated already and I do not wish to waste the Committee's time by repetition.

Next, there is the programme to build up the infrastructure in the difficult employment areas such as Scotland, the North-East and Northern Ireland.

I want to mention a few examples in Scotland. There is the £4½ million Tay Road Bridge, the £2½ million additional road works, the £6½ million on electricity transmission and distribution—adding up to over £20 million of additional capital expenditure announced in recent weeks, over and above the normal programme. In addition, there was the Chancellor's announcement on Wednesday of the decision to go ahead with the Fort William Pulp and Paper Mill.

Examples in the North-East are the increased authorisation of local authority spending on housing and education, £12 million on roads, which is double last year's figure, naval orders of £10 million, two cargo vessels for Ghana, financed by Government loan and to be built on the Tyne, and the Lackenby Dock scheme, announced on Wednesday by my right hon. Friend.

In Northern Ireland, in addition to the increased public investment, the estimated expenditure on the development of industry was about £9 million two years ago, was raised to £13 million last year, and is to go up to £15 million this year.

We now come to the two Budget proposals designed to increase further the attraction of the development districts to industry as a whole.

Mr. Walter Monslow (Barrow-in-Furness)

It is true that there are development districts where there is a high percentage of unemployment. In my own area the figure is approximately 7 per cent. and we have no development status. Do I understand that the facilities extended by the Chancellor of the Exchequer will be applicable to such areas as mine, although they have not development district status?

Mr. Hare

I shall be attempting to deal with the point which the hon. Gentleman has in mind. I know that it is of general concern.

I was saying that there are two Budget proposals designed to increase the attraction of all development districts irrespective of the part of the country in which they are. First, there is the alteration in the existing arrangements of the Local Employment Act. My right hon. Friend the President of the Board of Trade explained these in detail on Thursday. I shall not elaborate on them, but in my view they will make the Act more generous, more predictable and, I think, simpler in its operation.

The second of these proposals is a revolutionary one. It is the Chancellor's powerful proposal for tax incentives for the free depreciation of new plant and machinery. Here, as the Committee will realise, my right hon. Friend is breaking entirely new ground. These proposals are bound to encourage the expansion and modernisation of all firms already within these areas, and, at the same time, they will be immesely advantageous to the newcomers whom we wish to attract to those districts.

Some people—the hon. Member for Barrow-in-Furness (Mr. Monslow) is one—feel that the intention to link these provisions to existing development districts is too rigid, and will lead to uneven development in immediately adjacent communities. There is, of course a problem here. There is always a problem when a clear line has to be drawn. My right hon. Friend the Chancellor of the Exchequer admitted this on Wednesday, when he said: The greater the assistance given to special districts, the greater will be the differentiation between those inside and those just outside the boundary. This is inevitable. But if the scheme is to succeed the boundaries must be clearly established and then firmly accepted, and I invite the co-operation of the Committee in meeting this necessary condition."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 483.] It is obvious that the more widely the available jam is spread the less we shall be able to concentrate assistance within the worst areas of high unemployment. On the other hand, as I indicated in an earlier debate, the growth point concept has its attractions. As the Committee knows, the Government are making a study of regional problems. This applies particularly to Scotland and the North-East. These studies will throw light on whether any changes in the policy which has been presented are necessary, but the fact that the advantages of certain areas are being increased is in itself no reason for altering the boundaries—

Mr. Douglas Jay (Battersea, North) rose—

Mr. Hare

I think that this is relevant to the right hon. Gentleman's proposed interruption. My right hon. Friends the Chancellor of the Exchequer and the President of the Board of Trade will certainly consider arguments that right hon. and hon. Members wish to put forward.

Mr. Jay

Can the Minister tell the Committee—the President of the Board of Trade did not know on Thursday—whether this concession applies to agriculture?

Mr. Hare

No, it does not.

Dame Irene Ward (Tynemouth)

May I interrupt? May I ask whether my right hon. Friend will now comment on the statement made by Lord Hailsham that he does not consider that the boundaries of the development district in the North-East are satisfactory? Has my right hon. Friend yet heard what alteration is proposed for the North-East Coast?

Mr. Hare

I hope that my hon. Friend the Member for Tynemouth (Dame Irene Ward) will be able to make her contribution to the debate.

Dame Irene Ward

I shall certainly try.

Mr. Hare

I have said that both the Chancellor of the Exchequer and the President of the Board of Trade are prepared to consider arguments that; are put to them. Regional studies affecting both Scotland and the North-East are going on and this point will be considered.

There is also the extensive programme of advance factories of my right hon. Friend the President of the Board of Trade. As he stated in the debate on Thursday, he proposes to build a number of small advance factories in areas of high unemployment to follow on after the factories, announced last year, which are now in the process of being built.

My right hon. Friend has authorised me to say that there will be six new factories in the North of England. These will be at Aycliffe, Blyth, Stockton-on-Tees, West Auckland, West Hartlepool and Workington. Five factories will be built in Scotland. There will be one each at Port Glasgow, Kilwinning and the Calders and two in the Fraserburgh and Peterhead area. In Wales, there will be two factories which will be in the Milford Haven area and in the Bangor area. All these factories will be of about 10,000 sq. ft. each, with the exceptions that the two factories in the Fraserburgh and Peterhead area will be 7,500 sq. ft., that at Kilwinning 15,000 sq. ft. and that in the Milford Haven area 20,000 sq. ft.

What I have said so far should give the Committee a reasonably clear picture of the formidable battery of measures that the Government are producing to improve the balance of regional employment.

I wish now to say a word about the problem of redundancy. It is obvious that a rate of growth of 4 per cent. means more rapid change in the economy. As a result, some firms will grow, and there will be substantial movement of labour to the expanding industries. At the same time, the importance of other industries and firms will be less and their need for labour will decline. There will be workers whose skills and experiences are no longer needed in their former occupations.

It is against this background, that as the Chancellor explained, we intend to tackle the problem of redundancy vigorously in the next few months with a view to the publication of proposals and, if necessary, the introduction of legislation in the autumn. We shall, of course, do this in consultation with the employers and trade unions. We announced our intention of improving arrangements for dealing with redundancy last summer. Immediately following that, my Ministry carried out a detailed survey of existing arrangements not only in this country, but abroad.

This information I first discussed in January with the representatives of the British Employers' Confederation, the Trades Union Congress and the boards of the nationalised industries on my National Joint Advisory Council. At that meeting the three parties and the Government agreed to make a more detailed study of all the aspects of the subject and we shall be renewing our discussions at the next meeting of the Council this month.

We shall have, first, to decide what the aims of an effective policy for redundancy should be. There seem to me to be three main considerations. First—this is very important—to avoid unnecessary redundancy by careful planning. Secondly, to do all we can to find redundant workers new jobs as quickly as possible. Thirdly, to reduce the hardship which may arise for workers who have to change their jobs.

This is not merely a question of giving redundant workers compensation or severance pay. The problem, as I am sure the Committee will agree, is very much wider. We must aim to get more systematic forward planning of manpower requirements in industry so that it will be possible to keep redundancies to the absolute minimum by sensible recruitment and retirement policies and by transfer and retraining within a particular firm. Workers concerned must be given proper advance warning and notice so that they have the fullest chance to find a new job.

We are laying down minimum periods of notice in the Contracts of Employment Bill. These will represent a major step forward for many millions of workers and are important to our future plans for dealing with redundancy. The Bill, which is at present in Standing Committee upstairs, is, however, only a first step in improving status and security at work. It lays down minimum standards and deals with formal notice, not the longer advance warning of redundancy which should be given.

Advance warning should be given not only to the workers affected and their representatives, but also to my Ministry. This is often done now when there are large-scale redundancies, but only too often not. The practice should be extended and it should become quite automatic. This is important, not only so that the ordinary employment services of the Ministry can make their full contribution, but so that the best use can be made of the training facilities and of the other special services which we are in a position to give.

Finally, there is the need to reduce hardship which may arise for workers who are redundant. The question of financial provision when a worker loses his job through redundancy is obviously a difficult one, but I should like to put one or two considerations to the Committee.

Should there not be financial compensation to a worker when he loses his job after long service, when his prospects of finding new work may be reduced? Is not a man justified in feeling that he deserves special consideration when he finds that industry no longer needs the skill he has learned and practised for years or the knowledge and experience he has gained through years of service? I think that hon. Members on both sides of the Committee agree that the answer to those questions is yes, but the problem is, how? Progress is being made on a voluntary basis, but only about 15 per cent., or one in six, of workers in manufacturing industry are believed to be covered by schemes, which, in any case, vary considerably. I do not believe that redundancy payments on a purely voluntary basis will be comprehensive in the foreseeable future.

Some people—I am glad to see the hop. Member for Gloucester (Mr. Diamond) in his place, because he is one of them and he has been very consistent in this—have suggested that a duty should be placed by law on each individual employer to give redundancy or severance payments of a defined amount based on length of service, but I think that he knows that there are snags. How reasonable or practicable is his solution?

If the redundancy is caused by the introduction of new methods which will increase the efficiency and profitability of the firm, it can be argued that the employer should compensate those workers who are no longer needed. I do not think that we would argue about that, but, if the dismissals are caused by a fall in demand for the products of the firm, the cost may arise at a time when the firm can least afford it.

Mr. John Hynd (Sheffield, Attercliffe)

Does that mean that the Minister is considering legislation to cover those cases where he says it would be fully justified?

Mr. Hare

I want to develop my theme. I am studying all the various aspects of the problem and putting forward some of the arguments, suggestions and solutions which have been put forward in this House and outside.

Another school of thought argues that the cost of compensation payments should be funded and for this purpose suggests redundancy schemes on an industry-by-industry basis. The chief criticism against this is that the main burden would inevitably fall on the contracting industries, whereas it is the growing industries which will most benefit from the removal of resistance to change and from increased mobility of labour.

Therefore, there are others who advocate a national redundancy scheme. Should this prove to be the answer, I am quite certain that the Government should not simply take over from industry the responsibilities and obligations which are an essential part of the relations between employers and their workpeople. Redundancy schemes are one part of the wider employment policies of management which vitally affect industrial relations.

Mr. John Diamond (Gloucester)

I am grateful to the right hon. Gentleman for what he has said. Does he appreciate, however, that in everything he is now saying, and in what the Chancellor said, there is implicit that the Government have accepted the need for some kind of severance payment? What he is now considering is the method, who should bear it, should it be funded, and so on, but not the principle. Are the Government accepting the principle that there should be some kind of severance payment?

Mr. Hare

I think that there should be some form of redundancy scheme, but what I cannot say. What it would be most unwise for me to do would be to prejudge the shape this would take, until I have had further discussions with the interested parties.

Mr. Richard Marsh (Greenwich)

Will the right hon. Gentleman—[HON. MEMBERS: "Oh."] We are entitled to heat what the right hon. Gentleman has to say, although he has taken long enough to say it. All the arguments that the Minister has put up about redundancy agreements relate to private firms and would not seem to arise in Government employment. Is there any reason why the Government cannot have an overall redundancy scheme for Government employees?

Mr. Hare

I shall be able to answer the hon. Member's question a great deal better when I have made further progress with these consultations. I am sorry if he thinks that I am taking too long—

Mr. Marsh

Not today.

Mr. Hare

I will get on with my speech. I have tried to put some of the questions which I shall be discussing with industry during the coming weeks.

Mr. George Jeger (Goole)rose—

Mr. Hare

I have already been rebuked for taking too long and many hon. Members wish to speak in this debate.

I turn now to the question of training. My right hon. Friend announced on Wednesday that he proposed to make further substantial sums available to enable the facilities in Government training centres to be doubled and that he would allocate up to £10 million as a start for the establishment of the new industrial training boards.

We have at present 13 Government training centres. They are widely spread over the country, giving training in a variety of trades of importance to the economy as a whole.

Last December, I informed the House that we were opening three new centres, two in Scotland and one in County Durham, and that we were also enlarging the existing centre in Glasgow. I now propose to open a further 15 new centres and also, to enlarge some of the existing centres.

This expansion will be distributed throughout the country, but more than half the additional training capacity will be sited in Scotland and the north of England. More skilled labour of the right kind is required there if we are to be successful in attracting new industries. It is in areas such as Scotland and the north of England also that the problem of redundancy in older industries is particularly acute.

There are thus to be 18 new centres, the three already announced and the further 15 I have just mentioned.

I shall tell the Committee where, subject to the necessary negotiations, these 18 centres should go. Six will be in Scotland—in Motherwell, Dunfermline, Glasgow (in addition to the existing centre at Hillington), Dumbarton, Irvine and Greenock. Two will be in the North-East, at Tursdale, near Durham, and at Middlesbrough. There will also be considerable expansion of the existing centre at Felling, near Newcastle. In Lancashire, there are to be three new centres at Blackburn, Liverpool and Wigan, and in Yorkshire two, at Hull and Sheffield. In addition, I intend to reopen the centre at Long Eaton, in Nottinghamshire, put one centre at Llanelly, in West Wales, one in Gloucester, one at Southampton, and one in the London area, at Stratford.

The effect of this expansion will be that the present capacity will be more than doubled. When the new centres are in full operation about 5,000 additional men will be trained annually—the bulk of them in engineering and building trades in which the need is obviously most acute and where shortages of labour over long periods since the war have been most hampering to our economic efficiency.

As hon. Members know, I have met with some opposition from the trade unions in my plans to expand training in areas of high unemployment. I come to the point raised by my hon. Friend the Member for Tynemouth. I wish to be fair about this. Both the trade union members of N.E.D.C. and the General Council of the T.U.C. have accepted the need for the Government to extend their training facilities. Therefore, the opposition has come mainly from local union organisations. I and every other Member in the Committee appreciate that they have to consider very carefully how the particular interests of their members will be affected, but in doing so surely it would be disastrous if a narrow, short-term attitude was adopted. Expansion, I believe, is on the way. It would be a tragedy if areas of high unemployment failed to get their full share because trained labour was not available for industries wishing to come to them.

I am also going to expand the first-year apprentice classes in some Government training centres. These, I feel, have very successfully demonstrated the value of giving systematic full-time training to apprentices during their first year, and great tributes have been paid to them by both the employers and trade unions. We are also, through the Industrial Training Council, continuing to give all the assistance we can to group apprenticeship schemes.

These are all valuable initiatives, but side by side with them I am pressing ahead with the scheme for a fundamental improvement in the country's industrial training arrangements which was announced in the White Paper of last December. I am glad to see that those proposals have been widely welcomed. My Department is now having detailed discussions with the British Employers' Confederation, the T.U.C., and the nationalised industries, and we are getting the maximum co-operation from each one of them. We have also started discussions with the two industries which, from the point of view of training, stand out, I think, as of particular importance, namely engineering and construction. My right hon. Friends the Secretary of State for Scotland and the Minister of Education have had similar consultations with organisations in the educational world.

A new era in industrial training is at hand, and I think that, working together and armed with adequate financial resources—and my right hon. Friend has started me off well—employers, trade unions, the educational world and the Government can, I am convinced, bring about a revolutionary change in our attitude and methods. I believe that our industrial efficiency, as a result of this, will be markedly increased.

But I should like to warn the Committee that there is a danger. With the best will in the world we cannot get this new system going overnight. There has got to be legislation; boards have got to be appointed, and they have got to work out their plans and launch their plans. The danger, of course, is that in the meantime employers and trade unions may take the line, "Oh, well, a new system is on the way. We can sit back and wait for the new boards to put things right."

Nothing would be worse than this. Take, for instance, the five-year period of apprenticeship. It is true that the construction industry has led the way by recommending a four-year apprenticeship to its regions, but other industries have done nothing. I am certain in most cases the five-year period should be abolished. It really is of the utmost importance to the success of the new plans that employers should begin now to face up to these problems and to improve and develop their training plans, and, at the same time, that unions co-operate to the full with the employers in making them a success.

Sir Gerald Nabarro (Kidderminster)

Will my right hon. Friend permit an intervention from this side? This is a very fine and platitudinous statement about employers and unions, but will my right hon. Friend not add a third partner in this? The period of apprenticeship, notably in the engineering industries, still depends most largely on the co-operation of the Ministry of Education and the progress and increase of technical training colleges. If the Ministry of Education is brought into the picture and gives dynamic aid we may be able to reduce the period of apprenticeship.

Mr. Hare

My hon. Friend accuses me of being platitudinous, but perhaps he did not hear me say that the whole educational world has to be brought into this partnership in this new deal for apprentice training.

I have kept the Committee for quite a time and I have touched on the three human aspects I said I would.

Mr. Francis Noel-Baker (Swindon)rose—

Mr. Hare

No, I have kept the Committee quite a long time and I cannot give way.

In conclusion, I should like to add this. The Committee will undoubtedly recognise that what my right hon. Friend the Chancellor is doing fits in with the whole concept of the 4 per cent. growth per annum which those of us who are members of the National Economic Development Council have accepted. I am delighted to see my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in his place, because I do not think that he has been given anywhere near the credit he should, as the creator of N.E.D.C.

Mr. Jeger

By the Prime Minister?

Mr. Hare

But few will deny that all three partners in N.E.D.C. must accept the need for a national incomes policy if we are to overcome what is quite clearly one of the main obstacles to growth. What I am saying is that the Chancellor, in this Budget, has courageously broken out of the vicious circle which he himself described as the "chicken and egg problem": Without expansion we cannot have an incomes policy, and without an incomes policy we cannot have expansion."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 476.] In so far as they are concerned, the Government are carrying out their part of the bargain.

4.7 p.m.

Mr. Thomas Fraser (Hamilton)

The Minister of Labour, in the early part of his speech, made it clear that he intended to talk quite a bit of the difficulties of the areas which suffer from a very high level of unemployment. He ended his speech by saying that the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) had not got sufficient credit for the success of the policies which he launched.

Well, the right hon. and learned Gentleman the Member for Wirral and his colleagues who are now praising him might take note that those policies of restriction were imposed indiscriminately, almost two years ago, those parts of the country which then had a high level of unemployment have suffered the brunt of the contraction which has taken place since and now have a level of unemployment higher than anything that we have reached since before the Second World War—and that is going back quite a long time.

It is the difficulties which have arisen in those areas and which have arisen very largely from the policies put into effect almost two years ago by the right hon. and learned Gentleman the Member for Wirral which had led the present Chancellor of the Exchequer to bring forward some proposals for the amendment of the Local Employment Act.

The Chancellor said that the Government would have to consider further whether they should amend the system of listing districts to get the benefit of the Act so that we might deal with a larger area, but that there would be difficulties about this, and that a study was being made and a decision would be made later. The truth is that the Chancellor, when he was President of the Board of Trade and he introduced the Local Employment Bill at the end of 1959, or the beginning of 1960, made a very great mistake. He decided to repeal the Distribution of Industry Act, 1945, and the subsequent amending legislation to get away from the whole conception of the better distribution of industry throughout the country and, instead, to turn to the problem of unemployment in certain localities.

That is why the new Bill was called the Local Employment Bill, and why the President of the Board of Trade, as the Chancellor of the Exchequer then was, decided to get rid of the system by which, in an Act of Parliament, scheduled areas were to be given the advantages of the distribution of industry legislation, and to replace it by a list which would be drawn up by the President of the Board of Trade from time to time identifying individual localities to be benefited. The Chancellor of the Exchequer knows full well what we said about his proposals when the Measure was passing through the House. He will remember the discussions on Second and Third Reading and on the Amendments proposed by the Opposition.

Everyone who makes any study of the difficulties of these areas now knows that, even without amendment of the Local Employment Act, the listing of unemployment localities in the present spotty way is quite ridiculous, and also knows that when the new policies announced by the Chancellor on Wednesday are put into effect, the position will be even more ridiculous.

I mention the areas which I know best, and I think of parts of Scotland. In Renfrewshire, there are many towns which are listed and which may get the benefit of the new proposals, but the town of Paisley, alongside the great Rootes factory, happens not to be listed.

The President of the Board of Trade (Mr. F. J. Erroll)

It has not been descheduled.

Mr. Fraser

I do not understand the President of the Board of Trade. The benefits of the Local Employment Act are not at present given to Paisley because it is not listed. Is that not right?

Mr. Erroll

No further assistance is being rendered to projects in the Paisley area, but it will be eligible for free depreciation.

Mr. Fraser

Apparently, therefore, it is to be eligible for one of the Chancellor's two new proposals, but not both. I listened to the Chancellor and to the President of the Board of Trade attentively, but it did not seem to me from what either said that there were to be towns which were to get the benefit of one of the proposals, namely, free depreciation, but not the other, which was that most calculated to encourage new industry to the area, or the development of industry already in the area.

This will obviously be a further complication with which we will have to deal when the Bill is presented. Will Kilmarnock be treated like Paisley, or is it to be a town in which the new incentives to development will not be available, although other towns around Kilmarnock will have the advantages of the new inducements? Is that to be the position?

Mr. Erroll

Without having a map before me, I think that Kilmarnock is not a development district.

Mr. Fraser

This is the point. The same sort of thing will happen in the north-east of England, where there will be towns inside and outside the listed areas. Swansea is not listed, while nearby areas are.

This makes nonsense of the idea of tackling the problem on any kind of regional basis, but the Minister of Labour suggested that the Government might have to tackle the problem on a regional basis, as Lord Hailsham has been making clear in his examination of the problems of the North-East. It all runs right back to the Government's great mistake immediately after the 1959 General Election, when they replaced the Distribution of Industry Act by the Local Employment Act.

The right hon. Gentleman told us about the new advance factories which are to be built and most of which are to be of 10,000 sq. ft. The President of the Board of Trade will be able to tell us how many people are normally employed in a factory of 10,000 sq. ft. and the ratio of employment for 1,000 sq. ft. of factory space provided by the Board of Trade. The last time I asked him the question the answer was 1.7, which means that there would be an average of 17 workers per factory in factories of 10,000 sq. ft.

Sir G. Nabarro

In engineering, the average is just over 1 per cent., so that a factory of 10,000 sq. ft. in that industry would mean work for about 100 workers.

Mr. Fraser

I am not sure that the hon. Member has got it right. I was dealing with factories provided by the Board of Trade, and the last time I asked the question the answer was that the ratio of employment in the Board's factories was 1.7 workers per 1,000 sq. ft. of factory space. Even if there are three workers per 1,000 sq. ft., which is nearly double the average number, there are still only 30 workers in a factory of 10,000 sq. ft. We must take that into account to get into perspective the contribution to the solution of unemployment which this proposal will make in areas where there are 50,000 or 60,000 unemployed.

Mr. Diamond

Would not my hon. Friend agree that not only is it an insignificant contribution, but that a factory of that size might be so uneconomic as to be a waste of money?

Mr. Fraser

That is quite possible. I recognise that there is a place for small factories of 10,000 sq. ft. I have seen a lot of useful development with small factories in my own area. The East Kilbride Corporation, in Lanarkshire, has made a noticeable contribution to the well-being of that area by building small "nest" factories of 10,000 sq. ft. I am not criticising the Government for building these factories, which, I think, are very desirable, but I am asking the Committee to get the matter into perspective and not to be too carried away with the possibilities of employment provided by a factory of 10,000 sq. ft. in an area of 50,000 or 60,000 unemployed.

The right hon. Gentleman spoke about redundancy and severance pay and hoped that legislation would be forthcoming, but perhaps it would be better if I passed by that subject for the moment.

The right hon. Gentleman told us that there were to be 15 new training centres, in addition to the two in Scotland and the one in Durham, already announced. He made it clear that more than half were to be in the North-East and in Scotland. Very properly, he told us about the attitude of the trade unions to the setting up of these training centres, but hon. Members may not appreciate why the unions are somewhat chary about this proposal.

It so happens that we have been through all this before. It is more than thirty years since I retrained at a Minis- try of Labour Training Centre. At that time, more than half of the insured workers in Lanarkshire were on the dole. There was no shortage of tutors in all the skills, because so many were unemployed. We were learning one another's skills, but there were no jobs for us after we had been retrained. If the Government just go on increasing the number of training centres in areas where there is large-scale unemployment, they will find, as we found, that the new skills in which the workers are retrained are skills already surplus in those areas, that they have unemployed skilled men going into the training centres to teach other unemployed skilled men a new skill.

The Chancellor of the Exchequer (Mr. Reginald Maudling)

Is it not also true that in a number of cases there is the difficulty of employing people who are unskilled or semi-skilled because there is a shortage of highly skilled people in the same area?

Mr. Fraser

That is so. I hope that the Chancellor of the Exchequer realises that in every one of the areas of high unemployment skilled workers are moving out week after week and month after month. The right hon. Gentleman knows that when there is a shortage of skilled workers in Luton personnel managers are sent to Glasgow to consult the Ministry of Labour officers there so that highly skilled workers can be recruited from Renfrewshire, Aberdeen-shire, Glasgow, Lanarkshire, and the surrounding areas.

I am not saying that we must not have these training centres. In the complex industrial society in which we live it is essential for our well-being that workers whose skills become surplus to requirements should be trained in new skills to enable them to take up other jobs. I am not against training centres, but I am trying to rationalise the objections of the trade unions to them, and the Government must recognise that in those areas of high unemployment, in which more than half these new training centres are to be sited, it is essential that new employments are created to provide employment for these men when they are trained and thus ensure that after being trained they do not take their skills to a job in the south.

The Minister of Labour knows that for many years workers, after being trained at Hillington, have boarded a train at Glasgow, Central, for Euston, and thence to somewhere in the South. We do not want this process to continue. It is estimated that Scotland loses about 25,000 to 30,000 of her population by migration annually, and we have only kept our high unemployment figure down to its present level—and the figure is now 125,000—by the export of our workers to other parts of Britain.

I say no more now about the training measures for young people, to which the right hon. Gentleman referred, not because they are not important—I consider them to be of the greatest importance—but because this is not a matter which naturally comes into a discussion of the Budget proposals which are now before the Committee. In any case, legislation will be introduced on this subject and we can discuss it in greater detail then.

The Chancellor of the Exchequer, when talking about making use of human resources, said: It is the availability of manpower, and especially of skilled manpower, that sets the limit to our capacity to increase production."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 477.] That is true in theory, but, in practice, it is manifestly untrue. In Scotland and Northern Ireland there are human resources which have not been mobilised for many years. It therefore follows that we have not reached the limit of our resources there, and the same can be said for most of the north of England and, to a large extent, Wales.

One of the limiting factors in recent years has been the concentration of effort in too small an area of the country—the concentration of effort in the Midlands, London, and the South-East. There is no doubt that if growth industry had been better distributed throughout the country, we would have kept highly skilled personnel, the technologists and the technicians, in some of the areas of high unemployment, and we would have taken into industry in those areas a large labour force which does not sign on at the various employment exchanges.

The last time I looked at the figures for the run-down of jobs in Scotland I saw that we dropped by about 48,000 jobs, while the Ministry of Labour recruited only 24,000 people. Thus, 24,000 people simply disappeared. Again, if one considers the proportion of women at work in the South and the Midlands, one sees that the figure is very much higher than that in the north of England, in Scotland, in Wales, and in Northern Ireland. If the Government were to get a proper distribution of industry policy going they would mobilise resources which, at present, are not mobilised, and they would thus increase our capacity to increase production.

The President of the Board of Trade and the Chancellor of the Exchequer claimed that the Local Employment Act had been a great success. I can only say that the prescription offered in the Act has not effected a cure. The patient is worse than he was, but he is still alive, and so the Government say that the prescription has been successful. It may be that the fault lies in the Government's diagnosis being wrong in those areas of high unemployment. This applies to all the development districts, or all the areas as I prefer to call them, in which there is a high level of unemployment and in which there is a high proportion of older industries, some of which are declining and in all of which manpower is being considerably reduced because of technological developments which are taking place.

These are the areas which have not attracted new growth industries this century, and if we continue to deal with them as we have done in the past, that is, by trying to spill into them a little overspill from the growth areas in the South, we shall continue to find that in these older basic industries we shed male labour, but increase the number of women and girls employed in the new industries brought into the area. If the Minister of Labour looks at the statistics, he will find that in all these areas the number of males employed has decreased over the last ten years, while the number of females employed has increased. He may find that, nationally, there has been a net increase in employment, but the number of employed males has decreased.

The other point about these areas which depend on the older industries is that because no new growth industries have gone to them there is no demand for the scientifically trained manpower coming out of our universities. In Scotland, for example, more than half the science and engineering graduates never find jobs there. We do not get the new industries which call for their skills in research and development work. All the new design work is done in the South. The result is that only the simplest work is done in the development districts, and the educated manpower there is not sucked into industries that are being spilled there by the Local Employment Act.

If that is true, as I know it to be, it seems to be fairly obvious that if we are to deal with the problem of harnessing the human resources of this country in the interests of the whole population, there has to be a different approach to the whole subject of the distribution of industry.

The Chancellor, in his Budget speech, said something in explanation to those of his hon. Friends who want to see the duty on fuel oil removed. He said that, if he did that, it would make matters too difficult at present for the National Coal Board. He knows that very considerable financial burdens have been imposed on the Board over the years, burdens which would not have been put on any privately-owned industry.

The Coal Board, for a great many years, was not allowed to charge for its coal even the cost of production. The Government decided the level of coal prices, so the Board was obliged to make losses. From time to time it could not even meet its running costs out of income, and it most certainly could not meet the cost of capital investment out of revenue. It had, therefore, to borrow very heavily for all its capital investment, and was obliged to meet a loss of £70 million on imports of American coal.

The Coal Board now has outstanding borrowings of a little more than £900 million, on which it is paying interest of £42 million to £43 million a year. Half of that burden ought not to be lying on the Board. If the Chancellor were to agree to a capital reconstruction of the Coal Board so that, on behalf of the taxpayer, he might take that part of the burden which properly belongs to the taxpayer, the Board might be in a position fairly to meet any competition that comes along.

I say to the right hon. Gentleman that without capital reconstruction of the Coal Board he must certainly not proceed to remove the duty on fuel oil. We should also be reminded that we do not spend any scarce exchange on procuring coal in this country. It does not make very much foreign exchange, but it does not cost us anything.

In the Report of the National Economic Development Council, page 69, table 40, we see that imports of oil in 1961 cost us £483 million, that our exports of oil earned £93 million and that the balance of trade on oil was minus £390 million. By 1963, at the current rate of expansion, the Council tells us that our imports of oil would cost £589 million and that our exports would be down to £57 million, giving us a balance on oil of minus £532 million. This is quite a lot of money. There is something to be said for affording a little protection to the coal mining industry, which provides 70 per cent. of our energy requirements.

The Coal Board, up to now, has never asked for protection, but only not to be laid open to unfair competition. Every other industry basic to the well-being of this country is protected. On behalf of some industrialists, who want to see the duty on fuel oil removed, we must not remove it without having a look at the consequences. The National Union of Manufacturers and the Federation of British Industries have been recognising the unfair imposition that was put on the Coal Board by its being denied the right to charge the proper prices for coal for a number of years.

At present, consumers of coal, judging by the White Paper on the Financial and Economic Obligation of Nationalised Industries, published in April, 1961, say that the consumers of coal are paying a higher price than they ought to pay, and there ought to be a capital reconstruction of the industry. It is claimed that if we can get capital reconstruction of the industry, the Government could then see their way to take away the duty on fuel oil and all industry would then benefit from having a lower cost fuel, but I say to the Chancellor that he must not get rid of the fuel oil duty without first doing something to assist the coal mining industry.

The Chancellor's new measures to help the unemployment areas are free depreciation, particularly in connection with the building of new plant and the clearing of derelict sites. I have been told that free depreciation means a great deal to industrialists. I am not an accountant, and I do not know how much it will add up to, but I was amused by the President of the Board of Trade tailing us the other day what a benefit it would be to the industrialist who was able to write the whole thing off in twelve months. I have met a good many Scottish industrialists over the years, but none of them who could give me a picture of the economics of his undertaking led me to believe that he could write off 100 per cent. of the cost of establishing himself from the profits of one year's operations.

In any case, it is a change in the law by which they can write off more rapidly than a seven-year period. They will not be able to write off any more, but they can do it more quickly and this will be of benefit to them. I do not know to what extent this will be of help to them, but I welcome the change. I have advocated that there should be tax concessions but I think that it should have been by means of giving a more generous investment allowance in the unemployment areas than in other parts of the country. I welcome what has been done, but I am not sure that it will be sufficient to change the attitude in those parts of the country.

The second change is the fixed percentage grant for buildings and plant. Twenty-five per cent. of the cost of the buildings appears to many hon. Members to be a very generous offer. I ask them to remember, and I ask, in particular, the President of the Board of Trade to note, that the Board of Trade will be building factories, the economic rent of which will be 5s. or 6s. per sq. ft. I think that he will agree that he is offering these factories to industrialists at a rental of less than 3s. per sq. ft. Industrialists are not readily taking up these factories—not as readily as we would like them to do.

If an industrialist takes up a factory which has been built by the Board of Trade, he will be paying about half the economic rent of the factory and getting assistance equal to 50 per cent. grant towards the cost of providing the building in which he carries on his industry.

Mr. Maudling

That is already provided.

Mr. William Ross (Kilmarnock)

They are not taking it up.

Mr. Fraser

The point is that industrialists are not coming into these areas at the rate which we would all of us, including the Chancellor, like them to do. All I am asking is: let us get the 25 per cent. building grant into perspective. It may not be more generous than what is available to industry at present. It is a great inducement to industry which is already there—a challenge to the industrialists already established in those areas who have not been expanding in recent years. We shall see what advantage they take of this new offer.

There is a 10 per cent. grant for plant. The Chancellor made it clear that we should have a new Act of Parliament to deal with these things, although I had not thought it necessary to have a new Act of Parliament. The Chancellor has power to make grants and loans under existing legislation. I do not know to what extent his new proposals will be sufficient to attract the right kind of industry to these unemployment areas. I am glad that these steps are being taken, but I am not sure that they will be a success because of some other things which the President of the Board of Trade said.

I come next to the Chancellor's proposals about the clearing of derelict sites. He said that there would be an increase to 85 per cent. and 95 per cent.—depending on whether rate deficiency grant is attracted—of the cost to local authorities of clearing derelict sites. He should know full well that for five or six years after the war the then Government gave those authorities 100 per cent. grants for the clearing of derelict sites, but the Chancellor knows what happened after he wrote Section 5 into the Local Employment Act, 1960. An assessment was made of the area of derelict land in Scotland. There were 15,000 acres of derelict land in Scotland. In three years of the operation of the Local Employment Act, 11 acres have been cleared.

There is to be a slight increase now in the Government's assistance towards the clearing of these sites, but is not the Chancellor aware that when he wrote the Local Employment Act, 1960, before he gave the local authorities power to clear derelict land, he gave the Board of Trade power to do so. Section 5(2) of that Act gives the Board of Trade power to clear derelict sites. Why is the President of the Board of Trade not clearing derelict sites?

Complaints are being made from all parts of the Committee about the burden of rates. We have learned that to deal with a short-term high level of unemployment in the development districts the Ministry of Housing and Local Government and the Secretary of State for Scotland are permitting local authorities to proceed with schemes of public works which cost less than £15,000, provided that they can do them within six months starting on 31st March, 1963.

A great many local authorities have stretched themselves to the limit in taking over this additional work. When we ask that some particular road scheme should be proceeded with, the appropriate Minister always tell us that the local authorities have not the technical stall available to do the work which we think that they should be doing. But, willy nilly, the Chancellor says that we shall get the derelict sites cleared by giving the local authorities power to clear them with a higher rate of grant, provided that they have proposals in during the next nine months. Why nine months? After that we are to return to the lower percentage rates.

Does not the Chancellor know that his Ministerial colleagues tell us that the technical staff of local authorities are stretched to their limit? In any case, if local authorities are unable to do it, why does not the President of the Board of Trade do it? Surely the solution of the unemployment problem is more the responsibility of the Government than of the local authorities. In local authority areas where there is a high level of unemployment the rate burden probably bears more heavily on the ratepayers than in other parts of the country where they are a little more prosperous.

I put it to the Committee that the Chancellor and the President of the board of Trade ought to look again at the Act, and, in particular, to look at Section 5 of the 1960 Act. They should themselves get on with the job of clearing sites and getting them ready for the industry which we all hope to attract into these areas.

The President of the Board of Trade also said that he would carry through a tough I.D.C. policy. I have listened to many Presidents of the Board of Trade talking about the way in which they administered the I.D.C. policy. Every one of them always insisted that he was being as tough as possible, but when we went to see him on a deputation he said that he would be even tougher in the future.

The President of the Board of Trade and the Chancellor of the Exchequer have made it clear to us that no matter how tough they are, if the industrialist is also tough, he will get his I.D.C. at the end of the day. We were told that the new Ford development at Basildon would employ no more new labour. Three years ago, when we were referring to this £10 million project, the President of the Board of Trade said that Ford's would not employ any more labour. But when we have a £5 million motorcar project in another part of the country we are told that it will employ thousands of workers. Ministers have genuinely misled themselves in the matter.

Let hon. Members look at the digest published by the Board of Trade on industrial buildings in the course of erection. Where are they going up? In the areas of congestion and not in the unemployment areas. It is no good saying that the President of the Board of Trade is being successfully tough with his I.D.C. policy when we see that he is not.

The right hon. Gentleman told us about a meeting with the chairmen of 100 expanding industries. At first, we thought that he himself would meet them, but apparently this is not so. We do not know who will meet the chairmen of the 100 expanding industries, nor do we know whether they are 100 chairmen of expanding industries or half-a-dozen men who are chairmen of 100 expanding industries.

Presumably the President of the Board of Trade will seek to persuade the chairmen of these expanding industries that it would be a good investment for them to go into the areas of high unemployment. But what if these chairmen say, "No, thank you"? Do we then do nothing for the areas of high unemployment? Is there any possibility of the Government turning to public enterprise to fill the bill? I think that a good example is the Fort William pulp and paper mill project. The Chancellor told us in his Budget speech that the Government would make a loan of £10 million to Wiggins Teape & Company to build this paper mill at Fort William.

The Committee should know that the Government have been considering this for many years. On 2nd July, 1959, I urged the construction of this mill, and the present Secretary of State for Scotland, who was then a quite new private Member for Argyll, supported the plea for the pulp mill at once. Now we are to have it, but in the last two or three years there have been negotiations with four of the big pulp and paper companies. Three of them dropped out of the race and discontinued negotiations. One of them stayed on, and that one is to have a loan of £10 million from the Government to construct the mill. What if Wiggins Teape had dropped out, too? Would there have been no pulp and paper mill because private enterprise was not willing to build it? We should still have the trees in the north of Scotland and the demand for paper, but we should not have had the pulp and paper mill if there had not been a private enterprise firm willing to build it even with public money.

There are so many more examples of that type. Surely they convince us that, if private enterprise will not do a job which in the national interests should be done, the Government have a duty to step in with public enterprise.

We have been told over and over again how dependent for our well-being we are on exports. We are probably more dependent than any other major country. This really means that we are more dependent for our well-being on making the maximum use of our human resources than is any other country. The President of the Board of Trade now knows what the expanding industries are, because he is to invite the chairmen of 100 of them to meet him or his representative. The Government should now make up their minds that the expansion which they know must take place if the country is to be saved will take place in those parts of the country where labour is available and where new work is needed.

Let them by all means encourage private enterprise firms and businesses to go into those areas and do the work. Let them offer the inducements mentioned by the Chancellor of Exchequer the other day. But if they do not go, that does not mean, or ought not to mean, that those areas should not be saved and that the human resources of those parts of the country should not be mobilised in the nation's interests. The Government should create the appropriate public enterprise to do the job.

Anyone who reads the N.E.D.C. Report, who recognises and accepts the 4 per cent. rate of growth, and looks back at what has happened over the past ten years, will see that we have now got into such a sorry mess that if we get only a 4 per cent. rate of growth it will not be enough on current policies to squeeze expanding industries out of the Midlands and the South into the areas of unemployment.

We ought and the Government ought to recognise this. They should plan real expansion of production. They should plan where the expansion is to take place. In that way, and in that way only, shall we solve the problems of those areas in the north of Britain and in Northern Ireland—the other nation. Only in that way shall we allow that other nation to play its part with the rest of the United Kingdom in the development of the economy in the interests of all of us.

4.52 p.m.

Mr. Selwyn Lloyd (Wirral)

I welcome the approach my right hon. Friend the Minister of Labour indicated in his speech today to redundancy problems and also the steps he mentioned to increase training capacity and reduce the period of apprenticeship. I rather agree with the hon. Member for Hamilton (Mr. T. Fraser), as I think that most people agree, about the over-concentration of industry in certain parts of the country and the lack of balance. One aspect of this problem was put to me very forcibly the other day by an industrialist with factories both north and south of a line drawn from Preston to Grimsby, not to be too specific. He said that in the southern area there was much more changing of jobs between factories and that diminished efficiency and meant that time spent by management on building up team work within individual factories was often wasted. He said that in the northern area the situation was quite different, for the obvious reason that there were fewer other jobs to go to, but also, partly because of character, there was much less tendency to change jobs and, therefore, much less time wasted by management. I believe that this is the case. It is a matter which should be a considerable practical inducement to industrialists to go North to areas of higher unemployment.

Instead of dealing with the matters raised today in detail, I want to talk more about the general background. I think that is still very important to areas of high unemployment, whether one thinks that the trouble is structural or both structural and cyclical.

I want to begin by asking the indulgence of the Committee for a species of maiden speech, because in nearly eighteen years' membership of the House of Commons this is the first time I have spoken as a back bencher from this side of the Chamber. I am now experiencing the physical disadvantages. I have not got the physical prop, the solid structure, which I used to have in front of me. However, I now have my hon. Friend the Member for Kidderminster (Sir G. Nabarro).

Last Sunday week the Sunday Express had a page setting twenty questions to test the political potential of aspirants to political careers. Under the supervision of my daughter I answered the questions conscientiously and I got 61 marks. The citation for that marking was as follows: Do not despair. You would make a charming back bencher, a pillar of your party, and you would bask in the absent-minded smile of your leader. However that may be, in these discussions on the Budget and the economic situation, so far there have been two debates, one on the 1962 Budget and one on the 1963 Budget. I will deal, first, with the debate on the 1962 Budget, which received a certain amount of criticism. I want to mention some figures resulting from that Budget. The revenue was £4 million below the estimate—£6,794 million compared with £6,798 million. I think that to be a remarkable piece of estimating. Expenditure above the line was £76 million more than estimated. Expenditure below the line was £88 million less. In the result, we met all Government current expenditure out of revenue and nearly 85 per cent. of the Government's below the line liabilities.

I listened rather wryly to the hon. Member for Cardiff, South-East (Mr. Callaghan) talking about the way we had world leadership in exports at the turn of the century. I rather suspect that financial experts of that time would not have been quite so disparaging about the facts which I have just set out, at all events as a statement of accounts. The hon. Gentleman very much castigated me for the errors in forecasting. He said that the forecasts had been completely out. I think that it is pretty fair effrontery for right hon. and hon. Members opposite to talk about mistakes and errors in forecasting, because they were wildly out, as the hon. Gentleman well knows, in most of theirs.

I remember that the Economic Survey for 1948 said this: Because we are a country dependent for its existence on international trade many of the factors governing our economic development are quite beyond the effective influence of the planner and wide deviations from even the plans most recently drawn up are therefore unavoidable. The Labour Party made that statement having estimated that the balance of payments deficit for 1947 would be £350 million. In fact it turned out to be £675 million. [HON. MEMBERS: "After the war."] Yes; it was a time when the central Government had a much tighter control of economic circumstances and planning ought therefore to have been much more accurate. In any event, the hon. Gentleman will remember that one of the main themes I put forward in the 1961 Budget debates was the impossibility of predicting twelve months ahead with any certainty, because conditions do not remain as forecast. I think that is generally accepted. Therefore, I put forward the additional means of regulating the economy, which I think were accepted, certainly the first one. I am very glad that my right hon. Friend has continued the regulator, and I support the change which he has made.

Chancellors of the Exchequer—and some more than others—are always portrayed as rather Scrooge-like creatures who like restricting for the sake of restricting, who like taxing for the sake of taxing, who want to depress living standards, and are set against expansion or reflation. In fact, there is nothing a Chancellor likes more than expansion, because it makes for buoyancy of the revenue. Anyhow, it is very pleasant to give money away, particularly if it does not happen to be one's own.

In both the Budget debate and at Sheffield—the hon. Member for Cardiff, South-East misquoted what I said at Sheffield—I said that I would not hesitate to use the available regulators if the demand did not rise as forecast. In view of this allegation of a complete change and a complete inconsistency—

Mr. James Callaghan (Cardiff, South-East)

I would be glad to withdraw if necessary. Would the right hon. and learned Gentleman repeat what he said?

Mr. Lloyd

I said what I have just said; that if a change in domestic demand did not take place I would not hesitate to use the regulators.

Mr. Callaghan

On 30th April, at the Sheffield Cutlers' Feast, the right hon. and learned Gentleman said: The critics say 'Demand at home is sagging and there is a recession ahead. You ought in your Budget to have pumped a whole lot more purchasing power into the domestic economy. You have missed an opportunity.' The answer is simple. I did not do that because I expect to see production expand in 1962 without any additional stimulus through the Budget itself. That is exactly what I said last Thursday. That was the charge I made against him a year ago, and I repeat it now.

Mr. Lloyd

The hon. Member said on Thursday that I stated that there would be "no recession this year", I did not say that—

Mr. Callaghan rose—

Hon. Members

Sit down.

The Temporary Chairman (Mr. W. R. Williams)

If the right hon. and learned Gentleman does not give way, the hon. Member must resume his place.

Mr. Lloyd

The hon. Member is being a very unfair controversialist because he cannot bear to have anything he said criticised. There is the report in HANSARD in which he put specific words into my mouth that I did not use—

Mr. Callaghan

What were those words?

Mr. Lloyd

What I said in the Budget debate, when winding up, and also in my speech at the Cutlers' Feast; that if demand did not rise as forecast I would not hesitate to take measures to deal with the situation—

Mr. Callaghan

Would the right hon. and learned Gentleman allow me?—

Hon. Members

Sit down.

Mr. Lloyd

I will talk to the hon. Gentleman afterwards. [HON. MEMBERS: "Give way."] The point is whether I stated that in no circumstances would I later take reflationary steps. I never said that. In the Budget debate speech just quoted I said that in certain circumstances I would take the measures.

In fact, before the Budget I had reduced Bank Rate on two occasions. I made a third reduction at the end of April. At the end of May one-third of the special deposits were released, credit restrictions were then eased and the banks were asked to have special sympathy with the areas of surplus resources, hire-purchase deposits were halved on certain consumer durables, long-term interest rates were allowed to fall and, in June, decisions were taken about Government capital expenditure, particularly for housing, which took it well above the increase of 6 per cent. already accepted—taking it above 10 per cent.

In July, other steps were under consideration of which my right hon. Friend knows and, since he took over, I have supported every reflationary action he has taken. This picture of me as someone obstinately opposed to reflation of any sort is wholly false. It is quite obvious that if demand does not rise as expected action has to be taken.

As for the forecasts, for the first six months of that year the results were in accordance with them. Exports went up and, proportionately, we held our own with other exporting countries. Thereafter, conditions changed. The reasons are well known and are set out in the Economic Report. But I accept responsibility for the forecasts. I do not propose to shelter behind any official advice or any view put before me. If there was a fault, the fault was mine.

On the other hand, I claim that, first, the measures taken by me defeated a determined onslaught on the £ from March to July, 1961, and my very last act as Chancellor was to authorise re- payment of the whole debit outstanding to the I.M.F. Secondly, they changed a balance of payments from a deficit of £308 million in 1960 to a surplus of £67 million in 1961—an improvement of £375 million in two years.

Thirdly, those measures reduced the rate of increase in weekly wage earnings from an increase of 6.6 per cent. in October, 1960, compared with the previous October, to 3.2 per cent. increase in October, 1962, as compared with October, 1961—a rate that I suggest was much more consistent with any figure of long-term growth of productivity that could be reasonably considered. Fourthly, those measures produced a situation in which many industrialists had to re-examine the efficiency of their operations and look at their costs, and I think that our goods are now much more competitive than they were 2½ years ago.

The hon. Member for Cardiff, South-East made great play with this topic of expansion, alleging some inconsistency between the Chancellor and myself. He said that my right hon. Friend had told us that a healthy expansion of home demand and a strong £ go hand in hand, whereas I had based my Budgets on the need to safeguard the £ abroad which meant restricting demand at home, which was the whole case for the pay pause. That was not the whole case for the pay pause. The case for the pay pause was that it would keep down costs and prices. Nor did the hon. Gentleman quote my right hon. Friend precisely. My right hon. Friend said: Sound expansion without inflation will not weaken sterling, but strengthen it."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 455.] I absolutely agree with that statement, and I think that my right hon. Friend would also agree with me that expansion achieved by inflation, or accompanied by inflation, is unhealthy, and will, in the long run, do no good.

I know that it is fashionable to abuse stop-go, and if one could avoid fluctuations it would be perfect, but it is hopelessly unrealistic to think that any Government ever will be able to avoid intervention to slow down or speed up. It is hopelessly unrealistic to contend that what is right for one year is necessarily right for the next. But the Government of the day, in my view, because all the pressures in a democracy are in favour of inflation, must err, if they do err, on the other side.

I come now to the question of devaluation. That was one of the most important statements of the whole debate. I hope that I will not have a controversy with the hon. Gentleman over what was said then. He said that he was against devaluation, and referred to something said by his right hon. Friend the Leader of the Opposition. He said that unilateral devaluation would be an anti-social step of the first magnitude and that we must not yield to this temptation. I am delighted to hear that unequivocal statement. The hon. Gentleman is neither a floater nor a sinker. Mr. Kaldor has gone for a "burton". That was the Alan Day that was.

Holding that view, and on that premise—which I share—how should we tackle the sort of situation we have had since the war—the problems of a country so dependent on exports, and with one of the reserve currencies? The hon. Member talked of improving liquidity and referred to French, Italian and German surpluses. We all agree that that kind of imbalance is undesirable, but in 1961, as a result considerably of a British initiative, we got an agreement whereby the resources of I.M.F. were strengthened by some 3,000 million dollars worth mainly of German, French and Italian money. I agree that more should be done, but the tendency is to forget what has been achieved—and achievement is often more difficult than talk.

Then the hon. Gentleman talked of import controls as a solution to the problem and said that these should be looked at. I looked at them long and hard, but, in the first place, they are an administrative headache. That should not necessarily be a conclusive argument against them, but the fact remains that they are an administrative headache. They also take some time to take effect, unless there is to be a large-scale dislocation of trade, and they must be temporary if retaliation is to be avoided. They are a very "dicey" proposition.

The hon. Gentleman also said that courage was needed—that Chancellors should be more courageous, ride the storm, and use the reserves hi difficult times because that was their purpose. I did that very thing in March, 1961, at a cost of £320 million—more was lost in one day than ever before. In June and July one attempted to ride the storm, and we lost about £200 million more. The trouble is that one can mortgage one's house once and spend the money once; one can pledge one's securities with the bank and use that money once. There is nothing wrong in using reserves to finance the importing of raw materials, because those are just as valuable as the cash. But one cannot go on doing it unless in some way the money has been re-earned, and if the end of the road is not to be "an anti-social step of the first magnitude"—deflation—there are severe limits on the risk which it is reasonable to expect any Chancellor to take.

The hon. Member for Cardiff, South-East then talked about a long-term plan. Again, in every long-term plan, there are all sorts of difficulties. My quotation earlier from the 1948 Economic Survey is very much to the point. But I set up, with the approval of my colleagues, the N.E.D.C. to examine the problem of growth. It is an experiment in planning by consent. It has certainly captured the interest of the nation, and I believe that it is gaining ground. The Report to which the hon. Member for Hamilton referred is fairly tough reading but, considering the time available, it is a very great achievement by the staff of the N.E.D.C. It is a brilliant performance that they should have managed to get the Report out in that time. I look forward to the next publication. I hope that it will be forthcoming very soon, and I hope that the Council will extend its inquiries and will grow in influence.

My right hon. Friend referred to the question of an incomes policy and said: … expansion and incomes policy are entirely interdependent."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 475.] He pointed out that with an expansion rate of 4 per cent., an increase of 3 per cent. to 3½ per cent. on average in money incomes was one that could be tolerated. I agree. The difficulty, however, arises over the word "average".

I take the case of wages in the building trade, for example, and I do so because of their effect on the cost of houses, schools, hospitals and public construction of all sorts. It is an industry with a very strong bargaining posi- tion at the moment. It is likely to be overloaded again quite soon. It is an industry in which employers can easily pass on increased costs. Earnings in the industry have gone up by about 25 per cent. in three years, and building costs have risen by about the same percentage. I will not comment today on the decision of the unions concerned not to take part in the N.I.C. inquiry, but it is in the national interest that the facts should be known and that people should realise that if a 3 per cent. to 3½ per cent. increase is the average, then if one section of the community has 8 per cent. someone else will get little or nothing. This is the basic fact about an incomes policy which must be realised.

But more important than the short-term measures or the general ideas is to concentrate on ways of improving incentives and efficiency and reducing costs. I welcome the steps which my right hon. Friend has taken. Before the Budget he had already acted on Purchase Tax, and I strongly supported his action. It carried on what I started last year and took it an important step further. I am sure that my right hon. Friend was right to concentrate on Income Tax, and I welcome the steps he has taken.

In the matter of tax reform, I was delighted that my right hon. Friend was able to deal with Schedule A all in one go. On the added value tax, I share the doubts of both my right hon. Friend and the hon. Member for Cardiff, South-East. I think that it would produce very formidable administrative problems, and I suspect that if it were carried out one would have little thanks from industry afterwards. I have taken that view after a certain amount of study, and I await with interest to hear what Mr. Gordon Richardson has to say on the subject.

I support my right hon. Friend on the depreciation allowances. The experiment of free depreciation for the special areas is a very bold one, despite the obvious difficulties about boundaries and cost. I am sorry that my right hon. Friend has not pushed on with the idea of a single corporation tax to cover both Income Tax and Profits Tax for companies. There were difficulties, but I suspect that the opposition comes from those who think that in a democracy company profits are more vulnerable than the earnings of the individual. I feel that that is the basic prejudice against this tax. But company profits, of course, are already subject to Profits Tax and there might be many occasions when the Chancellor might want to alter the standard rate, either for individuals or for companies, but not at the same time or to the same extent. I welcome very much the progress made in the reform of the presentation of the Exchequer accounts. This was something about which I always felt strongly and which I pressed as soon as I got to the Treasury.

There is ground for anxiety about the increase in public expenditure. Estimates for current expenditure have gone up by nearly 10 per cent. This, I believe, is well ahead of the N.E.D.C. projection. If this sort of rate is regarded as the normal annual increase there are seeds of great trouble in it. Reflation by remission of taxation is one thing, because the tax can be put on again; it is a reversible process. But reflation by an increase in Government spending is not reversible and, if carried too far, can be dangerous.

I repeat my view that a regular 10 per cent. increase each year will bring inflation, and I ask my right hon. Friend to watch this most carefully despite all the pressures from both sides of the Committee. A great deal of work was done in the two years during which I was at the Treasury on the five-year forward look which followed the recommendation of the Plowden Committee. I should very much like to hear how that work is going on. Perhaps my right hon. Friend the Chief Secretary to the Treasury will tell us.

As for Government capital expenditure, I accept the proposition that when the private sector falls off the public sector should be stepped up, but I hope that the stepping up will take place on projects which will make the country more efficient. Mr. Harold Wincott talked the other day about "the infrastructure of industry" and gave it a very wide definition. I hope that when public expenditure has to be stepped up to fill the gap because the private sector is declining there will be concentration on the infrastructure of industry. I would give quite a lot to get our ports modernised even if that meant postponing some other work.

I hope that my right hon. Friend will think again about the idea of a Commonwealth Economic Development Council. It is relevant, not only generally but particularly, because there have been references in the Budget to special aid for certain Commonwealth members. I should like to see such a council constituted in the same kind of way as the N.E.D.C., with leading Ministers from the Commonwealth on it and with a staff like that of the N.E.D.C., looking not only at growth within the Commonwealth, but also at such matters as the co-ordination of development plans, security for investment, currency problems, migration, aid and technical assistance, and the marrying up of what are in many ways complementary economies. After the termination of the Common Market negotiations, it is particularly appropriate to think again and to take some initiative, because the Commonwealth Economic Consultative Committee does not fill the bill. I think that a Commonwealth Economic Council could capture the interest of the Commonwealth as the N.E.D.C. has captured interest in this country.

I apologise for the length of my speech. I shall be already getting into bad odour, I am afraid, as a Privy Councillor and a back bencher with my hon. Friend the Member for Kidderminster. I congratulate my right hon. Friend on an able Budget speech which was very easy to listen to and on well contrived tax reliefs which have a considerable follow-through in them. I think that their effects in 1964–65 will be even greater. I believe that this is a situation in which steady growth is possible, provided that our costs are watched, provided that the idea of an incomes policy is genuinely accepted, and provided that there is caution over Government expenditure. I endorse my right hon. Friend's view that expansion without, inflation is the only kind of expansion worth having, and I wish him all success in his efforts to achieve it.

5.20 p.m.

Mr. Neil McBride (Swansea, East)

I am certain that I shall have from hon. and right hon. Members on both sides of the Committee the indulgence granted on occasions such as this. At the outset, I pay a tribute to my predecessor as Member for Swansea, East, the late Mr. D. L. Mort. As a member of the British Iron and Steel and Kindred Trades Association, he had an expert knowledge of industrial matters. I, as a member of the parent engineering industry, will endeavour to attain his high level. In general matters, he gave of his talents and time in rendering good service to Swansea, East in particular and to the town of Swansea as a whole. I count it an honourable privilege to succeed Mr. Mort as Member for Swansea, East.

I direct the attention of the Chancellor of the Exchequer to the section of his Budget speech which in the OFFICIAL REPORT is headed, "Regional Problems". In this, the right hon. Gentleman speaks of the problem of clearing derelict sites and rehabilitating them, for which purpose the ceiling of grant provision is raised from 50–75 per cent. to 85–95 per cent. for all tenders received and approved in the next nine months. In the latest test of public feeling in Swansea, this was a by-election issue, and I therefore pose the problem of Swansea to illustrate what I suggest.

Within the last few weeks, the President of the Board of Trade was visited by a deputation from Swansea headed by his worship the mayor. This deputation wanted Swansea to be designated as an area requiring special attention because of unemployment. With particular reference to the problems described in the section of the Budget statement headed "Regional Problems", I ask that the term "development districts" be enlarged to read, "areas requiring special attention because of unemployment".

The problem in Swansea is that insufficient industry is located within the town. The problem is intensified now, and has been for many years, by the continued flight of industry from Swansea. The recent closure of a constructional engineering firm emphasised this fact sharply. Among the many which have gone from Swansea are chemical works, steel tube works, copper works and smelting works. Moreover, in this great seaport where there were once seven dry docks there is now only one. Therefore, in the matter of derelict sites, Swansea deserves great attention.

In the Morriston area there is a large site near which are to be found all the services which could readily be made available if the site were cleared, rehabilitated and made attractive to industry. The Swansea Borough Corporation's Parliamentary committee, headed by a distinguished former Member of the House, Alderman Percy Morris, has been in close touch with the Board of Trade on this matter. The trouble in Morriston has been made acute by the severe contraction of the tinplate industry. Men have been idle in Morriston since 1958, and there is little hope of alternative employment. The rehabilitation of a site such as the one I have mentioned would render a great service and provide hope for the future.

The Minister for Welsh Affairs will know that, when he visits Swansea and proceeds from Llansamlet to Landore, he passes through barren wastes where industry once fluorished. In these wastes there are derelict sites in which buildings stand like tombstones in an industrial graveyard.

The cost of rehabilitating such areas in order to make them attractive to industry would be much too heavy a financial burden for the Borough of Swansea to bear. For this area, which was once the metallurgical centre of the world, I make the plea that the grant should be 100 per cent. in order that its derelict sites may be rehabilitated and made as attractive to industry as possible. If such a proposal were put into effect, a great deal of employment would be created.

There are, in my view, three grounds for what I regard as this well justified proposal. First, industry attracted to Swansea would provide openings for adult labour displaced by the contraction of the older declining industries. Since 1951, Wales has lost 100,000 jobs. Many of the adult male workers displaced from employment in Swansea have little or no hope of securing work at all.

Second—this is important for the future not only of Swansea and Wales but of the British nation as a whole—there is the need to provide opportunities for school leavers. In Swansea now, the position of boys wishing to secure apprenticeships is acutely difficult. In the last full year's report of the Youth Employment Committee, it was said that only 179 boys who had left school during the year had been placed in apprenticeships, representing only 17 per cent. of the total; and for girls the situation was much more difficult. I believe that, if young people are to be given the opportunity to carve out the careers of their choice, there must be openings for them in places such as Swansea. If the derelict sites were levelled and made attractive, there would be brought to the area the light and diversified industries which would give them the opportunity to carve out their own careers instead of emigrating, as they will otherwise do, to London, Slough and Birmingham. The young people of my constituency want to set down their roots in their own area and bring up their families there, and it is right that they should.

Third, the improvement for which I ask would be of great advantage to the rate yield of the borough and would make possible the maintenance and improvement of essential services in Swansea. Only sheer prudence in severely cutting the estimates has enabled Swansea Borough Corporation to peg the rate for this year at 9s. 4d. on the new valuations. The Corporation in its budget for 1963 had to cut the estimates by, in round figures, £180,000, of which £170,000 would have accrued from the rate yield. If one adds to this the cut in education estimates of £150,000 made in September last year, one sees that it is quite impossible for the Borough of Swansea to provide any capital for the clearance of derelict areas, even with a grant in aid to the extent of 95 per cent. This is why I say that the ceiling should be raised to 100 per cent.

At present, the Llansamlet and Landore area enjoys everything which a good industrialist would like to find. There is a railway running through the centre of it. There is a fine port with berthage for 70 ships. I was interested in what was said by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) when he spoke about the modernisation of ports. Swansea, already efficient, would certainly welcome any help in making itself a 100 per cent. modern and efficient port.

In addition to the levelling and clearing, there is the problem of a road link so that goods may be sent to the points of distribution from the point of manufacture, and this would be encompassed by the 100 per cent. grant which I have proposed.

I regard this as a special local authority project and I believe that it should receive special consideration. A project such as this would help to cushion the borough in times of adversity and against unemployment. It would give hope, encouragement and a sense of aspiration to the school leavers of the future. It would help immeasurably in strengthening the economy of Swansea and by so doing would add materially to the prosperity of Wales. In time, the permeating effects would be of beneficial and lasting value to the nation.

5.30 p.m.

Mr. Douglas Marshall (Bodmin)

Right hon. and hon. Members always feel it an honour and a special privilege to follow an hon. Member who has just made his maiden speech, I am sure that I express the view of the whole House when I say that we have listened with great interest to what the hon. Member for Swansea, East (Mr. McBride) has said. He has obeyed to the full the tradition of this House by not being controversial. He has made a special plea on behalf of Swansea, part of which he has the honour to represent. The town was being blitzed on the last occasion that I was in it, and one always remembers with pride the way in which one's fellow countrymen were withstanding the blast at that time. I sincerely hope that the hon. Member will have a very happy time in this House, and we look forward to the next occasion that he speaks in this Chamber. [HON. MEMBERS: "Hear, hear."]

I wish to make one or two specific points to my right hon. Friend the Chancellor of the Exchequer. They are in fact exploratory points and, perhaps, will be more easily understood when the Finance Bill eventually reaches the House. However, in general, I feel that this is a Budget of expansion and of confidence. It has been said that a number of people outside this House, on hearing the contents of the Budget, would feel that it was flat. I believe that that would be the case only because they had not fully realised the significance of what was in the Budget. One cannot criticise people for the major reason for that, since many of the really important matters in the Budget are extremely technical and require a good deal of reading and studying.

It has been said, rightly, that the Chancellor has distributed a sum of £269 million per annum in tax reliefs, but, with the growth which that will stimulate, that figure can rise readily and easily to a figure of £600 million. Anyone who has burned the midnight oil in studying the Budget will realise that that is true.

In that part of the debate to which I have listened very little has been made of the fact that 3¾ million of our people are now taken outside the area of taxation altogether. This is not only good for the people directly affected but will lessen the impact on the civil servants in the Inland Revenue who have always been very loyal and very over-worked. It may be that right hon. and hon. Members foresaw that Schedule A taxation on owner-occupiers would be abolished because of what the Chancellor of the Exchequer's predecessor said, but quite a lot of people felt that it would not be done all in one go. My right hon. Friend has done it in one go, and this is extremely satisfactory.

Also, not much has been made of the lowering of the Stamp Duty on conveyances. But this will be extremely helpful to the man who has just got married and is buying a house for the first time. Most of us have been in this position, and this, too, will be an extremely useful measure.

I come to the points which I specially wish to draw to the attention of my hon. Friend the Economic Secretary. They are slightly technical and very teasing. My hon. Friend will be aware that over the last 18 years I have spoken in the House on metalliferous mining and mineral development generally. I have referred to the wealth which, I believe, lies hidden in our hills and have wondered what we could do to promote the extraction of this wealth for the benefit of the country. As far as I can remember, I have personally seen every Chancellor of the Exchequer since 1945 on this point and for the first time a Chancellor of the Exchequer has really tried to do something about it.

I therefore first say, "Thank you" to my right hon. Friend, and I mean that very sincerely. I should like my right hon. Friend to know that not only myself but the mining people of Cornwall also wish to thank him. I have been in contact with some of them, also Robert Boscawen came to see me last night to discuss this matter. People in the metalliferous mining and mineral development community in Cornwall feel that at last something is being done in this matter. What is much more important, they feel that this will help promote what they wish to bring about. I think that the original suggestion which some of my hon. Friends and myself, and, at one time, right hon. Friends, made would have given a greater incentive, but my right hon. Friend has not seen fit to implement it. He has put something else in its place, and we are extremely grateful for it.

I wish to make these two points, and both of them cause me considerable worry. This must be related to the plans which have been put into operation in development areas; my hon. Friend the Economic Secretary will realise that, in most cases, the areas in which the possibility of further or new development of metalliferous mining has been considered lie in development areas. But, if someone sets out to find mineral wealth, it is quite possible that he will find it in a place which is not in a development area. I should like to know what the position is exactly. For example, tin lies in only a very narrow part of the country.

Secondly, my hon. Friend the Economic Secretary will realise that the development of any mine is a long process. Whatever happens, it must be a long process. This is the difficulty. I should like to know the position if the area in which the mine is being developed ceases to be a development area. Will the assistance amounting overall to 130 per cent. planned for the area still be afforded even if that area after a year of two ceases to be a development area because a certain project has been started in it?

My next point is this. In studying the Budget proposals, I am not sure whether the mineral depletion allowances will go to the promoters, to those who try to develop a metalliferous mine, or whether they will go to the owners of the royalties. I should like to get this clear, because it is extremely important. In a great many cases, metalliferous mining is not like other forms of mining. Sometimes, it is impossible actually to buy. Consequently, payment is based, as it has been for generations, on a royalty basis. Therefore, one needs to be sure that it is the promoter who will derive the benefit, because the whole idea of the provision which is contained in the Budget is, one assumes, to get these things going.

I wish to ask my hon. Friend the Economic Secretary another question concerning ships. I quote as an example a development area in which there are repair yards, like Falmouth or Belfast, or where there are shipbuilding yards or both. A capital conversion of a ship might be contemplated. A tanker, for example, might be converted into a refrigerated vessel. This would be a capital change. As such, would it qualify for the benefits of the Budget? If this is so, as I hope will be the case, it could indeed help all our ship repair and shipbuilding yards which lie within development areas, and there would be a double instead of a single benefit. In studying the Budget, the position is not at all clear. I hope that whoever winds up the debate tonight will have sufficient time to give an explanation.

There is another point of which, I am sure, my right hon. Friend the Chancellor and my hon. Friend the Economic Secretary are well aware, but I cannot understand why nothing has been done about it. My right hon. Friend the Chancellor, with his great experience and knowledge, knows perfectly well that one of the things we want to do is to expand wherever possible within the Commonwealth. No hon. Member would deny that that objective is worthy of all of us. There is, however, a strange position in taxation. Every developing and developed Commonwealth country has a certain degree of growing national desires and, therefore, it is at times advantageous to have a company incorporated within that dominion or country of the Commonwealth.

If a United Kingdom company, registered in this country, operates in the Commonwealth, it derives certain benefits in taxation. The strange thing is, however, that if that same company desires to do what the Dominion in which it operates wants it to do and lo incorporate a company in the Dominion, which is wholly owned by the company in the United Kingdom, it is denied all those benefits. I cannot understand why my right hon. Friend the Chancellor will not do anything about this. I sincerely trust that something will be done in the Finance Bill.

An argument which the hon. Member for Sowerby (Mr. Houghton), whom I sec in his place, would fully understand is that that might lead to a certain degree of tax avoidance. It may be true that the Treasury cannot say what the extent of such avoidance would be. I would be content if the Treasury would tell either the Chancellor of the Exchequer or the Economic Secretary. I do not believe that the question has been put by either of them to their own Treasury officials. If the Treasury could persuade them that the extent of the tax avoidance would be considerable, that would be another matter, but I am extremely doubtful whether the question has been asked.

I come now to two controversial points. One of them is how to inspire exports. I fear that I shall view this matter somewhat differently from some of my right hon. and hon. Friends. It is so extremely difficult a problem that one never dreams that anybody will find the right answer. It is very difficult to define what is an export, whether it is a nut or a screw or the screw and the nut going into something else. The whole thing is very difficult to define within G.A.T.T. and the rest. Therefore, I have a great deal of sympathy for my right hon. Friend the Chancellor, my hon. Friend the Economic Secretary and everybody else in the Treasury on this subject.

A great deal has been said about the fuel tax. I share the view of my right hon. Friend the Chancellor and the view which, I think, has been taken by the Opposition Front Bench. Our major source of fuel—coal—has been undergoing a difficult time. We cannot suddenly decide to desert an existing source. I am not a Liberal—I am a Conservative; and I see nothing wrong in a certain amount of protection from time to time; but I consider that this question must be examined again within the near future, because it is obvious to everyone that this form of taxation simply raises costs and puts our manufacturers in a less competitive position.

If, therefore, at a later date—not as far away as the next Budget—it is seen to be possible, without damaging our major industry of coal, to relieve the tax on fuel, this would be a good thing. I share the view of the Chancellor that although the present may not be the moment to do it, it might be possible in the near future to remove this tax on fuel.

5.48 p.m.

Mr. John Diamond (Gloucester)

I intend later in my remarks to return to what the hon. Member for Bodmin (Mr. Marshall) has said about exports. I should like at the outset, however, to associate myself most heartily with the charming and well-deserved compliment which he paid to my hon. Friend the Member for Swansea, East (Mr. McBride). His was a remarkable maiden speech.

As it was a maiden speech, however, my hon. Friend naturally forbore from taking any part in a debate with the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), who had immediately preceded him from the benches opposite. I hope, therefore, that it will not be deemed in any way uncharitable of me if, in the right hon. and learned Gentleman's temporary absence, I reply to some of his remarks. I recognise that it is not possible always for somebody to be in the Chamber throughout a debate. Nevertheless, it is equally right that things which are said in the House should be answered.

I want to make it clear to the right hon. and learned Gentleman that, in my view, he differs totally from the present Chancellor of the Exchequer. All his attempts to pretend that he is the same as the present Chancellor and that his own policies naturally preceded those of his right hon. Friend, whose proposals should for this reason be supported, fall entirely flat on my ears.

To me, the present Chancellor appears to be acting like an expansionist. The previous Chancellor was a very clear restrictionist in his emphasis on the £—protection of sterling first and at all costs, and only when one had protected sterling could one possibly think of expansion. What the present Chancellor is trying to do—he has said so—is to achieve expansion without inflation. What the previous Chancellor achieved was inflation without expansion. The previous Chancellor paid lip-service to efficiency, but all his actions prevented all our manufacturers from producing efficiently because all their plants had to be at 60 or 70 per cent. of productive capacity, and everyone knows that the way to get costs down is to have one's plant running as far as possible day and night at full stretch.

The present Chancellor—I say this readily—struck me as being fair with his Income Tax reliefs. He has spread the reliefs at the lower end of Income Tax liability and given freedom from tax to nearly 4 million people. The previous Chancellor was grossly unfair in limiting his income reliefs almost exclusively to the richest section of the community, whereas the present Chancellor has directed his attention to the poorest section. I remember the previous Chancellor, and shall always remember him, as a person who was grossly unfair in regard to the Surtax reliefs which he gave and as the person who was most responsible for causing hardship and misery unnecessarily to 250,000 unemployed during this year. That is all I have to say about the right hon. and learned Gentleman.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

With regard to the hon. Gentleman's first point, would he not admit that the economic situation is totally different from what it was when my right hon. and learned Friend the Member for Wirral was Chancellor of the Exchequer? In those days we had a £300 million deficit; now we have a £67 million credit.

Mr. Diamond

The position is different only to this extent, that the previous Chancellor misunderstood, and showed in his speech today that he still does not appreciate, the task that he then had and of which he has now been relieved. He does not appreciate the need of it. He does not realise the need to keep the economy fully going. It was his lack of understanding, misinterpretation of the future and false estimate which led directly to our unemployment in men and in machines.

I now turn directly to the Budget. There are two things in it that I welcome very much for rather obvious and personal reasons. I welcome the statements which have been made both by the Chancellor and by the Minister of Labour today with regard to redundancy arrangements and severance pay. I welcome very strongly that both sides of the House now accept the principle that there should be severance pay in redundancy of an appropriate kind in appropriate circumstances. As to the detailed terms, obviously no hon. Member can introduce in a Private Member's Bill the ideal arrangement. Everyone must be grateful that the Government are now tackling the matter with all the resources available to a Government. I am sure that we shall in the end—I hope that the time is not too far distant—have a severance pay scheme which will be far better than any hon. Member, even myself, could possibly have envisaged.

But I hope that the Government will not hesitate to legislate. Experience has shown that this is necessary. The pace is too slow; it is impossible to achieve what is desirable without legislation, and legislation would be generally acceptable. But legislation must provide for minimum terms. Provided that the Government bear those two things in mind, I am sure that we shall make great progress in the autumn when the Bill, as I hope it will be, is introduced by the Government.

I also strongly welcome the idea now generally called "free depreciation". My hon. Friend the Member for Hamilton (Mr. T. Fraser) said that he was not an accountant and, therefore, did not find it easy to estimate whether this would be likely to have a considerable appeal. I can say immediately that I regard it as something which should be of considerable and dynamic appeal to most businessmen—certainly to any businessman who really understands his job. It is an excellent idea. The Chancellor went a little far in calling it new and revolutionary, since I myself have put it forward in Labour Party circles for five years and in the House of Commons for three years and devoted half my speech on the Budget last year to this topic. But we will not argue about it. So long as back benchers have the consolation of knowing that, by and large, any good idea of theirs will be adopted after a two-year lag, it makes one's task worth while.

I repeat that I think this is a fair Budget so far as its tax provisions are concerned, but it is a wholly inadequate one in terms of achieving the efficiency and expansion that we need. It is not right to say—the Chancellor kept on saying it—that what we now need to plan for is a 4 per cent. increase in total demand. That is what we should have been planning for two or three years ago. We have had two years of stagnation. For the Chancellor to come forward in an expansionist mood and say at the end of the two years, "Let us now start where we should have started two years ago", is wholly inadequate. If that is the best that he can do in the way of a target, we shall not achieve anything like so much as we should do. If the target had been 4 per cent. for each of the last two years and 4 per cent., for this year, making a total of 12 per cent., I could have understood it. It is because of these figures that I think we should go for a percentage much higher than that, something, if possible, in terms of manufacturing improvement, in the nature of 10 per cent—at all events, much nearer that than 4 per cent.

I say this particularly because we have to cure unemployment. That is one of the things the Budget is supposed to be about. But everyone knows that the unemployment capacity is at least 15 per cent. greater. That means that there could be an additional demand on the economy of about 15 per cent. before the total number of men out of work would be not only re-employed but fully employed. Therefore, if we are to have an increase of only 4 per cent., it would be perfectly possible to have it without one man being re-employed if we went all out for efficiency. It is not likely to happen that way, but it could.

Sir Alexander Spearman (Scarborough and Whitby)

I do not necessarily accept the hon. Gentleman's figures, but if they were right, would he not agree that, so far from there having been two years of stagnation, if productive capacity has grown by 15 per cent. it must have been a very dynamic two years?

Mr. Diamond

That is untypical of the hon. Gentleman. It is indicative of a restrictionist approach to suggest that the way to get the economy put in order is to restrict the demands on the economy and restrict productive work. The hon. Gentleman does not believe that. I am sure that he believes that the way to do it is to get everybody fully employed. That is what we could now do if we set our sights at much higher than the 4 per cent. envisaged.

I well realise that if one talks about a target of 10 per cent. or double the 4 per cent. it requires certain consequential arguments, and I now propose to address myself to them. First of all, it requires a very substantial increase in exports. My first comment on that is that we are now acknowledged to be competitive in export prices. Indeed, the time has never been when we were not competitive in price. We were always threatened that if the wage earners got the increases they claimed we should cease to be competitive in price. But we have never reached the stage of losing exports in any substantial way through being uncompetitive in price.

Everyone in industry knows that one of the greatest goads to competitiveness and efficiency is a substantial wage demand. I am not encouraging substantial wage demands, but am just saying that that is what puts the managing director on his mettle. That makes him think, as it makes Americans think, in terms of more horsepower and of less manpower. That is the way one begins to think of new ideas, for the human capacity to think of new ideas is endless. Just because one had a good new idea a year ago does not mean that one cannot think of one now.

Mr. John Biffen (Oswestry)

If it is so vital to make comparisons with the attitude in the United States, would the hon. Gentleman also accept comparison with the attitude of the United States as to what is an acceptable level of unemployment?

Mr. Diamond

The two situations are utterly different. Geography in the United States is totally different from ours. The distances between towns are vast. In any case, it is not the desire of the United States to maintain the level of employment which it has experienced now for some time.

What we need is exports. We are already competitive. That is the first element among the things we need for successful exporting. The trouble is that we are not export-minded as a nation. I agree with the hon. Member for Bodmin, who said that selective tax incentives were not the way to increasing exports. I do not deny that one can produce a system of tax incen- tives, but I believe that the arguments I have heard from the Government as to why one cannot do it are shallow. One can do it if one wants to. But I do not want to.

I do not want to select a small part of those who contribute to the whole of the total production and efficiency of our country and say to them, "You will get a soft ride if you export more." We do not want any more inducements and soft rides. We already have enough of that in agriculture and in the "You have never had it so good" atmosphere.

We want hard rides. We want every person in this country to realise that there is no action which he takes which does not have an effect on our export capacity. Every manager must realise that, if he is more efficient in anything he sells on the home market, this has its effects on his capacity to export at cheap prices. Every wage earner must realise that every time he makes application for an increase in wages he must take into account our competitive position in exports. Every person in this country should be more export-minded. But we shall not achieve that if the Government take aside a small number of people and tell them, "You are the people on whom our exports rest. You can do the exporting while the rest of us sit back and watch."

Sir G. Nabarro

I do not think that that is a fair statement of the argument. Let us take the E.E.C. as an example. Five out of the six countries arrange their taxation in such a way as to abate that part of the taxation which relates to goods exported from those countries. That is not a fiscal incentive. It is merely the removal of taxation from export goods. That is all that is wanted here in order that we shall remain strictly competitive with Western European countries.

Mr. Diamond

This is a very long argument and it is one that I would not accept. If the hon. Gentleman is talking about T.V.A. then I do not accept that argument. I accept what the Chancellor has said about it.

Sir G. Naharro

I am not necessarily talking about T.V.A. alone. The German turnover tax is another example They all add up to the same thing, however.

Mr. Diamond

I think that Purchase Tax is simpler, more reliable, cheaper to collect and just as effective. I am not yet persuaded that the way to export more is to put up all prices so that the exporter has large reductions in his export prices. But that is the effect of T.V.A. and of the German method, and I do not approve of it. I believe that after the inquiry—with which I am delighted—we shall come to the conclusion that there is a great deal to be said for Purchase Tax and for all of us accepting it as part of our responsibilities somehow or other to achieve greater exports.

Other people are export-minded. For instance, the Germans and the Italians think of exports as I want us to think of them. They concentrate on the possibility of exporting first and of serving the home market afterwards. Until we accept that kind of priority we shall not achieve the necessary increase in exports. I hope that whichever member of the Government is to have the pleasure of entertaining the 100 expanding businessmen to lunch will impress on them the need for exports.

I wish also that our exporters would concern themselves much more with advertising overseas in foreign languages. We are far too conservative—with a small "c", for no one would attempt to use the word with a capital "C" these days—and are too terrified of making spelling mistakes in foreign languages. Yet even this can he effective in its own way. One case which came to my notice was that of an English-language advertisement by the manager of a French hotel outside Paris. It met with considerable success by stating that every front first-floor bedroom not only looked over the river but had a French widow in it. I recommend our own would-be exporters to try their hand at advertising in foreign languages.

We are trying to create circumstances in which we can achieve greater exports. I have indicated that we are competitive and that, if we increase our export-mindedness, our exports could go up. But there remain two snags. One cannot export without an importer and one cannot export if one is to run into balance of payments difficulties.

How does one create more importers? The initiative taken by my right hon. Friend the Leader of the Opposition in Washington, the Kennedy Round and the G.A.T.T. negotiations are all methods of increasing opportunities for importers and of increasing international trade. I hope that we shall not overlook the proximity of the fastest increasing market—the E.E.C.—for it presents us with the most ready means of increasing our exports.

The fact that our negotiations for entry have come to what I hope is only a temporary halt—it was certainly untimely—does not mean that the problems thrown up by the negotiations have been solved. The fact that we are not talking about these questions does not mean that they have been answered. They are still there. Yet not one word about it was contained in the Budget statement, which was the first to follow the negotiations. There was no indication of what we should do or of what alternative there is. This passionate lover, the Conservative Party, which embraced the lady of the Six so fervently and publicly in Brussels—

Mr. Cyril Bence (Dunbartonshire, East)

He was a gigolo.

Mr. Diamond

—seems to have thrown over the lady.

Mr. D. J. Williams (Neath)

He found out about her.

Mr. Diamond

I am as much in love with her as ever I was. Love was officially declared by the party opposite at their conference last year but not one word about it was contained in the Budget statement. Are we to resume the full negotiations? Are we to start them again in more limited aspects at any time? What alternative have the Government in mind?

Has any alternative been thought about? According to the Conservative Party, it was fundamental to our economic recovery that we should join the E.E.C. The Chancellor, in his Budget statement, was talking about our recovery but said not one word about what we were to do now following the breakdown in the Brussels talks.

I recognise that there are difficulties. No politician likes to jump in just after he has had a rather unpleasant cold shower. He likes to wait for the circumstances to improve a little. No doubt the Conservative Party, having been pulled backwards through a large thicket, feels that it would like time to settle down a little before having another go. But the country cannot wait while the Conservative Party makes up its mind whether it is in its political interests to have another go or not.

Sir G. Nabarro

What would the Labour Party do?

Mr. Diamond

I am making my speech.

Mr. Bence

We are the Opposition. The hon. Member for Kidderminster (Sir G. Nabarro) is on the Government side.

Sir G. Nabarro

Split?

Mr. Diamond

I hope that I do not interrupt the hon. Member for Kidderminster too much.

The serious part is that at the moment there is a vacuum in Europe, which every politician knows is the most serious situation to exist. How is to be filled? My anxiety is that it shall not be filled in the wrong way. Unless we take urgent steps to do something, it may be filled in the wrong way. We should take steps to re-establish connection, not over the whole field, because that has been demonstrated too recently to be impossible, but in a limited field where success might lie. The reason why I am anxious about this is because the real damage that was done when the negotiations were terminated was not in what was said, because there was force in the argument, but because the force of the personality matters. It was a case of using force to end an argument.

If what M. Monnet had called the European method had been considered and if arguments had been put before the Council of Ministers which they had examined as we examine arguments in Standing Committees and come to a conclusion one way or another on those arguments, it would have been different. One person has considerable power—we might think too much power, for apparently it is the case that if there one says "Resign" one is liable to be fined £40, according to a B.B.C. public statement. How many times have I said to hon. Members opposite "Resign", not with success I am afraid? A situation is developing which one wants to avoid. One does not avoid it by refusing to go to tea parties but by getting together and restoring as far as possible unity of thought and co-operation between the Six and ourselves.

Then joint co-operation and discussion over the matter can be re-established. Only when we are ready to accept that method, and when the Six are ready to accept it, will it be possible to say that the European Community is moving ahead. We should want to do everything possible to make that come about and to play our part in it. I am spending so much time on this topic because I think it is directly related to present problems concerned with the Budget. I have been talking about exports and the need for importers. They are there in Europe. I now want to talk about the need for reserves and, I repeat, they are there in Europe.

There are the reserves of France, Germany and Italy. When I last looked at the figures I found that the reserves of each of those countries were greater than our reserves. Our reserves should be used for a variety of purposes. I entirely agree with the Chancellor that they should be used to finance a temporary increase in imports which would follow an expansion of exports. The only safe long-term method of increasing reserves is by exporting more. If during the process of solving the long-term problem of reserves we are met with the short-term problem of increasing imports, nothing is more sensible than that we should use reserves for that purpose.

That is one thing we can certainly do, but there is another problem connected with our reserves. That is support for international trading, the currency which is used—sterling with dollars—to finance international trading. This is a convenience to international traders as well. It is a convenience to all the members of the Six. Here is a matter of common interest between ourselves and the Six, not a matter of opposed interests. Here is a method—if we are prepared to forget, as I hope we are, the outworn ideas of prestige and being the sole people concerned with maintaining a currency for world trade—by which we can co-operate with them with our knowledge, our "know-how" and our machinery in the City for giving effect to all this.

If we are prepared to co-operate with the Six in this way, and they in turn are prepared to co-operate with us by combining their very substantial reserves with ours, we could find a common interest which would not only assist us in the major problem of exports, but would re-establish a method of getting together with OUT immediate and natural neighbours to the benefit of all. I very much hope that the Government will take a major initiative in seeing whether we can get together in this limited field.

6.17 p.m.

Sir Robert Cary (Manchester, Withington)

I hope that the hon. Member for Gloucester (Mr. Diamond) and also my hon. Friend the Member for Bodmin (Mr. Marshall) will allow me to join with them in congratulations to the hon. Member for Swansea, East (Mr. McBride) on his clear, cogent and thoughtful maiden speech. I do so not only because I was impressed by the speech, but because the late Mr. David Mort, his predecessor, was for some years the hon. Member for the Eccles Division of Lancashire. Just as the hon. Member for Swansea, East has succeeded Mr. Mort, I later represented the Eccles Division of Lancashire for ten years after Mr. Mort.

I also take up the matter raised by the hon. Member for Gloucester in the point he made against my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), whose excellent speech this afternoon will certainly be long remembered by many hon. Members on this side of the Committee. At the beginning of that speech my right hon. and learned Friend said that he found himself short of the comfort of speaking at the Dispatch Box, but with my hon. Friend for Kidderminster (Sir G. Nabarro) in his place in front of him. Nevertheless, in making that speech, he showed the same sort of courage which he showed two years ago when he took those vital steps to defend the £. He took those steps then which led ultimately to the change in his own career, but by that means we now enjoy doing what we are able to do in this Committee through the agency of the present Budget.

My right hon. Friend the Minister of Labour would be the first to agree that the proposals enshrined in this Budget are much the best that could follow in sequel to the debate on unemployment on 4th February, when we pleaded for a major initiative by the Government to help us with that problem. I say to the Minister of Labour, as to the Chancellor of the Exchequer, that this happens in a period when the Prime Minister heads the Government, one who, as a back bencher, before the war, I heard plead from the opposite benches for the flexibility that this initiative represents.

My right hon. Friend pleaded again and again for help in overcoming the terrible unemployment of those years, and I think that the way in which such ready aid is now provided to help overcoming unemployment, and so soon after that debate on 4th February, is a fulfilment of the Prime Minister's own career as a parliamentarian.

Time is running on and there are many things I should like to say to the Committee, so perhaps, like the hon. Gentleman the Member for Gloucester, I shall telescope some of my points. My right hon. Friend the Minister of Labour will recall that in the debate on unemployment I pleaded for the appointment of regional industrial commissioners to administer the sort of proposals which are now before the Committee. I think that we shall have great difficulty in the tactical exercise, and through the invitation given to industry, to set up business in the more distressed areas. On the fringes of those areas there are areas of semi-prosperity in which the unemployment level may not be more than 5 per cent. or 6 per cent.

The temptation for industrialists to be drawn away under these provisions and to take with them some of their labour, from the semi-prosperous areas to the more distressed areas, is a real one. The present system of issuing industrial development certificates is much too rigid. I would much prefer to see the whole of this business placed on a regional basis to be operated by regional industrial commissioners who really do know the battlefield in which they have to work.

The present system, good though it has been in some respects, administered directly by the Board of Trade, is now insufficient to exploit and make the most of the quite generous proposals put forward by my right hon. Friend the Chancellor of the Exchequer, if these are to be a good sequel to our debate on unemployment.

What, perhaps, is the first sequel which there might be for some of the areas most badly hit? Speaking for Merseyside and the north-western area, I am a little distressed myself by the slowness there has been with the development of that vast extension of Ford's there. Having listened to the hon. Gentleman the Member for Hamilton (Mr. T. Fraser), I hope, with him, that now that that new paper mill has been announced the course may be swifter for the benefits which the expenditure of that £10 million could bring to that area of Scotland.

I would ask my hon. Friend the Economic Secretary to say, when he winds up the debate, just a little about the present methods of deploying the industrial development certificates and whether there has been any examination in the Board of Trade as to how locally the industrial commissioners could be employed who could give a better expertise in the fulfilment of the Chancellor's proposals. We had an excellent system during the war of civic control through people known as regional commissioners. There were 12 of them. For the unpredictable circumstances of the future I should like to see our country split into 12 regions and the appointment of an industrial commissioner for each one. In some areas there may not be much work for them in other areas they could be extremely busy, but their effectiveness and importance one cannot overestimate. I think that they have a vital part to play.

There are one or two other points, also, I would put to my hon. Friend the Economic Secretary. Following the debate of 30th January of last year, I pleaded with the Chancellor of the Exchequer that the £1 licence duty which goes to Customs and Excise be diverted to the B.B.C. I am very grateful that that has happened, but I also asked for an additional £1, making it £5 on the assumption that the B.B.C. would be allocated in the beginning a second television channel and that the rate of expenditure which would fall on the B.B.C. would compel it to borrow far too much money. I am anxious that the B.B.C. should not be driven to borrowing too much money. There are limits to its borrowing powers. I notice that the £1 benefit in Customs and Excise is to date from 1st October. I wonder whether it ought not really to date from the beginning of the financial year, 1st April.

That is now a week ago. It would be worth £5¼ million to the B.B.C. if the £1 benefit were transferred to 1st April from 1st October. I think that my right hon. Friend, in his Budget speech, mentioned £13 million as the cost in a full year and in the first year £7¾ million. The balance is £5¼ million. I would ask him seriously to consider whether that transfer could come on 1st April this year.

I also invite my right hon. Friend to consider helping people of extremely moderate means for whom an outlay of £4 all at once is a burden. I wonder whether there could be issued through the Post Office half-crown stamp cards which people of extremely modest means could buy from time to time as contributions towards the payment of the £4 licence a year. This would be a form of saving by instalments for people far whom it is quite a penalty to have to produce £4 all at once for a licence.

I have one more thing to say which concerns that part of the Chancellor's speech which touched on fuel oil. This was also referred to by the hon. Gentleman the Member for Hamilton. There is one important section of the oil world; it belongs to the world of derv, that is, oil which is used for diesel-engined road vehicles. There are 75,000 buses and coaches in our country for the dery for which there is charged no less than 2s. 9d, a gallon, a rate of taxation of 275 per cent. It makes the rate of taxation on a mink coat or diamonds relatively modest. This is passed not only on to the companies in cutting back their services, but on to the passengers in the fares that they have to pay. We could as well be crude about it and print on a bus ticket that or ld. of the ticket is required to pay fuel tax—tax at 2s. 9d. a gallon.

My hon. Friend the Economic Secretary knows that I am responsible for operating a great public service unit in the north of England, and many hon. Members opposite know that I am familiar with this problem. I have personally waited upon five successive Chancellors of the Exchequer for some modification of this tax, but without success. Even the consideration which my right hon. Friend the Chancellor of the Exchequer is to give to oil duties is not to concern derv.

I agree with the hon. Member for Hamilton (Mr. T. Fraser) that more should be done to protect the coal industry. For years I represented a coal constituency. That sounds wrong, but it sometimes happens that public life is full of contradictions and, of course, it was in an age, when I did not look as I look now. I looked more like a Bevin boy when I was elected. Perhaps the electors thought that they were electing me to go to the pit; I do not know.

I feel strongly about this issue, but I do not want to unpack all my Parliamentary and industrial luggage about fuel taxation on dery except to say that when we return after the Recess we are to discuss the Seedling plan for the railways and that it is tragic that we should have such a recommendation from such an able industrialist and yet follow a policy in fuel taxation which has cut so many of our bus services to ribbons and which has left great counties like Westmorland and Durham and Cumberland and Lincolnshire deserts because of the absence of the services which once existed there. Many of them will now have to be restored.

Mr. Ridley

Will not the closure of the branch railway lines increase the traffic available to buses and thus achieve the object for which my hon. Friend is arguing?

Sir R. Cary

I could not agree more. In the end, it must lead to an immense restoration of the bus services in rural areas. The tragedy is that the services should have had to be cut back by present-day operators so often. I wish that we had the great pattern which we had ten or fifteen years ago running through our rural areas. Many of the routes which once existed have now been cancelled.

The theme of expansion without inflation which has been put forward by the Chancellor is rather nice. It is said that inflation has been with us and going on progressively since the Middle Ages. Yet I recall that it really got under way when we formed the Coalition Government in 1940. The House of Commons then had a Money Committee and we asked the famous Cambridge economist, Maynard Keynes, to come and talk to us.

We then had no doubt that we would win the war. We had heard the speech of my right hon. Friend the Member for Woodford (Sir W. Churchill) on his return from Paris, when General Weygand had spoken to him in such immoderate language. We were concerned not with winning the war, but how to pay for it. We asked Maynard Keynes to come and address us and I remember that he told us two things. The first was that we would have controlled inflation. We were rather puzzled by that, because it seemed like asking someone to control a runaway horse. But he then said something which quite shocked us. He said, "Do not be frightened of inflation. It is the finest debt payer in the world".

Progressively, debts have been discharged too often by the medium of inflation. Indebtedness can go too deep and too far. For that reason I reinforce the Chancellor's plea that his proposals may receive the fulfilment they deserve in the design they intend and that we shall have expansion without inflation.

6.35 p.m.

Mr. William Hamilton (Fife, West)

The hon. Member for Manchester, Withington (Sir R. Cary) always makes an agreeable speech, but as he spoke I could not help wondering how he voted last year and in previous years on Amendments to the Finance Bill proposed from this side of the Committee to reduce the tax on derv, or how he voted on Amendments which we proposed to the Local Employment Bill.

However, we are thankful that he is now converted to the point of view expressed from this side of the Committee many years ago. Listening to the debate on the Budget proposals over the last few days, it has struck me as amazing what the imminence of a General Election can do, plus one or two by-election results and public opinion polls. We have had almost a mass conversion by the Tory Party to views which have been held on this side of the Committee for many years.

In particular, I remember a debate last year on the development districts and the Local Employment Act when we were challenging Government policy on unemployment and when the present President of the Board of Trade, he was also the President of the Board of Trade at that time—he was one who saved his skin last July—said: I challenge the hon. Member for Cardiff, South-East to suggest how we can do better than we are doing at present … apart from minor details and changes in emphasis he cannot suggest how we can do better than we are doing. The Government are very proud of their achievement in this respect"—[OFFICIAL REPORT, 10th April, 1962; Vol. 657, c. 1188.] That complacency and indifference, which have continued ever since, have brought us to the impasse at which we now find ourselves.

The evidence that the position is getting worse rather than better is overwhelming for anyone who cares to look at it. When the Local Employment Act was first initiated, in April, 1960, the number of wholly unemployed in the development districts as a whole was 121,135, a rate of 4.5 per cent. In April, 1962, two years later, the number of wholly unemployed in the development districts as a whole was 118,197, a rate of 4.6 per cent. In other words, two years' operation of the Act—and we all remember the propaganda at the last General Election about what this Act was to do—had made a difference of 0.1 per cent., hardly any impact at all. In the development districts there was a reduction in the total number of unemployed of less than 3,000.

In January of this year, the number of unemployed in the development districts was 178,101, a rate of 7.5 per cent. The Minister of Labour told us today that the latest figure was 7.7 per cent. Three years of the Act has increased the unemployment rate in the development districts from 4.5 per cent. to 7.7 per cent. In Scotland, in April, 1960, the total wholly unemployed in the development districts was 65,348. In January, 1963, it was 89,500. There was a drop in the percentage rate from 5.5 per cent. in April, 1960, to 5.4 per cent. in April, 1962—a drop of 0.1 per cent. in the first two years of the operation of the Act—but it went up to 8.9 per cent. in January, 1963, and it is not very much different now. In the three years of the operation of this Act in Scotland unemployment in the development districts increased from 5.5 per cent. to 8.9 per cent., and the gap between unemployment in the development districts in Britain as a whole and those in the rest of the country widened considerably during that period.

The relative problem is getting worse instead of better, and, clearly, anyone who looks at the facts, and who has been looking at them as the situation has developed, must come to the conclusion that the Act was inadequate. The most that the Government could claim—and, indeed, this has been claimed on some occasions by some of the fairer-minded hon. Gentlemen opposite—was that things might have been worse had it not been for the Act. This is the most that could be said for it, but this is a very different claim from that which was made for the Act when it was initiated three years ago. We all remember the last General Election. At that time unemployment was one of the major domestic problems, and the claim made by the Tory Party for this Act were wildly extravagant and grossly dishonest. Scotland was not deceived then, and she is not now.

Major developments in Scotland have taken place outside the ambit of the Local Employment Act. The provision of the strip mill had nothing to do with that Act, nor did the action taken by the motor industry. Indeed, the Board of Trade was determined to get the motorcar industry there whether the Local Employment Act got on to the Statute Book or not.

Mr. R. Gresham Cooke(Twickenham): rose—

Mr. Hamilton

There have been far too many interjections. Many hon. Members want to take part in the debate. I intend to say my piece on this.

I think that the investment by Rootes and B.M.C. could have been taken to Scotland under previous legislation. Moreover, the total number of jobs provided is not known. The Minister does not know it. His Department does not know it. Nobody knows how many jobs have actually been provided. All that the President of the Board of Trade could say last week was that the number of jobs to be provided was estimated at 90,000, but he does not know how many of those will accrue. He does not know how many have accrued. He quoted a figure of 3,000 for B.M.C., and possibly another 1,000 for Rootes, but we are not sure how many have been provided, and the Board of Trade makes no systematic attempt to get the figures by asking these firms what we are getting for the expenditure of this public money.

The Government had some good fortune, because it so happened that at the time the Act was going on to the Statute Book the motor-car industry was in the position of wanting to make big capital investments. This cycle does not come round at more than ten-yearly intervals, and it just happened that when the Act was being considered the industry was in the position of wanting to expand. Had it not been for that, the results of this Act, miserable as they are, would have been even more miserable. Furthermore, we know that the amount of money being spent under the Act is decreasing, and is likely to continue to do so over the next few years.

Consider Bathgate, where the B.M.C. factory is situated. The percentage rate of unemployment there, at Broxburn and the Calders in April, 1960, was 5 per cent., with 1,368 unemployed. In April, 1962, it was 4.1 per cent., or 1,099 unemployed, a slight reduction, but in January, 1963, it was 9.8 per cent., or 2,147. This is where the big motor-car industry development is taking place, and there has been very little change since then.

Great play has been made of the fact that £81 million has been provided under the Act, but, as the President of the Board of Trade pointed out, £52 million of this is a loan, and £29 million was spent on providing Board of Trade factories. In other words, most of the money will come back to the Treasury. It is not a grant. The net outlay will probably be about £10 million over three years and I do not think that anybody has the right to be satisfied with what has been achieved under this Act. Indeed, the Government themselves are admitting that. We would not have had these measures if the Act had been adequate. If the Act had been an enormous success, the unemployment problem would have been solved and none of these measures would have been produced. We are to have new legislation, but is this to be supplementary to the Local Employment Act, or a massive amendment of it?

I pay my tribute to the tax concessions provided by the Chancellor. The free depreciation and the cash grant of 25 per cent. on the cost of new building, and 10 per cent. on the cost of machinery is a very open-ended commitment by the Board of Trade, and the President of the Board of Trade knows very well what the Estimates Committee said about open-ended commitments. In addition, firms will get all the normal investment and initial allowances. Enormous amounts of public money are being used to bribe private industry to do a job which is socially necessary. This is a measure of the failure of the capitalist system to solve these problems.

I do not often read the Investors' Chronicle. As far as I know, it is not a Labour journal. It had an article headed, "Chips for Everybody", an extremely good title. If a firm establishes itself in a non-development district and sets up a branch in a development district, according to this journal—and I should like some enlightenment on this—the firm can offset all these potential claims to which I have referred against the tax liability arising from profits earned in other parts of the country. That means that any firm which transfers a branch to a development district can get a useful subsidy against its whole tax liability.

If there were a recession, if, by any chance, the Tory Party got in at the next General Election as a result of these bribes and we had the recession which would inevitably follow, and the branch decided to cut off its limb in Scotland, what would happen to the public money that had been squandered? We have a right to know. There may well be an initial rush for this kind of "lolly" before the election and before the Treasury puts on the brakes. Indeed, I think that that is the intention. Industrialists are already saying that they had better get in before the Treasury finds out what it is committed to. All that might happen before the election. That might do the trick, but we do not know what will happen after the election.

I understand that the President of the Board of Trade is to arrange a few dinners with, and talk to, leading industrialists. What has he been doing during the last few years? Has he not been doing this? I thought that it was the function of the Board of Trade to find out which firms were about to expand. The management corporations which were set up in Scotland, England and Wales are no more than estate managers. Why cannot they go out and advertise? Why cannot they be given a job of work to do? They are very anxious to do it. They have the "know-all" of their own local areas. Why should not they go out and meet these businessmen? They know what can be provided. They know their own localities, and they are the people who are best able to attract industrialists.

This is welcome as far as it goes, but there are contradictions in it. It is a condemnation of the system that the party opposite believes in, but, even so, there are contradictions in it because this has to be taken in context with all the other things that the Government are doing. Public money is to be poured out to persuade industry to move. But then the Minister of Transport says that, although the Treasury and the Board of Trade are to pour money out to persuade industry to go to these outlying parts, he is to cut the railways to make it more difficult for them to do so.

The Prime Minister says that these two things are in harmony—Dr. Beeching and Mr. Maudling are in harmony. Let me give the example of Anstruther, in Fife. I am surprised that the hon. Member for Fife, East (Sir J. Gilmour) has not tried to get into the debate. This is a scheduled area under the Local Employment Act. In April, 1960, unemployment in Anstruther was 5.7 per cent. In March, 1963, it was 10.1 per cent. The only railway that goes through Anstruther is to be cut by Dr. Beeching's proposals. I do not know how we can attract industrialists to that area by these concessions if there is to be no railway there.

Let us consider Fife as a whole, which is virtually a development district. The main road into that area from the South will cross the Forth Road Bridge and the Government are insisting that it shall be a toll bridge. The Scotsman, only the other day, begged the Government to look at this again. If the Government really are concerned to solve the unemployment problem in Fife and other parts, they ought not to put this kind of impediment in the way of industrialists.

Mr. Tam Dalyell (West Lothian)

The same situation exists south of the Forth as in the areas to which my hon. Friend has referred and the unemployment rate is 9.2 per cent. in the Bathgate area.

Mr. Hamilton

My hon. Friend knows very well that the local authorities on both sides of the Forth are very much in this together, including the Tory-controlled Edinburgh Council. They realise the importance of getting this free access north and south of the Forth.

I end by saying how alarmed I was when the President of the Board of Trade said that he would operate the stop-go policy as it had been operated since the Local Government Act came into effect three years ago. That is the process of scheduling, descheduling and rescheduling, thus creating enormous difficulties not only for the management corporations, but for the industrialists themselves. It will be a very big headache for the Inland Revenue to work out all these grants if there is to be scheduling, rescheduling and descheduling.

The Government said that one of the great merits of the Local Employment Act was its flexibility—the ability to put on to the list and take off by will. The Government get a "stooge" on the back benches opposite to put down a Question and the area is scheduled. This is quite outrageous and makes it impossible to work these grants. I think that the only answer is for the Government to admit that it was a mistake to get these "measles", these "spots", around the country in the form of development districts and to get back to the principle of scheduling areas. Only in that way shall we even attempt to solve this problem. I hope that the Government will have the courage and bigness of mind to accept that they made a mistake in April, 1960. Then, and then only, shall we treat their proposals seriously.

6.58 p.m.

Mr. John Maclay (Renfrew, West)

In the years during which I have been a Member of the House of Commons, which are now rising in number, the nature of my interests and latterly my duties have meant that I have spoken on a remarkable variety of subjects. Nevertheless, I have been thinking back as accurately as I can, and I believe that this is the first time that I have ever taken part in a Budget debate, so I hope that the Committee will bear with me.

For this has been no ordinary Budget debate. Certainly the Chancellor's speech was no ordinary Budget speech in that it does two or three very important and unusual things, one of which is to give us a pulp and paper mill in the Fort William area, and, important as that is, of far wider import is the fact that it introduces for the first time in this country the acceptance of the principle that differential taxation on a geographical basis is possible.

Then on Thursday we had the very useful crop of advance factories appearing in different parts of the country and today, in the excellent speech of my right hon. Friend the Minister of Labour, we heard more about where the retraining centres are to be placed. I am grateful for the advance factories part of all these proposals. There is to be one in my constituency at Port Glasgow. I am sure that the hon. Member for Greenock (Dr. Dickson Mabon) would not grudge that to the people there any more than the people of Port Glasgow will grudge him the benefit which he has had.

It has been a most interesting experience watching the expressions of public opinion over the week-end following the first impact of the Chancellor's Budget speech. There is little doubt that the impact of the Budget is increasing as people consider what the Chancellor did and as they realise more and more clearly, even more than they did at the end of an extremely lucid speech, what the Budget does. The Chancellor's speech covered some new ground and it needed a lot of digesting before we could fully appreciate what the results of the Budget could be.

There has understandably been a general welcome to the spread of tax relief. This welcome is not only because of the way in which the tax relief has been placed but also because this method of tax relief is likely to lead to the most rapid increase in consumption. The hon. Member for Gloucester (Mr. Diamond) was very much less than fair to my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). One or two other hon. Members have also been unfair to my right hon. and learned Friend. This Budget is the inevitable and proper complement to the Budget of my right hon. and learned Friend and the action which he took. The one has made the other possible. I repeat what was said by my hon. Friend the Member for Manchester, Withington (Sir R. Cary)—that the speech of my right hon. and learned Friend was memorable because he proved very clearly the link between the facts which made his Budget right and the policies which he followed right and the facts which make this Budget also right.

The full significance of the Budget lies not only in the tax reliefs but in the addition of the tax reliefs to the increase in spending. I was delighted by the euphemism for "deficit"—"borrowing requirements"—now used, I think for the first time. As a result of all these operations, there will be a borrowing requirement of £687 million compared with £66 million last year. This makes us realise that the impact of the Budget is much greater than was at first appreciated.

I sympathise with the remarks of my right hon. and learned Friend the Member for Wirral about Government spending. It is inevitable that this year Government spending should be heavily increased. The important question is whether it will be possible to keep that reasonably under control in future years so that we do not run the risk of another crisis based on excessive Government spending and on Government spending getting out of hand.

My right hon. Friend the Chancellor also made it clear that, having studied all the figures and obtained all the Estimates, every Chancellor in the end must make a decision based on his judgment. There are a remarkable number of imponderables and unknown factors involved in the decision. A most striking example which he gave was that a change of only 1 per cent. in our savings habits one way or the other could put his estimates out by no less than £200 million. Perhaps in this era of N.E.D.C. and all that we shall find ourselves in the course of a year quite properly being urged to spend 1s. more or 1s. less in every £5 of our available income. It may well be that this is one of the steps which must be taken and, for this and other reasons, I wonder more and more whether it is not time for us to begin to question the inviolability of our annual accounting system.

I am delighted that for a year or two Chancellors of the Exchequer have had the possibility of using the regulators. It is necessary that these should be available for use between main Budgets. I wonder whether serious thought should be given too to the possibility of revising our system of annual accounting and annual estimating on a Departmental basis. May I take the example of the Health Service? At the beginning of the year the Minister gets his Estimates through. These are argued in great detail. Then the results go through the whole National Health Service. Towards the end of the financial year is a bad time to overspend the Estimates but it is also a bad time to underspend them, even if there have been reasons which have made it almost impossible to avoid doing that. Inevitably there is a tendency for a Department or one of the Services to hurry up its spending towards the end of the financial year even if there is no good reason for doing so. The reason is that normally there is no carry-over of money under-spent into the following year. Equally a Department may prejudice its Estimates for the following year if it appears to be unable to spend what it was granted in the previous year.

This is a very complicated business, and I will not follow it through tonight, but for many years I have wondered whether we should examine carefully the implications of the tight annual accounting which goes on at present. I commend this to the Chancellor because if he can establish the principle of differential taxation on a geographical basis in this country, then he can do almost anything with the Treasury.

I turn to my main theme. I do not intend to make a long speech. My theme is the same as that of the hon. Member for Fife, West (Mr. W. Hamilton)—the effect of the Budget and the measures which have been announced in the last few days on development districts. The hon. Member for Fife, West seemed to be in a hopeless dilemma. He had to express some appreciation of what the Government had done in the Budget, but the greater part of his speech expressed doubts about it and his major doubt was about the effectiveness of the Local Employment Act. He got into a tangle over Rootes and the B.M.C. development in Scotland. The whole point is that the Local Employment Act was a codifying and improving piece of legislation based on the experience of previous years. It was a great improvement on the machinery which existed before that.

Mr. W. Hamilton

No.

Mr. Maclay

I have had some experience of what happened under the working of both, and I can assure the hon. Member it was a great improvement. Let no one write down the value of the £81 million. May I give the Scottish figures, which I think are more or less up to date? To the end of February Scotland had had approvals of £42 million out of that £81 million, with a potential employment of 32,000. Of this sum, £33 million bad already been spent.

Mr. Bence

In the pipeline?

Mr. Maclay

Hon. Members opposite have asked the impossible—that within three years our capital investment should have been translated into equating the employment figures of Scotland with those of England. I have never claimed, and I think that no Minister has ever claimed, that it could be done in that period. What the Government have been doing through the years is to try to alter the basic structure of the Scottish economy so that we shall be able to equate our employment figures with those south of the Border. It is bound to be a long process. It cannot take place overnight. We have to go on finding methods of improving the machinery for achieving this objective.

I make no bones about my reference to the pipeline, a word which I have mentioned many times before. If hon. Members are in any doubt about the pipeline, let them look at Bathgate, Linwood and many other places. Of course this cannot lead to full employment overnight and of course Scotland could not expect to contract out of the general falling off in business activity which has taken place throughout the country and throughout the Western world in the last few years. If hon. Members are considering the importance of the Local Employment Act, let them look at the two good years before the general slackening of activity took place.

What matters is that we should all be in a position now—unions, local authorities, Government and management—to take advantage of the next surge of activity, when it comes. I believe that the modifications announced by the Chancellor are extremely important to enable us to take the maximum advantage of what is to come.

Two improvements were needed. One was on a point about which we heard a lot in the past. I am glad that it has been put right. I refer to the lack of precise knowledge of the extent of assistance until a considerable period of negotiation had taken place with B.O.T.A.C. or the Board of Trade. May I give one example? I was discussing the question with an industrialist who was contemplating a new factory and who had not decided where to go. I met him at 2 p.m. in Scotland. He told me that at noon on that day he had had a telephone call from a country on the other side of the Channel which he had not even visited—I will not be more exact—offering him precise terms of what they would give in the way of grants and loans if he would go there.

That seems to me a pretty odd way of doing business, but the fact remains that it is what we are competing with at the moment, both over the Channel and in other areas. I am delighted that my right hon. Friend the President of the Board of Trade has agreed to the standard grants of 25 per cent. and 10 per cent., in addition to the normal benefits under the Local Employment Act.

The other weakness which is now being put right was the lack of that kind of differential inducement which would influence all long-term thinking as well as short-term thinking on development on the part of industrialists. The Local Employment Act worked well in a period of industrial expansion, but I have the lingering feeling that the average industrialist contemplating in his bath, or wherever industrialists do contemplate the long-term future, particularly when they are not under the pressure of an expanding period in their industry, instead of feeling that when he needed to expand he would go to a development district, used to wonder how he could avoid being cajoled or induced by the Board of Trade to go to such a district.

Old habits die hard. People do not like moving to new areas, unless they are hard pressed to do so. What will happen in the future with the free depreciation allowance is that in all thinking about future development the claims of the development districts will be foremost in an industrialist's mind. I sincerely hope that they will have the results which some hon. Members believe that they will have. I seemed to note a difference of view between the hon. Member for Hamilton (Mr. T. Fraser) and the hon. Member for Fife, West as to the effectiveness of these inducements, particularly free depreciation. I believe that they can be very considerable. I hope that all industrialists will have noted them and will be thinking forward, not just short-term, but long-term, as to how they can get the best advantage out of them.

Some people have questioned the desirability on general grounds of differential taxation on a geographical basis. This view has been expressed not so much in the House of Commons as outside. The fear has been expressed that industry may go to uneconomic sites. That danger exists under any system of direction of industry, which I am delighted to see that the right hon. Member for Belper (Mr. G. Brown) has got out of the Labour Party system over the weekend. I do not think that the danger exists under the Local Employment Act procedure as it will be amended.

Tradition and some prejudices have been inhibiting movement. Therefore, this is not a question of going to uneconomic sites but of going to sites which, for a variety of very good reasons—some not so good—industrialists have never even bothered to contemplate. I have not yet found an industrialist who has moved to Scotland and settled in who is not thoroughly satisfied with his decision.

However, these moves have meant some big changes for the key workers and for the management of firms, not just for the executive management but for the people who work rather lower down the line. They have meant, for example, a change in their social life and in the schooling of their children. We need a very effective combined operation in Scotland if we are going to make this work. It should be applied not only to services, roads, water and housing in the new areas which are to be developed, but also much thought must be given by communities to how they can make the incomers welcome. This applies not only to sports and com- munity facilities but even to cultural facilities. I am certain that a great deal can be done by the unions in Scotland, if they would turn their minds to it, to help to make the arrival of new industries a success. We must make a major effort if we are to reap the full advantage of the steps the Government have announced.

My last point is about pulp and paper mill. The hon. Member for Hamilton obviously welcomed the pulp and paper mill, but he asked what would have happened if Wiggins Teape had not been prepared to go ahead, and implied that, if this firm had not gone ahead, some Government agency should have done it in its place. All I can say to him is this. I have some knowledge of what has been going on in the last five years in relation to this paper mill. If Wiggins Teape had not been prepared on technical, practical and economic grounds to go ahead, helped by the Government, Heaven help any Government who had set up a Government corporation to run that paper mill. I say that with deliberation.

The problem is a highly technical one. The difficulties which have been holding up the mill have been partly the availability of raw materials in Scotland and partly the problems connected with the process to be used. The highest praise is due to Dr. Frankel, of Wiggins Teape, for the way he has refused to be put off by the difficulties inevitably encountered in a project like this. The highest praise is also due to the local authority and to the Scottish Council which has been involved in this project since the beginning The highest praise is also due to the Secretary of State for Scotland and the Scottish Office for making this project possible, with the help of the Chancellor of the Exchequer and ultimately of the President of the Board of Trade.

One Scottish newspaper described this Budget last week as a tartan Budget. Personally I am inclined to agree with that. It was a very good week for Scotland, finishing up not too badly on Saturday afternoon. In congratulating the Chancellor of the Exchequer and the President of the Board of Trade on what they have done to improve the workings of the Local Employment Act and on what they have done to help these areas which have the sympathy of all of us, I would also add my most sincere congratulations to the Secretary of State for Scotland whose hand is visible in much of what we have learned in the last few days.

7.16 p.m.

Mr. Roy Jenkins (Birmingham, Stechford)

I have no doubt that the right hon. Member for Renfrew, West (Mr. Maclay) speaks with considerable knowledge of industrial problems in Scotland, but I thought that he went a little far in a dangerous direction by saying that, had one particular firm, which, I should think, is probably a very efficient firm, which I am glad is going ahead with this project, not been able to undertake the project in the Fort William area, that would have been the end of the matter and nothing could have been done to help the area. That seems to me to be an extremely unfortunate and a rather rash proposition.

Mr. Maclay

I did not say that nothing could be done to help the area. I warned the hon. Member for Hamilton (Mr. T. Fraser) against ever setting up a Government-sponsored corporation to run a complex paper mill in the Western Highlands.

Mr. Jenkins

It is bad for an area or for a Government to be so completely dependent upon the good will of a particular firm as the right hon. Gentleman has suggested. I doubt very much whether it is the case. I very much hope that this project—this mixed public and private project—will be a great success to the area.

Earlier in his speech, the right hon. Gentleman said that this was the first time in a long career in the House of Commons that he had spoken in a Budget debate. From the point of view of Chancellors of the Exchequer, at any rate those on his own side of the Committee, I thought that that was probably a pity, because he seemed to take an extremely charitable and warm-hearted attitude towards Budgets in general—last year's Budget was right; this year's Budget is right; all Budgets are right, but the current Budget is even more right than most. That quality of the right hon. Gentleman is one which would make future Conservative Chancellors, if there are any, wish that he will intervene very frequently and with equal benevolence in future Budget debates.

I would not go quite so far as the right hon. Gentleman went in praising the Budget. I think that probably the best that can be said about this Budget is that what it does it does without great inequity, but that that is not very much. It is worth noting, in passing, before coming on to perhaps more central considerations, that by so doing it makes nonsense of two rather favourite Conservative propositions of the last decade. The first is the view which we have heard from many Chancellors—and, I am sure, from the present Chancellor himself, because, after all, he comes to us having had the benefit of a long experience of defending other people's Budgets, even if not of defending his own until this occasion—that inherent in the reduction of direct taxation is the fact that very big concessions must be given at the top end of the scale.

On the occasion of all the Budgets during the past decade in which substantial concessions have been given—and by that one means principally the Budgets of 1955 and 1959—it has always been advanced, "It may be the case that these concessions lead to people with very large incomes getting £500 a year"—or whatever it may be, "off their Income Tax bill, but that is absolutely inevitable in reducing direct taxation." I have always been very sceptical about that proposition, and the Chancellor this year has shown that I, and others, were quite right to be sceptical.

There was no need at all, if one did not want to do it, to introduce concessions in direct taxation that had this funnelling effect which led to very large concessions on the top-scale incomes and very low concessions on the incomes at the bottom of the scale. If the will were there, one could concentrate direct taxation concessions in such a way that even with the higher incomes the absolute amount in money terms was little more than twice that gained by someone on an average income.

I hope that it will be noted that a great deal of the argument to which we have listened about the inherent nature of direct taxation concessions has been exploded by what the Chancellor has done this year—

Mr. William Shepherd (Cheadle)

Is the hon. Member putting forward that proposition in general terms, that that must be taken quite irrespective of the current level of the rates and the graduation?

Mr. Jenkins

I do not think that I was putting forward a general proposition at all. I were merely saying that the great number of arguments to which we have listened over the better part of a decade have been shown by what the Chancellor has done this year to be extremely fallacious arguments. I made that point, as I shall make the next, in passing, before coming to what seems to me the more essential nature of my criticism of the Budget.

The next point to be noted is that the reflationary effect of the Budget, such as it is—and I have some doubts, as I will show later, whether it is sufficient—is achieved to a very great extent not by cutting taxation, but by pushing up Government expenditure. The Chancellor got a fairly warm reception from his own benches on Wednesday afternoon, and got a very cool Press on Thursday. He probably got a slightly better Press during the weekend from the "Sundays", but I think that of all the articles I have read that purported to be strongly favourable to him the informed one that was most favourable was that in the Sunday Times, by Mr. Rees-Mogg.

Mr. Rees-Mogg made this point extremely strongly—to such an extent that it might have been mildly embarrassing to the Chancellor—friendly though the article was in other respects, because what he said about the Chancellor's proposals was: It is this £621 million"— by which he meant the size of the increase in the overall deficit— which includes the effect of higher expenditure not covered by new taxation, which really counts; the £260 million of tax concessions is only a minor part of it. The public may not yet have grasped that the Chancellor is reflating more by increasing expenditure than by reducing taxation I do not know whether or not the public have grasped it, but I wonder whether certain right hon. and hon. Gentlemen opposite have grasped it.

What about the Minister of Defence—has he grasped that this great Budget is achieving at least two-thirds of its effect by pushing up Government expenditure without covering that expenditure by increased taxation? What about the right hon. and learned Gentle- man the Member for the Wirral (Mr. Selwyn Lloyd), to whose speech we listened with great attention this afternoon, but of wham, I am sorry to say, we have not seen very much in the Chamber since.

I thought that the right hon. and learned Gentleman started in a very sparkling form. That part of his speech which appeared to have been prepared by his daughter was, I thought, more sparkling than that with which, perhaps, he did not have the same assistance. I also thought, during the earlier part of his speech, that he would, perhaps, find the head of his hon. Friend the Member for Kidderminster (Sir G. Nabarro), to whom he referred, a more inspiring podium than the Dispatch Box to which he was used.

As the right hon. and learned Gentleman's speech progressed, that did not seem entirely true, and I thought that I saw the Chancellor—who, of course, always looks relaxed—looking even more relaxed as his right hon. and learned Friend proceeded, because it was fairly clear to me—and, I should have guessed, to most of the Committee—that the right hon. and learned Gentleman's speech, whilst obviously an interesting and informed one, was much more a statement of case against wrongful dismissal than a clarion call to the nation for the future.

I do not know whether the extent to which, as I say, the reflationary effect, such as it is, of the Budget is based overwhelmingly on pushing up Government expenditure and not on pushing out purchasing power through reductions in taxation was fully appreciated. There is at least two of one to one of the other in the balance. However, in spite of that fact, I remain unconvinced that the Budget has done as much as it should have done this year in the circumstances that confront us, and I remain unconvinced from the point of view of catching up the lost economic time of 1962 and the early part of 1963.

I listened to the Chancellor's speech carefully and I re-read it this morning, but I could not see any indications in it—and the Chancellor will correct me if I am wrong—that he was looking, this year, and the year for which he was budgeting, for a rate of growth appre- ciably above 4 per cent. That, I understood, was his target for the year starting from April, 1963.

I think that he will get his 4 per cent.—indeed, I would not be surprised if in this forthcoming year he were to get somewhat more than 4 per cent. I should not be surprised if he were to get 5 per cent., or something of that order. But I would still think that, in view of the present state of the economy and of our recent economic history, it is not enough; that that is not the target he should have set himself. I certainly do not think that it is enough from the point of view of taking up the slack in the economy.

Obviously, in all these matters—and I am sure that the Chancellor would be the first to admit this, as, indeed, he did several times in his Budget speech—one cannot deal with absolutely precise figures. Everyone deals to some extent in guesses, some ill-informed, some possibly better informed, but I should certainly have guessed, without claiming any particular authority for it, that the amount of slack in the economy was very much in excess of 4 per cent. or 5 per cent. and was something much more like 10 per cent. or 12 per cent., without necessarily putting that as the highest figure—it might well be more at present.

In addition, a rate of growth in this forthcoming year of only 4 per cent. or 5 per cent. will in no way get us back to the N.E.D.C. target of growth starting from 1961 and moving up to 1965–66. We should by this time already be 6 per cent. above the level of production in 1961; instead of that, we are an unspecified amount below the level of production at that time. There was the figure published before January, with its sudden and depressing dip; no one can be quite certain what has happened since. Therefore, there can be no question but that a rate of increase of 4 per cent. or 5 per cent. this year will fall far short of getting us back on this line of advance behind which we have fallen during the last year and a bit.

The question we must all ask ourselves is whether a rate of increase in national production of this sort, well above 4 per cent. or 5 per cent., would amount to an uncontrolled boom leading automatically and inevitably to a repeat of the 1955 and 1959 performances. I confess freely that the only hesitation I feel about suggesting to the Chancellor that he ought to have gone for a much more rapid rate of increase of national production at present is associated with the level of investment in private industry today. The Chancellor knows very well that it is nearly 20 per cent. below what it was a year ago. In his Budget speech, he predicted, without, not unnaturally, laying much stress on that part of his speech, that it will continue to fall for a little time. This is a depressing prospect.

It is easily possible to establish too mechanical a link in one's mind between the level of investment and the rate of growth in the economy. To some extant we have all fallen into that fault in the past few years. At the same time, I do not think that one can possibly pretend that to take a rate of investment still relatively low, as it was a year ago, and to cut that rate by one-fifth and in the Budget following to predict a further fall, is a state of affairs one could possibly accept.

I believe that the Chancellor hopes and thinks that at some stage—and I certainly hope in a not too distant future—there will be a spurt in the rate of investment in private industry, but it is difficult to predict when this will take place. Therefore, there is a case for leaving a certain amount of room in the economy for this to come along without straining the economy when it comes. I am extremely surprised, for these reasons, that the Chancellor should have chosen to give his main stimulus to purchasing power in the form of Income Tax concessions which will not take place until three months from now.

I should have thought that, above all, he would have wished to get this rapid rate of stimulus in the economy at present, possibly leaving room for the future for private fixed investment, when that should begin to develop, to come up and take the slack at that time. But to proceed on the basis of putting his main weight on concessions which cannot bite until after 5th July seems to me to be approaching this problem from the wrong point of view.

Subject to that point about the need for a higher rate of investment in private industry, which one looks for as a reversal of recent trends in the not too distant future, I do not see what could have been lost, even from the point of view of being very cautious about the external state of the economy, by going for a higher rate of expansion than the 4 per cent. for which the Chancellor has gone and the 5 per cent. which I believe he might possibly achieve. After all, the theory that exports would be extruded from this country by stagnation at home was decisively thrown out of the window by the Chancellor.

If the right hon. Gentleman's Budget speech marked any advance in Government economic thinking, it surely lay in that, and however much the right hon. and learned Member for Wirral may try to say that there is a continuous philosophical line between his Budget and that of the present Chancellor, I am sure that he, who is not here to hear the rest of the debate in which he made an important speech, would find it difficult to establish a continuity of thought in this respect between himself last year and the Chancellor on this occasion.

If, however, as I think rightly, this view that a stagnating home economy automatically produces increased exports is abandoned, what logical case remains for going for a limited measure of expansion, a measure of expansion substantially less than the economy could rightly stand, and one substantially less than is necessary to take up the slack that exists? If the Chancellor is, quite rightly, abandoning this old exploded view that we get high exports by stagnation at home, what remains? If it could be proved that the policies pursued by the right hon. and learned Member for Wirral and other Conservative Chancellors of the past had led to a reshaping of our economy over the past few years, so that it was much more concentrated on goods dominating in the world export markets, that would be an improvement, but I do not believe that that can be shown.

I know of no evidence that as a result of Conservative squeezing policies our economy has been squeezed into a better shape from the point of view of concentration on industries which really do well in the export markets. Nor do we have a special incentive for exports in the Chancellor's Budget. I am a little more in favour at the present juncture of doing something in this direction than was my hon. Friend the Member for Gloucester (Mr. Diamond), who spoke earlier and with whom I normally agree closely.

I do not think that it is quite good enough that the Chancellor, at this stage in the life of the Government, should say, This is a problem which requires a great deal of study. I am going to appoint a committee and see what happens." It may be the right hon. Gentleman's first year as Chancellor, but it is, after all, the twelfth Budget of this Government. If we are to have a system where no Chancellor lasts more than two years, and a few no more than eighteen months, we cannot have also a system under which every time a new Chancellor comes along everything that has gone before is to be wiped out, without benefit of Treasury research or anything of that sort.

The Chancellor has not done anything, directly and of itself, to stimulate exports. Therefore, having thrown out the sterile idea that we get exports through stagnation, with what is he left? I think that there are two things. The first is the hope that by getting some sort of incomes policy working, the competitive position of our exports, for this reason, may improve somewhat in the next year or so. The second is the hope that in an economy growing more rapidly, and more fully used than has been the case recently, there will be a chance of reducing unit costs in industry and, therefore, improving the position of our exports from this point.

I should have thought that on both considerations there was everything to be said for going for a higher level of expansion, compatible with not overloading and overstraining the economy, and that if we could get a 7 per cent., 8 per cent., and 9 per cent. growth in a year, in view of what happened in the past, we would improve the position of our exports from both points of view.

To take first the wages policy, surely the fact must be admitted by all hon. Members that by chipping away at various attempts at getting a wage freeze or a voluntary incomes policy we do not enormously influence the rate by which wages or other incomes go up. We may reduce the rate a little, by 1 per cent. or conceivably 1½ per cent. a year, but in a modern economy, with free wage-bargaining and with anything approaching full employment, there is extraordinary stability in the wage increases which occur. But what varies enormously is the rate of increase in productivity with which we have to balance the wage increases.

Therefore, in these circumstances, from the point of view of the effect of wage costs upon exports, the highest level of increase in productivity which one is reasonably able to go for offers the best prospect of improving the competitive position of our exports. The same factor applies very much to the unit cost side. If we can get a higher level of production in industry, average costs per unit of output will be somewhat lower and to this extent we put ourselves in a better competitive position.

I find it difficult to understand whether the Chancellor has made up his mind to try to get over this difficult hump of the relationship of expansion to our balance of payments position. Most of the evidence is that, in the short run, this country, with the present shape of its economy, begins, during the initial stages of the boom, to import more than it exports. What we have tended to do on too many occasions has been to become frightened by the early manifestations of this and to cut back. But this cutting back has done nothing at all to improve the long-term competitive position of our exports, and it has certainly done a good deal to harm our general rate of growth.

At some time, we have to get over this hump. If we could get over this short-term hump, we could, I have no doubt, sustain a rate of growth over a number of years which would improve the competitive position of our exports. Growth as opposed to non-growth may harm the balance of payments for six months, or a year, or conceivably for eighteen months, but over two, three, four or five years, it would, I believe, have exactly the reverse effect. What we must do is get through the extremely difficult interim period.

I cannot be sure whether the Chancellor, in his rather half-hearted approach to expansion this year, has, in fact, decided to make a brave attempt to break through that barrier which has bedevilled our economy in the past. It is extremely important that we should do so. I do not believe in being alarmist about the state of world trade, or the general economic prospects throughout the West, although the Chancellor said, rightly, I think, that the prospect this year was less encouraging from the point of view of world trade than it was last year. I do not know how one reconciles those views with the need for a very cautious Budget last year and the need for a much more expansionary Budget this year; but If leave that aside.

There can be no doubt, I think, that the world trade outlook is not particularly encouraging at present. However, there is a danger that, particularly in view of the new disunity, at least the economic disunity in Europe and, perhaps, in the West as a whole, which I regard as one of the worst consequences of the Brussels breakdown, we could be entering a period in which we should face more deflationary and more restrictionist tendencies in the world than we have for a long time.

It is extremely important that, at the outset of this period. Her Majesty's Government, of whichever party, should say, "We are for expansion. We want to go on with expansion, and we want world monetary and trading policies which will help us. We shall not ourselves turn to restrictive measures of a monetary, tariff or restrictionist sort on imports unless we are absolutely forced to do so. We appeal to others to work with us to make this expansion possible." The Chancellor has given that message in a very muted form. I wish that he could have given it in a much clearer voice.

7.43 p.m.

Mr. John Biffen (Oswestry)

It is always a great delight to listen to the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), though his speeches usually put rather an onus on whoever is called to follow him. I very much endorse the hon. Gentleman's concluding remarks, particularly those in which he attacked the concept of British policy reverting to some kind of economic autarchy. I hope that his words were not entirely lost upon his right hon. Friend the Member for Battersea, North (Mr. Jay) who has just left the Chamber. Briefly, because I know that many hon. Members wish to speak on the Budget, I wish to address myself to just three points: the balance of payments situation, the Income Tax changes proposed in the Budget, and the question of the development districts.

I make no apology whatever for returning to the subject of exports which, rightly, has featured in most of the speeches in the debate, but I am a little concerned about the ease with which is trotted out the argument that any strain on the external situation will be assured by borrowing, the argument being that that is what reserves are for. This is very comforting. but I have seen no one particularly anxious to do a very detailed analysis of what is likely to happen to our external situation in the coming year. I fancy that this reluctance is due to the fact that the results would not be too comforting.

The hon. Member for Stechford quite rightly drew attention to the Chancellor's own caution about our prospects in world trade and their effect upon our export performance. Our export performance in 1962 over 1961 showed an increase of only 3 per cent., which invites the conclusion, on the basis of the Chancellor's remarks, that perhaps not even that target will be reached during the coming year.

Unlike the hon. Member for Stechford, I am a shade alarmist about the trading situation in the West. Although I am as anxious as any hon. Member to see the Kennedy Round successfully negotiated under the G.A.T.T., I am not over-sanguine about the prospects of its successful conclusion. This being so, I think that our export position does give cause for concern. Coupled with that—in a way, this is even more important—I am a little concerned about the trend of imports in the coming year. The general assumption so far has been that the expansion we are likely to see taking place in 1963 will affect stock building. This, of course, is true. However, while during the Common Market negotiations we heard a great deal about the changing pattern of our exports, we sometimes tended to pay insufficient attention to the changing pattern of our imports. As trade becomes liberalised, any increase in home demand quite often throws up a fairly sharp rise in imports of consumer goods. I wonder, sometimes, whether we take sufficient account of this.

The last occasion when we had an overall deficit something like that which is planned this year was after the 1959 Budget, and the 1960 import figures showed an increase of 13½ per cent., a very considerable rise well above that which, I suspect, many of us expect this time. It is true that one cannot do a direct comparison with what happened before, and I do not think that one would expect to see the same volume of importation of French motor cars and French sheet steel. It is very fashionable in the Committee to talk in the language of the National Economic Development Council in looking forward to future benefits, but it seems, on a good deal of the evidence available, that we are unlikely to reach the N.E.D.C. target of a 5 per cent. increase in exports, although we are all too likely to exceed the N.E.D.C. target of 4 per cent. increase in imports. It is said that this can be carried on the reserves. This may be so, but I should like to feel a shade more certain than I am at present that all these matters have been fully taken into account.

Now, my second point, the Chancellor's tax changes. Clearly, it is a matter of judgment whether £269 million is the desirable figure for the Chancellor's concessions. Many hon. Members opposite have argued that it should be a good deal more. I belong to a rather more cautious school, thinking that even £269 million might be edging on the limits of generosity. But, on the other hand, I am not one of those who think that this is in itself inflationary, not only because of the considerable amount of resources not being currently utilised and which certainly could be utilised without bringing about inflation, but because it is not yet clear how much of the £269 million will find its way back into national savings. I should be interested to know how much of the £700 million deficit to which reference has been made by the hon. Member for Stechford will be financed out of national savings.

According to today's Financial Times, Lord Mackintosh said: I expect another good year ahead, therefor, especially when the new Savings Certificate is available. I hope, with the Chancellor, that the movement will be able to play a significant part in helping to bridge the overall deficit anticipated in the Budget of nearly £700 million. My right hon. Friend the Chancellor of the Exchequer said in his Budget statement: As the Committee knows there are other public funds from which the Exchequer can and does borrow, and other sources, such as national savings, to which it can turn, before resorting to the market."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 475.] I am sure that many hon. Members, especially those who are concerned lest the total effect of the tax remissions tend to be inflationary, would be interested to hear the Treasury spokesman expand a little more on my right hon. Friend's statement.

Unlike the hon. Member for Stechford, I was glad that the concession of £269 million was made through Income Tax, and, although he did not say that he would have preferred Purchase Tax remissions, my impression was that he would not have been averse to further Purchase Tax remissions.

Mr. Roy Jenkins

My preference was not for direct or indirect concessions but for something which would apply to April rather than to July. It was a time consideration.

Mr. Biffen

I thank the hon. Gentleman. The last thing that I would wish to do would be to put words into his mouth which he did not utter.

The reason I am glad that the Chancellor of the Exchequer has avoided making further Purchase Tax concessions and has channelled his concessions through Income Tax is that there is some evidence to suggest that some of the commodities which carry Purchase Tax are recovering quite well. The level of hire purchase renewals is now so depressed that one would have been very gloomy indeed if one did not expect an upturn. The hire purchase information published on 2nd April suggested that motor vehicle sales were now doing remarkably well. I noticed, again from the Financial Times, that refrigerator manufacturers this year have had their best February on the home market since the peak sales year of 1960, according to the Domestic Refrigerator Development Committee.

I now turn to my third point, which concerns the development districts. I must admit that here I shall deploy an argument which has a direct constituency bearing. I note the very considerable financial advantages which are now being given to companies which go to development districts, but I hope that these advantages will be coupled with a rather more relaxed attitude towards the issuing of industrial development certificates. These words will not fall easily on the ears of many hon. Members opposite, but there are a number of areas—my own constituency is a case in point—in which one can have an unfortunate combination of circumstances. There can be high unemployment in a small localised district which cannot by any stretch of the imagination be justifiably included in a development district. There can also be quite substantial hidden unemployment, because certainly in rural areas there is no tradition of women registering with employment exchanges as there is in urban areas. Thirdly, there can be rural depopulation. A combination of these circumstances has a depressing effect on life and the attitude in such an area and, when a local authority is successful enough in deploying its case to any industrialist to the extent of persuading him that its area would be a good area in which to put a small factory, I am cruelly disappointed when the Board of Trade intervenes to say that this should not happen.

The case that I have clearly in mind is Market Drayton, which, with unemployment in the region of, I believe, 6 per cent., has twice recently been refused an industrial development certificate, As I am told when talking to industrialists who wish to come to Market Drayton, one of the great advantages of this small market town is its proximity to the motorway M.4. This very much underlines the point made by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) that the industrial infrastructure should be first charge on increases in public expenditure.

I am an optimist, because I believe that the United Kingdom today is probably in a far better cost situation vis-à-vis its competitors than it has been over recent years. This is not entirely because of our own self-restraint. It has certainly been aided by the fact that European costs have been rising fairly rapidly. Therefore, it would be very discouraging if these advantages were thrown away on any precipitate rush towards a consumer binge, and I am fairly certain that that is not the intention of my right hon. Friend the Chancellor of the Exchequer.

I still think that the main problem which confronts this country in its economic challenge is the necessity for change, and perhaps even structural change, in our economy and a reallocation of resources where new demands exist, and I hope that in our concern for the very real social problems which exist today we will not become too much spokesmen for areas of decay and neglect the new industries. I think that for this Committee to debate and expose all the difficulties which go with declining industries is possibly not always the best use of our time. I believe that we should spend at least equal time examining and praising the virtues and dynamic of the industries of the South.

I adhere unashamedly to the belief that, in the long run, businessmen rather than civil servants know best where to locate their industries. I hope that we will see expansion not as an alternative to industrial and commercial change but perhaps as an anaesthetic to dull the pain and harshness which go with industrial change. I think that the Budget has been welcomed as fair in this respect, and that perhaps it will go some way towards doing that.

I was delighted that the hon. Member for Gloucester (Mr. Diamond) called the Budget fair. I am not sure that I followed him when he said that agriculture got a soft ride, but perhaps he will develop that point on another occasion. It certainly seems to me that this Budget is designed to promote a successful incomes policy, and by it I believe that my right hon. Friend has put a very real responsibility on those in authority outside this Committee. I very much agree with the remarks of the hon. Member for Ashton-under-Lyne (Mr. Rhodes), who said on 4th April: Yesterday, the Chancellor went a tremendously long way towards making the climate of opinion far the introduction of an incomes policy."—[OFFICIAL REPORT, 4th April, 1963; Vol. 675, c. 679.] That is a compliment from across the Floor of the Chamber which is very welcome, and I am sure that we all very much hope that the hon. Member is right. I disagree with those—and I think that the hon. Member for Gloucester would be among them—who talk as if there were some dramatic way of demonstrating our alternative to the Common Market. It may be that there is no dramatic way of demonstrating what we intend to do after the Brussels breakdown, but I believe that a successful incomes policy could easily be the most effective answer to those who have sought to exclude Britain from Europe.

8.0 p.m.

Mr. William Ainsley (Durham, North-West)

I trust that the hon. Member for Oswestry (Mr. Biffen) will forgive me if I do not follow him but concentrate rather on the problems that face us in the North-East. As the Minister of Labour reminded us today, the North-East has 6 per cent. unemployment, which is more than double what we find over the average for the rest of the country. That, however, does not reveal the full extent of the problem.

Recently, I asked a Question about the number of workers who had exhausted their right to unemployment benefit and I was astounded to find that in the northern region, over 8,000 had exhausted their benefit rights. If we think of this in terms of family life, we can easily accept a figure of 24,000. That is the extent of this problem which faces us in the North-East.

I want, however, to direct attention particularly to the areas upon which attention has not been focused. The Government appointed Lord Hailsham as the Minister for the North-East. He visited Newcastle, Sunderland and Middlesbrough and dealt with the problem concerning the East Coast. I do not wish in any way to minimise the problems there, but I want rather to deal with the problems in the west of Durham, in places like the constituencies of Blaydon, Consett, Bishop Auckland and Durham, North-West, which have never been mentioned or visited by Lord Hailsham.

I have the honour to represent the constituency in which I was born, where I have worked with the people and where I have shared their joys and sorrows, their aspirations and their hopes. The constituency of North-West Durham covers an area of 264 square miles, including some of our loveliest scenery. It stretches from the Pennine Range, with work of afforestation, and includes hill farmers and small farmers, who have been extremely upset by the policy pursued by the Government in negotiating to join the Common Market. These people had invested the whole of their savings in their work and they were asking what was to become of them as small farmers.

Bishop Auckland, which is not in my constituency, has 9.2 per cent. unemployment. Moving further west, however, into the sub-office of the Bishop Auckland area. I have had figures from the clerk of the local authority showing that there is 11.5 per cent. unemployment; and 130 men are under notice to finish work at the collieries.

Moving further around, I come into the area represented by my hon. Friend the Member for Durham (Mr. Grey). The employment exchange for that area gave the unemployment figure as 4.7 per cent., but as I move into the West I can double that figure. In the Brandon Urban District, Hedley Hope Colliery, Waterhouses Colliery, Esh Winning Colliery and New Brancepeth Colliery have recently closed down and there is nothing to offer to the people of the area.

Moving further around, I come into Lanchester and Burnhope. The Minister admits that these places come into the area of the Consett Employment Exchange, which shows an unemployment figure of 5.8 per cent. I realise the employment position of the Consett Iron Company, but I face a different problem in my constituency. The Minister of Labour cannot assess fully the problem of unemployment and depression which is found in the whole of my constituency.

The west of Durham includes the older parts of the coal field. We were renowned for the by-product plants that produced the finest coke in the world. My home town was known as the coke town. Within a radius of 5 miles are to be found the townships of Crook, Willington and Bishop Auckland, all of which are famous in the amateur football world as winners of the amateur football cup. In industrial relations, these people are second to none. Anybody who examines the records will find that there has been no trouble in the way of industrial unrest. I can say from 15 years' experience and as secre- tary of a miners' lodge that there was never a day's stoppage. These are the men who are now cast upon one side.

At the beginning of the century, there was always a shortage of manpower in the mining industry. No other industry came to compete for the manpower. Since then, we have had various economic measures to make industries pay. We may get an accountant like Dr. Beeching, or even Lord Robens, and we realise the problems that they face. It is, however, the responsibility of the Government to ensure that a diversification of industry comes to replace the basic industries as they die out.

Our five by-product plants each employed 250 men. These men, skilled at their own occupation, cannot take up other work. It is they who will form the reservoir of unemployment. All the while there has been a transfer of men from the west to the east, but only those, as in the case of professional footballers, who have come to the top in their training can do well in the mining industry. When they reach the age of 40 or 50, they have to leave the coal face and go on to datal work. When we are told about the high pay that men earn in the mining industry, it should be remembered that two-thirds of them are on datal work.

No longer can we transfer these men across the County of Durham. The west is now left with the kind of problem that my area is facing. We have eight secondary schools, but there is no hope of finding employment for the young people when they leave the schools. I have pursued the idea of converting Brancepeth Camp into an industrial training centre. It is Government property. The War Office was prepared to hand it over to the Ministry of Labour and in July, I received information that 24 people would be accommodated at the camp and that it might be possible to take six adults for retraining.

What happened? The Minister of Labour made some contacts, and the chairman of the Durham Division of the National Coal Board promised to squeeze 20 into the Tursdale Camp, a mining training centre. Why is this? It is because of the drift from the mining area. Mining is folding up in the west. Tursdale in just on the fringe of the mining area, and the development is taking place to the east where the deeper mines are. That is why even now there is a projected scheme, costing £70,000, for a new training centre at Seaham Harbour. The Minister of Labour has connived with the chairman of the Durham Division of the National Coal Board to take over Tursdale gradually as the new centre comes into being.

However, one ought to realise the problem that we face in the west. The Minister has admitted it. It is only three miles from the camp, but one cannot travel direct to it. One has to travel five, six or seven miles by the old-fashioned stone wall or hawthorn hedge marking the old cart roads. So the movement of young people to the east leaves a decadent west in Durham. The creeping paralysis that starts with Blaydon, Consett, Bishop Auckland and the north-west of Durham is now moving towards the constituencies of my hon. Friends the Members for Durham and Sedgefield (Mr. Slater) as the mining industry falls away from the west to the east. The problem in the west of Durham has never been tackled by the Government. When I questioned the Minister, his reply was that these were travel-to-work areas. I have with me some correspondence from a local councillor in the Weardale area, who says that it will take more than three hours to travel from Weardale to Darlington if Dr. Beeching's proposals go forward. It is at Darlington that I get on the train to travel to Kings Cross.

We must get out of the mentality of Whitehall. We must realise that the provinces that we represent have been neglected for the past 10 years by this Tory Government. We are now seeking to redress some of the wrongs that have been committed over that period. This is an admission of the failure of the Local Employment Act, and I am proving it. This area was scheduled when the Act was introduced, but the unemployment figure has gradually increased until it now stands at 11.5 per cent.

In the debate on the North-East Coast we were promised an advance factory. A month before that the Government were building no advance factories. When my colleagues from Scotland had their debate they were promised advance factories. Then came our debate on the North-East Coast, and we were promised a factory. We have a vacillating Government. They have no policy, and that is why we condemn them. They have had a stagnant economy. I do not blame the industrialists, but they have not expanded in the way they should into the development districts. That is why the problem in the development districts has snowballed.

According to information received from the Ministry in reply to a Question, 338 industrial development certificates were issued in these areas last year. With regard to the Local Employment Act, without applying to the Board of Trade—and there need be no reference to the Ministry—industrialists who obtain planning permission from the local authority can extend existing factories by 5,000 sq. ft. There is nothing to stop them expanding for 5,000 sq. ft. and then obtaining local planning permission for another 5,000 sq. ft. extension. As we travel to and from the North-East we see what is going on in the London region. Until the Government seek to plan for the whole of the country, we shall find that slowly but surely—many times I have wished it would happen—the traffic in London will grind to a standstill. Yet all the while we are denuding the countryside.

What will happen if we pursue Dr. Beeching's plan? He has published a good Report, and I have nothing against it; but the Government must accept responsibility for its social, industrial and political implications. The Government are building an advance factory, which has been agreed by the Ministry, in Crook, but under the Beeching plan the service from Crook to the main line at Darlington is to be stopped. We are facing our problem because there is no co-ordination between Government Departments. The Minister of Housing and Local Government gives local authorities permission to go on with their building programme. Yet in the Crook and Willington urban district there are about 25,000 people and in the Brandon urban district a new township of 20,000 people is being built, and all the while there is no work for them. New schools are being planned.

The Minister of Education visited Crook a few months ago. The Parliamentary Secretary to the Ministry of Labour followed a short while after and addressed the Conservative Association. What was his subject? It was not the problem of new schools or education in the area, and from my 20 years' experience on the local authority I know the problem that we have been facing. It was not the problem of juvenile unemployment and not the problem of adult unemployment. It was the Government's negotiations over the Common Market. Because the Government were banking on our going into the Common Market they are now bereft of policy, and the sooner they go to the country the better it will be for the people I have the honour to represent.

8.18 p.m.

Mr. R. Gresham Cooke (Twickenham)

I am sure that the hon. Member for Durham, North-West (Mr. Ainsley) will excuse me if I do not enter into the problems in his part of the country. We have a great appreciation of the beautiful countryside there and of the most excellent footballers who come from his area. I would merely observe that what the Chancellor has done in his Budget through depreciation and capital allowances, and so on, and also the development that is going on in the eastern part of the country, should help the employment situation in the hon. Member's part of the country in the long run.

Amidst the welter of words about the Budget that we have heard and read one facts stands out, and that is that it has pleased an enormous number of people, and I am sure that it will go on pleasing a great many people for a long period. After hearing my right hon. Friend's Budget speech, I calculated that there were nearly 30 items of tax relief or beneficial tax changes in it, which is substantial. I would merely say how excellent I think the free depreciation allowances are in the development districts.

As deputy-chairman of the Wider Share Ownership Committee, which is trying to extend the number of people who take a personal stake in British industry, I must say that I was very pleased that the tax on stock transfer was reduced to 1 per cent., because I am sure that it will help that movement forward. I cannot understand why it should be put off until 1st August, however, even if that is the date for the operation of the Finance Bill when it becomes an Act, and I hope that my hon. Friend the Economic Secretary will note that some of us may put down Amendments to the Bill to advance that date if possible.

As I spoke on this subject during the proceedings on the Finance Bill last year, I think that justice is now being done to Rolls-Royce and to Crewe, who were unjustly punished out of all proportion because of the provision concerning the allowance for expensive motor cars in last year's Budget.

My first reaction to this Budget was to wonder whether the Income Tax reliefs and the abolition of Schedule A tax would not be likely to be spent on the lighter type of consumer goods. This would not assist in alleviating the difficulties of our heavy industries, which are at the heart of our problem. I believe that the capital allowances will help as the money percolates through the economy, but this will take time. I am willing to suspend judgment for the moment, except to say that if, by next September or October, we have not got our heavy industries going again, I hope that my right hon. Friend will use the regulators that he still has and take further steps in favour of these industries.

I want to concentrate my remarks on exports. I hope that I will be excused in doing so, because I sat through the debate last Thursday when my right hon. Friend the President of the Board of Trade spoke but I was squeezed out by a rather lengthy speech by the hon. Member for Nelson and Colne (Mr. S. Silverman). Our balance of payments must be righted not by borrowing, but only by the honest sweat of our brow. I recognise that the Chancellor considers that to some extent expansion will bring about increased exports because companies will have more money for export promotion and, therefore, our exports may increase automatically. But we must keep constantly before us the fact that if we are to increase production by 4 per cent. annually we must also increase exports by 5 per cent. That is a sentiment which I would like to see more often expressed on the benches opposite. I hope that the hon. Member for Sowerby (Mr. Houghton) will acknowledge that when he winds up the debate tonight for the Opposition.

We must not only have a 2½ per cent. annual increase in exports, which amounts to £100 million increase per year. The figure must be 5 per cent., or £200 million a year. In my view, our exports are concentrated in the efforts of far too few companies. I understand that the motor car industry exports £642 million of goods a year, which is 17 per cent. of our total exports. These include vehicles, spare parts, components, tractors, tyres and other goods. But when one analyses the figures one finds that 90 per cent. of these exports are carried out by 12 companies—seven big vehicle groups, four component manufacturers and one tractor manufacturer. Thus, 15 per cent. of our total exports are being carried by 12 companies.

From the figures for other industries—for instance, I.C.I., in the chemicals industry and other large companies—one can easily conclude that the bulk of our exports are being carried out by the top 20 companies. According to the Board of Trade tables, the general rule appears to be that the larger the firm the larger the proportion of its exports. That is natural, because smaller firms have not the staff and resources to carry out big export campaigns, and if one of them gets an order in Birmingham it will not bother about Barcelona; and if it gets business in Manchester it will not go to Melbourne.

This leads me to what I think is the grave necessity for some form of tax incentive. I am glad that the Chancellor is setting up a committee to inquire into this, but I was very surprised to hear what the President of the Board of Trade had to say on it. I would have interrupted him if I could have believed my cars, but I could not, and I have since confirmed my impression in HANSARD. My right hon. Friend said: We believe that Britain would be a certain loser in an incentives race, so we do not intend to start one up. The point is that all our competitors already have some form of tax incentives, so if we adopted one we should only be reducing our handicap. My right hon. Friend went on: Since tax incentives and subsidies for exporters are ruled out, the Committee may ask me: what incentive is there to export?"—[OFFICIAL REPORT, 4th April, 1963; Vol. 675 c. 672–3.] Are tax incentives ruled out? If they are, that is contrary to the Chancellor's view and presumably the view of this Committee. Have the Government already made up their mind not to go in for a scheme of tax incentives?

The Economic Secretary to the Treasury (Mr. Edward du Cann)

No.

Mr. Gresham Cooke

I am glad to hear that, because we want first to have the impartial investigation by Mr. Richardson.

In Germany, there is the turnover tax. A manufacturer gets a cash refund Pr a drawback on his exports. In France, the T.V.A. tax is levied at each stage of manufacture. If the manufacturer sells goods for £100, for instance, the tax may be £20. First of all, there is no T.V.A. tax on exports and, in addition, the exporter may deduct the amount of tax passed on to him in the cost of material he has bought. These calculations are done on a monthly basis, so that a French exporter, in making his actual export, gets a cash refund. That system is a direct incentive to both large and small companies to export.

I think that we could have that system here in place of Purchase Tax, which is no incentive to exporting because there is no draw back to exporters when they make their actual exports. For the T.V.A. tax there are different rates according to different commodities—only 6 per cent. on coal and oil and 20 per cent. on jewellery and furs—but the significant thing is that it is to be adopted, I understand, throughout the Common Market.

The Australians have a system of tax relief on expenditure on export promotion. Every £1 spent on this receives taxation allowance. That, I think, is within the terms of G.A.T.T. and well worth considering. In due course, we will have to take some such steps as these.

I turn from the question of a tax incentive to some practical steps to improve our balance of payments in the present position. Now that we are not now in the Common Market, we could do more to increase our trade with E.F.T.A. The Chancellor has made a second reduction in the protective part of the revenue duties on a number of goods coming from other E.F.T.A. countries. We should press on our E.F.T.A. friends to reduce their revenue duties where they are too large and are holding up our exports.

For instance, Norway imposes a 30 per cent. revenue duty on motor cars. I am told that if it were reduced by half the price of a popular British family car would come down by £150 and our car exporters could double the amount of cars sold, from 10,000 to 20,000. If that reduction were made the duty could be kept on exports from Common Market countries. We should ask for the revenue duty to be reduced for E.F.T.A. partners, but kept on for Common Market countries. If revenue is required it could be obtained by spreading the sales tax over all the motor cars imported. Finland, another E.F.T.A. country, has a duty of 14 per cent. If that were halved we could reduce the price by £78 and put up our exports from 6,000 to 10,000 cars. E.F.T.A. countries should do these things to keep in line with the spirit of the E.F.T.A. partnership.

I was delighted to hear the Chancellor say that he would tie loans to Ghana, India and Pakistan to definite orders for British exports. The U.S.A. has been doing this sort of thing for years. If the U.S.A. makes a loan to India for tractors the tractors have to be American ones. I see no reason why we should not earmark our loans in this way on a much larger scale.

To stave off the chance of an import crisis which might come later in the year, will my right hon. Friend consider instructing all Government Departments to scrutinise most carefully imports of foreign goods, materials and equipment coming to this country in the next few months, because we may be on a knife edge, and with growth of expansion there might be imports by the autumn which would cause an "expansionist threat". That seems worth considering.

I was also pleased to hear that the Chancellor is still considering the simplification of taxes. I think that we have to reach the day when company taxation is all on one system, perhaps based on 45 per cent. of profits, and taxation of individuals is all on another personal system. I cannot see why Surtax and Income Tax should not be incorporated on one graduated scale and paid under P.A.Y.E. I know the difficulties and arguments against that, but we have to reduce the time spent on these computations.

I do not hold the view, which is held so generally by many hon. Members, that expansion of our industry is purely a matter of economics. I do not think that it is. Expansion, or lack of expansion, comes from something much deeper and from difficulties which will face the Labour Party if it ever comes to power. They are in the British way of life. We are low in the league of growth because we are a very poor country in the matter of applying science. Applied science is one of our weaknesses. We have some splendid fundamental, basic ideas in science, but we take a very long time before we give them commercial application.

The machine tool trade has hardly scratched the surface compared with the automatic type of machine tools produced in America, Germany, Sweden and Switzerland. We have been very slow in producing a front-wheel drive or a rear-wheel drive car, but it has been popular on the Continent for very many years.

Mr. G. R. Mitchison (Kettering)

We have both.

Mr. Gresham Cooke

We have both, but we were very slow in introducing them. The general view was that this type of car would not be very acceptable in Britain; therefore it was not produced.

The fuel cell was discovered by Sir William Grove, in 1842, 120 years ago. It is a method of making electricity without mechanical means, by mixing two gases. If it is successful commercially it will produce a wonderfully mobile way of producing electricity anywhere—in the desert or anywhere else. Yet I wager 100 to 1 that the Americans will bring out the first practical and commercial fuel cell.

Why does this kind of thing happen? It may be that in England we have such a love of classical education and the humanities, even a love of the horse, and lack adaptability and fear being vulgar. We forget that the first British motor car was not produced until ten years after the Germans and the French had produced theirs, and not until after the early 1890s, when the French had already won the Paris to Toulouse race at an average speed of 16 m.p.h. The motor car was certainly looked on as being very vulgar when it first came out.

Mr. Mitchison

Would the hon. Gentleman agree that British business has been for long founded on ignorance and integrity? Does he think that they are disappearing?

Mr. Gresham Cooke

I am certainly not going into that. What I am saying is that our way of life and our love of a classical education, and so on, does not assist our rapid application of new ideas to commercial life. There are all sorts of inhibitions in this country about producing new ideas. I have given one or two examples of how conservative the British way of life is in so many ways. For instance, people think there must be a railway line to every village. Even the trade union structure, with 394 separate unions, is one of the most conservative things in the whole world.

For the best use of our technical resources in future, whatever Government are in power, there will have to be more planning. The shipbuilding industry will have to be concentrated just as the aircraft and cotton industries and the railways have been or are being concentrated, because we have to release engineers to the lighter and newer trades. To achieve expansion in the way so many hon. Members want, we must remodel and reinvigorate the British way of life. That may bring about a good deal of disturbance and distaste, because of the changes which will be necessary.

8.36 p.m.

Mr. Ifor Davies (Gower)

The hon. Member for Twickenham (Mr. Gresham Cooke) opened his remarks by stating that, despite the welter of words already uttered in this debate, he felt sure a lot of people would welcome the Budget. I was reminded during his remarks of a comment made by the right hon. Member for Woodford (Sir W. Churchill) who stated that a Chancellor of the Exchequer must accept everything with gratitude but take nothing for granted. I would say that he may accept with gratitude all the compliments raised from that side of the Committee but he should not take for granted that we on this side will embrace all those compliments.

The hon. Member in the opening part of his speech dealt with free depreciation and the development districts. This was part of the theme of the Minister of Labour when he opened the debate this afternoon. In the short time I have at my disposal I should like to concentrate my remarks on the theme for the development districts.

I feel that there is a tendency in the Committee these days when we discuss unemployment to refer particularly—rightly so, of course—to the problems in Scotland and the north-east of England, and I can very much confirm how grave those problems are, but I should like to mention particularly the problems in the Principality of Wales, and I should like to put the matter in perspective because the figures of unemployment in the Principality are also very alarming. In the March report in the Ministry of Labour Gazette we find that whereas in northern districts there was 7.1 per cent. and in Scotland 6.2 per cent., ours in Wales also stood at about 6 per cent. I understand that the latest figures show a drop of 1 per cent., but we are still third in the league if I may put it that way, and so it is a matter of grave importance to Wales. I hope that Ministers, when they are considering these figures, will not forget how very great a problem and how important a problem these figures show Wales to have.

The point which must be emphasised more and more in these debates, a point which was brought out very well by my hon. Friend the Member for Fife, West (Mr. W. Hamilton), is the failure of the Local Employment Act. If I remember rightly, he instanced the remarkable figure of unemployment in the development districts of 4.5 per cent. when the Measure was introduced as compared with a figure of 7.7 per cent. today. I would refer particularly to the problem of development districts in Wales. In those districts in Wales the unemployment figures vary from 5 per cent. to 12 per cent.

I would emphasise what the Minister of Labour said this afternoon. If I remember aright, he said that he would listen with attention to the case put in this debate about these areas. I understand that he still has an open mind.

In considering the development districts, it is essential that the problem should be dealt with regionally and that areas should not be considered piecemeal. This is especially important in Wales and in particular in my own constituency. The Swansea Valley was scheduled as a development district but was taken off the list for priority—I believe that the phrase which the President of the Board of Trade used was that it had been put on the stop list. Will the Economic Secretary clarify whether although it is on the stop list, it will still qualify for free depreciation?

Mr. du Cann

Any area which is on the stop list will qualify for free depreciation allowance.

Mr. Davies

I am obliged for that information. I plead with the President of the Board of Trade to reinstate areas scheduled as development districts but on the stop list so that they have the full qualifications for the Budget's benefits. If areas on the stop list are to have the benefit of free depreciation, it is only one step more to extend the other benefit, having regard to the unemployment figures.

More than any other area, the Swansea Valley has suffered from the contraction of its native industries, especially heavy industry. Many collieries have closed. The last steel works at Pontardawe closed last year. No new industries have come in because there is no incentive for them to do so, because the area is on the stop list. I ask for especial attention for the problems of this area.

My hon. Friend the Member for Swansea, East (Mr. McBride), in an admirable maiden speech this afternoon, also argued for the Swansea area. He is a Scot, but I welcome him as an ally in the Principality. I emphasise what he said about the Swansea district and Swansea Valley having the grave problems of derelict areas. A major contribution to the area has been made by a joint effort between Swansea University and the Nuffield Foundation in helping to clear the Landore derelict area for the community's benefit. It is sometimes said that Wales has no real problems of unemployment now, but the position in parts of Wales is so serious that the whole of South-West Wales and Mid-Wales and North Wales should be scheduled as an area deserving the benefits of the Budget.

The Minister of Labour this afternoon emphasised what he called the human problems. I congratulate the Chancellor also on using the phrase "human problems" in his Budget statement. It has been said already today that the Budget is noteworthy because of this difference from previous Budgets, for it deals not only with economic theory and the problems of imports and exports, but with the human problems, and it is the first Budget I have heard to show this concern with human problems. The Minister of Labour also spoke of severance pay and redundancy, but I will pass over those problems, far I have promised to be brief.

The third subject mentioned by the Minister of Labour was training. In connection with training in industry, when we talk about the need for technological changes and the need for technicians, there is a tendency to overlook the fact that it is the skilled craftsman who is the background of industry. Technical changes are likely to alter the skills required, but they will not reduce industry's need for, and dependence on, craftsmen as such, and no increase in the number of technicians will be of any value unless the craftsmen are available to back them up. With our reputation for providing skilled craftsmen, it would be the height of folly to overlook the importance of the craftsman, and I welcome the emphasis which has been placed on this human problem by referring to the need for training which has been one of the themes of today's debate.

One aspect of the human problem has not been mentioned. I am referring to the relationship between increased productivity, which in turn is related to incomes, and joint consultation in industry. We have a pretty good record for industrial relations, but that record is still not good enough. I am not satisfied that joint consultation, in the real sense of the word, which is essential if we are to respond to the appeal of the Chancellor of the Exchequer, is sufficiently practised, or in reality, is as effective as it ought to be.

Many industrial disputes today are the result of human problems, to use the Chancellor's term. They are the direct result of emotional disturbances and poor communications between management and men. The truth is that despite the good work which has been done by the Ministry of Labour's industrial relations officers, the T.U.C., and many other organisations, we have barely started to study the human problem of manage- ment. Indeed, it is a sad fact that we spend more on advertising than we do on industrial research.

I submit that expansion without inflation, the theme of the Budget, and increased productivity, together with their human problems, the theme of today's debate, are complementary to good industrial relations, which means joint consultation in its true sense. I submit that this Budget will fail in its economic objective if mutual trust, confidence, and good will are not established in British industry.

8.48 p.m.

Mrs. Patricia McLaughlin (Belfast, West)

I hope that the hon. Member for Gower (Mr. I. Davies) will forgive me if I do not comment on some of the important points in his speech except to say that I agree with what he said about the importance of human relations.

In welcoming, in general, the new thought and line in the Budget, and, in particular, the point mentioned by my hon. Friend the Member for Twickenham (Mr. Gresham Cooke), who emphasised the need for further exports, I want to concentrate on the aspect of this Budget which affects the development districts, including Northern Ireland.

As my hon. Friend the Member for Twickenham said, it is true that a large part of our export industry is carried on by a few large firms, but there are also many small firms which export, and it is these firms which should be encouraged to increase their output. For instance, the biscuit industry exports about £1 million worth of biscuits every year, which represents a lot of biscuits. Many small industries such as that could increase their output. It should be possible for a person to say, "I am not running a satisfactory firm unless I am exporting, unless I have a product that is in any way required or demanded overseas, and if it is not required I ought to be able to find out why".

We must have a new look at our whole approach to exports, not just in respect of the big firms, but in respect of the small man who, despite the amount of work which the Board of Trade has done in helping and giving advice, still does not find it easy, or sometimes even possible, to take the capital risk involved. I wish that there were time to develop this further, because this is surely the essence of what we are aiming at in a Budget of expansion without inflation. We must sell more, and sell it over a wider base. This is very important for everybody, for the development districts as well as the areas already fully employed and over-employed.

The Chancellor said that he required to have 4 per cent. growth in order to have a satisfactory return and an incomes policy of about 1 per cent. to ½ per cent. below that. In Northern Ireland, which is the only part of the United Kingdom that I have time to concentrate on tonight, the growth has been well in the forefront of the general growth throughout the United Kingdom. I want to point out quite clearly that it depends on the situation in the area whether the growth in the area is satisfactory to the needs of that area.

The needs of Northern Ireland have by no means been met up to date. We have had tremendous growth in the industries of growth, but we have had tremendous shrinkage in the traditional industries which are being affected all over the United Kingdom. That is part of the reason why we are so concerned and why the Chancellor has brought in these new measures which will give a great deal of help.

In Northern Ireland, the shipbuilding industry is shrinking considerably. We also have a serious situation in the aircraft industry, and everyone knows what a problem that is today. In the textile industry there has not only been a large run-down, but much greater mechanisation and modernisation leading to the employment of fewer people and greater used of modern machinery. Even in agriculture today there is far greater mechanisation and employment of fewer people.

Seen against the background of the difficulties in the other development districts, Northern Ireland has its specific problem which is still outstanding, despite what has been done in the Budget to help the development districts generally.

Other development districts have their problems, but Northern Ireland has a special one, and that is the sea which makes it necessary for Northern Ireland to import every piece of raw material in order to manufacture. We have a very large number of shrinking industries, despite our efforts. We have more people employed today than ever before, but we have more people than ever before needing employment because of the vast increase in population. This is one of the human factors with which we must be concerned. Therefore, we need 6,000 new jobs for youngsters every year in addition to work for the men and women coming out of the shrinking industries. I ask the Chancellor what ideas he has for helping to solve a specific problem like this.

There has been some help for Scotland and for the North-East. Money has been advanced and loans given for various developments, but there has been no specific mention in the Budget of any special help for Northern Ireland. I am aware that the new free depreciation will cover the whole of Northern Ireland and not be confined in one area. But Northern Ireland is a small area and it is almost impossible to differentiate where the needs are. That means that we need a further differential to add an inducement to manufacturers and developers to come across that strip of water.

Had Britain joined the Common Market, I believe that we should not be facing this problem so acutely at present, because there were a number of American firms which were awaiting the opportunity to set up in an English-speaking part of the Common Market so that they could use the skill and the common language. Northern Ireland had not only hopes but very firm promises of firms to go there provided that the Common Market became a fact. In view of what has happened, we must think in other terms.

Northern Ireland is a most forward-looking part of the United Kingdom. We hear far too often about the problems and not about the forward-looking effort. Today, the industrialist in Northern Ireland becomes very excited about the possibilities of the way of life which be and his family can enjoy, but there is much more to be done to encourage industrialists to go to Northern Ireland.

I must ask the Chancellor to accept that I had many points which I wanted to put to him, had I had the time. Will he please think in terms of possibly a tax incentive or of some other valuable long-term incentive which could be applied short-term to get us over the hump of this problem and to enable us to move into the position of producing more jobs than there are people needing jobs rather than the other way round? Will he please help us to catch up with the demand?

The Chancellor and the President of the Board of Trade know very well that great efforts have been made to attract new industry. Great efforts are being made at diversification, but they are not enough. This is the first time that the Budget has contained an inducement to people to go to development districts such as Northern Ireland and to stay there. It is not only a question of firms which need to expand going to these areas, but of maintaining their position in these areas. Occasionally, we have found in Northern Ireland that it is the outlying parts of an industry which suffer first when the industry suffers.

I welcome the Chancellor's proposals by which industrialists will have special treatment as long as they remain in the area. They can take some years to write off their allowances as they wish, but this will not solve the problem, nor will it necessarily solve it in all other industrial areas.

Mr. William Baxter (West Stirlingshire)

Will the hon. Lady give us the names of the firms which were ready to go to Northern Ireland provided that Britain joined the Common Market?

Mrs. McLaughlin

If the hon. Member will talk to me later I will let him know. I have only three minutes left, and I hope that he will forgive me if I continue with my speech.

I emphasise that in Northern Ireland the Government have taken every measure possible within the terms of their own authority. It has been announced that we are to have our own N.E.D.C. and that there is to be further development of apprentice training and of retraining. This is happening in this country, but we have been at it for a long time and are well ahead with it. Hon. Members must realise that this is very important. It is no use my asking the Chancellor to do things unless I remind him of what we are already doing. We are playing our part, and we are asking Her Majesty's Government to play their part.

What is being done is good, but it is not sufficient for us to sit back and to say that what is being done will suffice, because it will not. We require a further inducement and differential. We require bold measures. The Chancellor's outlook in the Budget has been bold. He has helped, and he is to be congratulated, but once we have decided to go down a road we should go the whole way. I ask the Chancellor to see whether there is any way in which he can go further and can provide specific inducements which will make Northern Ireland not only a forward-looking place, but also the forward-living place which we want it to be.

8.59 p.m.

Mr. G. R. Mitchison (Kettering)

I have heard a great many interesting speeches today, perhaps particularly that of my hon. Friend the new Member for Swansea, East (Mr. McBride). His sincerity, his thoughtful simplicity and his obvious knowledge of the needs of the constituency for which he has been chosen I feel sure commended him to the whole Committee.

I should like also to say a word about one other speaker, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd). I found his speech most amusing, particularly the results of his 61 per cent. successes—of course, in a field other than that of finance—and also his comments on the Plowden idea of looking ahead five years. Considering that he himself explained that his own forecasts had held good for six months and no longer, I thought that it showed a distinctly hopeful spirit to expect other people to place any reliance on forecasts for five years ahead.

The plain fact of the matter is that the right hon. and learned Gentleman was hopelessly wrong in his last Budget. His forecasts were wrong, except for a short period. In those circumstances it was altogether too much to expect that the remedies he proposed on his mistaken view of the coming year were likely to be the right ones. It would indeed have been a singular coincidence if they had been.

It is not altogether surprising that we had last year an Economic Survey which began with a forecast of the coming Budget. This year we have no more than an Economic Report which in its own wards confines itself to a factual statement of the position. The words are these: a factual analysis of economic developments during 1962. It is rather funny, but this kind of humour can have the most lamentable results. There is no doubt that the results of the conclusions at which the right hon. and learned Gentleman arrived in the Economic Survey for 1962 have in fact proved contrary to what he expected and singularly unfortunate for a large number of people. What the right hon. and learned Gentleman said was this; this is the summing up: This is the background against which we shall be working in 1962. Provided the pressure of home demand is kept in check"— is that what his successor is doing in this Budget?— and the incomes policy widely applied"— that was another and stricter incomes policy— the country will be able to take advantage of the favourable opportunities for exports in 1962. Whether there have been such opportunities or not, the country has not taken advantage of them. These opportunities may not remain, and it is essential to make the most of them. If this is done, production could expand without a damaging increase in the pressure of demand upon resources and without renewed risk to the balance of payments. That is a very different picture from the one which the present Chancellor of the Exchequer has put before us in relation to this Budget.

I think that the right hon. and learned Member for Wirral happened to enter the Chamber just after I said how good his jokes were about his 61 per cent. success. I respectfully say to him that I think that in this case he has been wrong—wrong, no doubt, in quite respectable company, but hopelessly wrong. It is rather foolish—I hope I am being respectful—to try to persuade the country or this Committee that he was completely right, that the forecasts were right, that the remedies were right, and that things have so changed that the present remedies are equally right. That is not remotely like the real position.

I turn from that to the Budget as a whole. It has been welcomed in some quarters as a very astute approach to an incomes policy. I shall not embark on a discussion of that, except to say that I do not believe that an incomes policy will ever succeed in this country until someone realises that the present definition of "income", largely a tax definition, is a very artificial one and that also to be taken into account are capital advantages, both so far as taxation goes and as regards their results in the social world in which we live.

It does not matter whether a man is over-spending—if he is over-spending—on the results of hard-earned income, which he may have deserved, or whether he is doing it on the results of some capital appreciation which, by any ordinary ethical standard, he certainly does not deserve. When we come to matters of taxation and of an incomes policy, I should have thought that it was a very good thing to get rid of that obsolete, and disappearing, and somewhat unjust distinction. There is a line to be drawn, but it is certainly not the line we draw nowadays in practice.

I agree with what my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) pointed out so very clearly, that this Budget must be taken in conjunction with the fact that the increase of Government expenditure will put about double this amount of money into circulation and that, so far as the pump is being primed, it is being primed more by increased Government expenditure, little though hon. Members may like it, than by anything in the Budget.

I should like, if I may, to divide the Budget into the two halves that appear in Table XI in page 20 of the Financial Statement, the first being headed Income Tax, and the other, Income Tax and Profits Tax. Income Tax starts with the abolition of Schedule A. I have noticed one rather amusing comment from several corespondents in newspapers, including a very short and witty letter from a lady which appeared in The Times this morning; that it is all very well to be presented with relief under Schedule A if it is to be taken away from one by an increase in rates.

A great deal of odd stuff is talked about rates, and I shall not add to it now. I would simply say that this seems to emphasise the wisdom of the plan that my party has had for a long time. The urgent necessity is an examination of the relationship between central and local government expenditure. That is just the sort of case that illustrates this very clearly.

I turn from that to the other increases in allowances, for this is what they all are. The most substantial of them is an increase of the single allowance and of the married allowance, and an alteration of the reduced rates of tax. That increase alone in this coming year accounts for slightly more than half the total cost to the Revenue of the Budget concessions. It is a very large amount, and I am very glad that it is being done, but the reason for its being done is perfectly obvious.

My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) last year made this the central point of his comments on the Budget, and we carried it further by way of Amendments in Committee on the Finance Bill. I shall not go through all my hon. Friend said then, but would remind the Committee of one or two very simple conclusions which, as far as I know, have never been disputed. One was that as regards a salary of £800, £53 was taken in tax and National Insurance contributions in 1955, and the amount when my hon. Friend was speaking was £72 for those two items. This is another instance of what happens under Tory Governments; they invariably, towards the end of a Parliament, claim great credit for putting right that which they have done wrong in the earlier years.

To carry it a little further, my hon. Friend, having pointed out that the P.A.Y.E. earner had been milked, added: Seven years ago he used to pay £1 in every £4 of the total taxation. Today, he is paying £1 in every £3."—[OFFICIAL REPORT, 10th April, 1962; Vol. 657, c. 1167.] I am very glad to see that the right hon. Gentleman has taken this lesson to heart and that he is now, at long last, carrying out a little of what my hon. Friend suggested.

But it is not only in respect of that particular allowance. I think that I am right in saying that every one of these increases has been pressed for by the Opposition, not casually but systematically year after year, and with all the sound arguments which remain at the command of my hon. Friend the Member far Sowerby (Mr. Houghton), among others. One cannot get very enthusiastic about this part of the Budget. One gets one's clothes stolen while bathing, but this is not a very distinguished lot to have pinched. We were perfectly right to have put these proposals forward, but I do not think that a Government can get on solely on them.

I leave that to come to what is in many ways a more important subject, under the heading Income Tax and Profits Tax, relating to allowances for plant and machinery. I say that it is more important not because I would reduce in any way the importance and value of the family concessions but because those were so obvious that they had to be made. I cannot see any right hon. Gentleman who was a Chancellor shortly before an election failing to do that kind of thing.

As for the investment allowances, I notice that on the estimated figures for the coming year the personal allowances amount to £221 million out of a total of £260 million, while the whole of the rest amount to £39½ million, of which no less than £27 million are accounted for by the changes in Stamp Duty. The point is that these concessions on investment allowances will be very small beer at present when this is an urgent problem.

Although hon. Members opposite may not realise it, there are people throughout the country who are without a job. I heard my hon. Friend the Member for Hamilton (Mr. T. Fraser) talking about his own retraining in the 1930s with that transparently sincere eloquence which always characterises what he has to say. I remember those days, and I remember going to some of the places where that kind of suffering was experienced. I have never forgotten it and I never shall forget it. There are people in the country who still remember that sort of thing. Every day that measures fail to be taken adds a considerable total to the sum of human misery in Scotland, Wales, Northern Ireland, and indeed all over the country. I therefore find these delayed action provisions somewhat unsatisfactory on that account.

I should like to comment, first, on the increase in investment allowances for expenditure on scientific research. The maximum in a full year will be £1 million. We should take with this the acceleration of depreciation allowances for scientific research, though the latter concession is in effect merely an interest-free loan. The net result is a very small concession indeed to scientific research. I turn to the N.E.D.C. Report, paragraph 174: Though research and development do not invariably show a return, the returns when achieved usually more than cover the cost of the failures as well as the successes. Sometimes they are very great. Information is accumulating which suggests some correlation between research and development effort and growth of productivity. And in paragraph 181: … inadequate scientific and technical awareness by management is the most usual reason for reluctance to introduce technical changes"— and so on.

It is perfectly clear that the N.E.D.C., quite rightly, in my opinion, would note the lack of scientific research and the lack of the application and use of it as considerable factors in this country's failure to produce and to export on the scale needed today. I do not believe that lack of productivity and lack of exports depend on any slackening of individual effort. In my view, they depend very largely on the somewhat inferior quality of much of the management in Britain. The British industrialist has shown himself to be uncommonly slow to take up the advances of science and apply them to the purposes for which he could usefully and with benefit to the country apply them.

This is a serious matter. If all the Government can offer is a tax concession amounting to £1 million in a full year and, as it were, a loan of, at the most, £4 million in any other year, and if the results in this coming year are to be classed as only negligible, I wish that the Chancellor would think again and think of something a bit more useful and immediate. Millions have been granted and lent to industrial firms. We have had another case just lately. I wish that somebody could give them, instead of millions, a little more intelligence and awareness of the advances of modern science and the possibilities of it.

In France nowadays—I do not turn to France with unmixed blessing in every respect by any means—one finds that the use being made of science and its place in French planning are both far more important and far more successful than anything in this country. We have a Minister for Science. He is also in some vague way the Minister for the North-East Coast and Minister for Sport. He holds, I believe, some position in the Conservative Party. His multifarious activities, concealed, no doubt, under different hats, must limit a little his devotion to scientific advance.

The position is just not good enough. The result is showing itself in the competition between industrial nations nowadays, when those which have the best forms and schemes of higher education, for the advancement of science and for the application of the results are winning the race.

Now, a few words about the allowance of free depreciation in development districts. Again, the result this coming year is negligible. The most that can be reached finally is £45 million. This is, no doubt, a substantial sum, but one remembers that the concessions on Stamp Duty amount to £40 million in a full year, which is much the same figure.

The free depreciation in development districts may be a much more important matter. This is a tax concession of considerable value, following the lines indicated by my hon. Friend the Member for Gloucester (Mr. Diamond) last year. The Government have not put forward a new idea in this Budget except by taking off the Stamp Duty, and even that their own side has been pressing for years. Here we have it at last—free depreciation in development districts.

My difficulty concerns the idea of development districts. I very much agree with what my hon. Friend the Member for Hamilton said on this point. The difficulty arises on the rather narrow point of what is the exact boundary of a development district and what one does about changes in it from time to time. However, at the root of the matter there is a much wider difficulty. If the Government make considerable tax concessions and try to attract people to a limited area, they are trying to cure a nation-wide trouble by dealing with the form in which the problem arises locally.

After all, this is a national matter. The problem of unemployment may be very bad in one place, less bad in another and comparatively small in an area such as London and the South-East. But it is utterly impossible to try to get at the root of it simply by dealing specially with a number of districts. I entirely agree that that must be done. All that I say is that it is certainly not sufficient, and perhaps the incidence of this tax concession will show that very clearly.

In addition to the difficulties at the margin of the area and at the point when the area is changed—taken out of one list and put on the stop list or taken off the stop list with the result that those who came in later are placed in a different position from those who came in previously—there is the question of unemployment itself spreading over the country. I do not apologise for taking a spot of trouble in my constituency as an instance.

I was rather surprised and shocked when looking at the figures of what I think is not permanent but short-time unemployment on page 119 of the last Ministry of Labour Gazette. I found that there were three industries in the country where the number of men and women who had been put off for the whole week or who were working only for part of the week exceeded 10 per cent. of the total number of people in the industry. Those three industries in order of badness were bedding, furniture and boots and shoes. They are not perhaps the three which would occur to one at first. The figures in this respect are worse than those in textiles or, to take another instance with which I have some local acquaintance, iron and steel, or in engineering.

Perhaps the worst unemployment for some time past has been in Scotland. It spread south and, no doubt, from festering parts of Lancashire. Gradually, it has come down to what everyone usually regards as a prosperous part of the country, down into the Midlands. I can see the effect of this in my constituency. I take this as an instance. What it shows most clearly is that if we want to deal with unemployment we must by all means have special arrangements for the worst hit areas but must also regard it not even as a regional problem but as a problem which must be dealt with nationally.

The only way in which one can really get it right, other than temporary patching of the kind which we have been driven to, is to have a national plan for industry. One must not hesitate, where the necessity arises, to do by public enter- prise what private enterprise appears unable to do. There can be no question of sacrificing human beings and their work to the interests of some remarkable ideology which I do not share.

It is the plainest of common sense that if we want to deal with unemployment, we must not let ourselves, on purely human grounds—on social grounds, if one likes—be stopped by considerations of that sort. I was shocked to hear the reluctance of some hon. Members opposite to accept what, I should have thought, was a self-evident proposition.

Sir Cyril Osborne (Louth)

The hon. and learned Member said that the Government would not accept a plan to plan the economy and to plan for full employment. Will he tell the Committee how he would plan exports, upon which 5 million jobs depend, when he does not have the power to compel the foreigner to buy British goods?

Mr. Mitchison

To reply as shortly as possible, the first thing I would do would be to find out what the foreigner wanted and to produce it. [Interruption.] I am not sure that there are proper arrangements for that at present, and I speak with some knowledge of the industry to which I have just referred. I am not convinced that the intelligence, as it were, that is given to our businessmen is sufficient.

The second thing I would do would be to see that we sell it. I agree with what my hon. Friend the Member for Gloucester said today. We are uncommonly slow to take advantage of foreign conditions, to speak to the foreigner in his own language—to be, in short, good salesmen. If small firms cannot do it, there should be a collective arrangement.

Lastly—and this is surely the substantial point—we have to produce what is required as cheaply and as well as possible. If our attitude to scientific advances is the sort of attitude to which I have referred, the man who is out of a job is being sacrificed to the backwardness, the innate conservatism—the phrase comes from an hon. Member opposite—of many British businessmen. That ought not to happen. It is not right.

Several Hon. Members rose—

Mr. Mitchison

I am sorry, I had better go on. I have only two minutes left.

I sum up in this way what I have to say. I regard this as a rather dull Budget. Most of its comes from our own suggestions. [Interruption.] Most of it comes from our own suggestions, and we have got tired of making them to a Government which, until just before an election, was unwilling to adopt them. One can get bored with even the best ideas when one goes on trying to put them over to a stupid and reluctant Government.

I regard it, however, as part one of an electioneering Budget. The remarkable thing about it is that it contains hardly a single measure dealing with indirect taxation. It is all about direct taxation. The Chancellor keeps in his hands the powerful instrument of the regulator. What I expect him to do—we shall see if he does it— is to begin to use the regulator a little nearer the election, unless he thinks that the Budget has completely done the trick. I share the view which was expressed by my hon. Friend the Member for Stechford about that. I think that in this Budget the Chancellor may get the general expansion that he wants but that he is unlikely to get the correlated expansion of 5 per cent. in exports. For those reasons, I look at the Budget with a somewhat qualified enthusiasm.

9.30 p.m.

The Economic Secretary to the Treasury (Mr. Edward du Cann)

Today's debate has been remarkable in that we have not only had the pleasure of listening to the maiden speech of the hon. Member for Swansea, East (Mr. McBride), who spoke with authority about his adopted constituency and with all the ability that we expect from a Scot, but we have also had two memorable "maiden speeches"—from my right hon. Friend the Member for Renfrew, West (Mr. Maclay) and my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). I have always been concerned lest, unwittingly, I gave offence to my right hon. and learned Friend in July last year, because I then married one of his most beautiful and charming constituents and thereby cost him a vote. I only hope that I gained one in its stead and that he does not hold this offence against me.

We have been discussing principally unemployment. To some extent we have also discussed the past, but I propose, in winding up the debate for today, to talk about the present and, more particularly, about the future. I believe that that is what interests the country. Let me make it clear at once that it is the Government's policy to attack, to contain, and, I do not doubt, to conquer unemployment where it exists. There is no worse human problem, and there is no more urgent task, as the hon. Member for Gower (Mr. I. Davies) and the hon. Member for Durham, North-West (Mr. Ainsley) pointed out.

The Budget has as its main theme expansion without inflation, expansion that can be sustained. The hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), whose speech I regret I unavoidably missed, suggested that perhaps we were not being ambitious enough. I hope that he at least gives us credit for being on the right lines. I think that was part of the point of his speech.

The present problems of our economy are the product of two factors. The chief is the deficiency of total demand in which the most important element has been the lack of buoyancy in export markets. Our overwhelming interest is that world trade should continue to expand. While we shall do our best to assist in this process, exerting our influence through the international institutions to which we belong—the G.A.T.T. and E.F.T.A.—and joining in the Kennedy Round, and so on, there can be no guarantee, of course, of a rising trend in 1963 or after.

Something has been said about an improvement in the world payments systems. I am delighted that the right hon. Member for Huyton (Mr. H. Wilson) should be a convert to the ideas expressed by my right hon. Friend in Washington last September—a late convert, perhaps, but none the less welcome.

The prospect for world trade as a whole, as my right hon. Friend pointed out, is, perhaps, that it will increase at a slower pace in 1963 than in recent years. We must, therefore, resolve that, whatever the level of world trade, Britain must achieve, if possible, a greater share for her exports of goods and services. This was a point which was made by my hon. Friend the Member for Twickenham (Mr. Gresham Cooke). It is essential to see that exports rise.

The question has been asked whether or not we are sufficiently export-minded. That was asked by the hon. Member for Gloucester (Mr. Diamond) and also by my hon. Friend the Member for Belfast, West (Mrs. McLaughlin). I certainly think that it is true to say that sometimes we are not. I would repudiate the strictures by the hon. and learned Member for Kettering (Mr. Mitchison) about the management of British industry in general. One of our purposes is to facilitate the realisation of the export potential of our country by concentrating on the sub-themes of the Budget—modernisation, efficiency and competitiveness.

The breakdown for the time being of our negotiations to enter the European Economic Community, referred to by the hon. Member for Gloucester, re-emphasises the need for success in these fields. To use a modern phrase, perhaps the need in the 1960s is for Britain to "get with it".

I give one example of modernisation to show what I mean. The choice for our railways lies between an out-of-date, wasteful system and a modern, competitive profit-earning streamlined complex—in simple terms, between a railway as designed by the celebrated cartoonist Roland Emmett and the railways as envisaged by Dr. Beeching. As one whose constituency is affected as much as anybody else's by the reorganisation, I, like so many of my hon. Friends who believe in modernisation, come down on the side of Dr. Beeching. So, I believe, will the country.

The Budget, together with the measures already taken by the Government, is designed to improve demand at home and facilitate change, especially to make it easier for our fellow citizens. The stimulus to the economy which the Budget gives will have its effect upon areas where unemployment is above the national average. For these, as the Committee knows, there is the special help about which we have been asked questions during the debate and to which I will refer later. The substantial structural change mentioned by the hon. Member for Hamilton (Mr. T. Fraser) and my hon. Friend the Member for Oswestry (Mr. Biffen), which our country faces is, I believe, to be welcomed.

Indeed, if I may, so to speak, pluck from the air a phrase broadcast by the hon. Member for Cardiff, South-East (Mr. Callaghan) the other evening, I might say, "Away with the abacus and in with the computer. Here is Britain's opportunity". To that extent, I agree with the hon. Member. We have to make it easier, as the hon. Member for Gower said, for the citizen to fit into the pattern of modernisation. This is the object of the training schemes and the proper provision for redundancy payments, which have been explained by my right hon. Friend the Minister of Labour.

In particular, we need to change the image of the development districts. We must clear them up through the derelict sites grants, improve communications both to and from these areas and within them, and move Government work and Departments, where appropriate, to them. All this is Government policy and has been expanded during the course of the Budget.

Mr. Jay

If the hon. Gentleman wants to improve communications with the development districts, why does he propose to close the railway to Stranraer, which is the route to Northern Ireland?

Mr. du Cann

The Committee knows and, with his intelligence, I would have thought that the right hon. Gentleman would have known—I have always respected him for his intelligence—that although Dr. Beeching has produced his plan the Government have yet to come to a decision on it.

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

But the hon. Gentleman says that he supports it.

Mr. du Cann

Not only must we have the imagination and the will for reconstruction—with the improvement of facilities and amenities, especially in development districts—but we must have the capacity as well. I want to say a word about our construction industries in particular in this context. The Government are making estimates of the capacity of the building and civil engineering industry. Many of the measures announced in recent weeks and in this debate, on which hon. Members on both sides have pressed us, will place a very heavy demand on the resources of this industry.

There is a rapidly growing volume of public service investment in roads, hospitals, schools, higher education and new towns—all of which will make substantial demands. We have to develop methods of high productivity to meet these and the requirements of the private sector for factories and other construction work, which is also important, and the need for slum clearance and housing projects, both public and private.

Therefore, we have to look for substantial improvements in techniques with improved productivity. My right hon. Friend the Minister of Public Building and Works, who is now responsible for Government building and is in a good position to give a lead, is paying special and urgent attention to the practical problems involved. He has appointed a Director General of Research and Development.

Mr. Baxter

Have you any idea of the capacity of the building industry?

Mr. du Cann

I am not sure whether that question was addressed to you, Sir Robert, or to me. But if I were asked if I had any idea of the capacity of this industry I would point out that this is precisely what I am talking about. Because of the danger of strain on the industry, we must make sure that it has the most modern techniques so that it can meet the volume of work demanded of it.

As I said, my right hon. Friend has appointed a Director General of Research and Development, who will foster modern methods of building so as to help the industry increase its capacity and thus undertake these expanding programmes and complete them quickly. I hope that that point has the attention and favour of the hon. Member for Stirlingshire (Mr. W. Baxter).

A number of statements have already been made on this subject. The Director General will no doubt co-ordinate research over the whole field and see that its results are disseminated to all concerned. In general, it is the. Government's objective to ensure that the industry can meet commitments made both regionally and nationally by public investment programmes.

My hon. Friend the Member for Twickenham asked, in particular, about aid and surplus capacity, if I may "pull his leg" for a moment—[An HON. MEMBER: "Be careful."] I do not see why I should be careful; he and I are very old friends. If I cannot "pull his leg" I cannot "pull the leg" of anyone in this Committee. He made a remark, which I thought a superb contribution from one who has had such a record of distinguished service to the motor-car industry, that it was about time motorcars had engines either at the front or the back.

On aid and surplus capacity, during his Budget speech my right hon. Friend gave details of the progress we have made up to date. As he said, we are considering a number of other projects. Of the projects he specifically mentioned, I am happy to tell the Committee that an agreement with India is being signed tomorrow. On another project, Her Majesty's Government have informed the Chilean Government that they are willing to provide a loan of £1.5 million to be spent on the products of British industries where there is surplus capacity. Therefore, it is fair to claim, we have been most active in pursuing projects in fulfilment of my right hon. Friend's undertaking.

The Committee will understand that I cannot give the details, in answer to questions asked by the hon. Member for Cardiff, South-East, of the proposed Chilean loan at this stage. We have indicated that we should be pleased to examine in particular specific proposals for ship purchases. I hope that that will have the support of the Committee.

As the Committee knows, aid from the United Kingdom tied to our surplus capacity industries is in addition to our normal aid commitments. This particular project of aid to Chile should not be misinterpreted as indicating a new development in policy of aid to South America. However, I should perhaps point out that our existing aid programmes are already near the limit of what the United Kingdom can afford. The arrangement for providing £10 million of additional aid from surplus capacity has to be viewed in the context that our regular aid expenditure is running at the level of about £160 million and that the tendency is for it to increase still further. This programme places a heavy burden on our balance of payments.

Aid expenditure forms a substantial part of our total overseas expenditure, which amounts to an annual figure of £550 million, including defence expenditure. The proposed loan to Chile takes the total of offers and acceptances under what I might perhaps call the surplus capacity extra aid, originally proposed at the level of £10 million, up to £11 million, and there are a number of other projects still in the pipeline.

Quite apart from these, however, we are looking very carefully indeed at all proposals to incur further aid commitments—and there is no lack of them—to see to what extent they can be matched with surplus industrial capacity in this country. If we can foresee orders which will benefit areas at present suffering from unemployment above the average, we may be able to take a somewhat less stringent view of such proposals than we should otherwise feel bound to do in the light of what I have just said about the burden of our aid programme generally.

By no means the major part of our aid programme is susceptible to this sort of treatment, but, by using our surplus resources in this way to the maximum possible extent, we hope that it may be possible for us to maintain and even increase our programme with benefit to those industries which are now facing difficulty and without placing an unnecessarily heavy strain on the balance of payments.

Mr. Dalyell

Can the hon. Gentleman give details of a loan to East Africa, referring to sales of locomotives?

Mr. du Cann

Not specifically at the moment, but, if the hon. Member will put down a Question to my right hon. Friend or myself we will do our best to answer it.

I now say a word or two on the subject of free depreciation, about which there has been much discussion in the debate. This has been welcomed by the hon. Member for Hamilton, the hon. Member for Gower and my hon. Friends the Members for Twickenham, Belfast, West and Manchester, Withington (Sir R. Cary). It was described as bold by my right hon. and learned Friend the Mem- ber for Wirral, and the hon. Member for Gloucester, who has very great accountancy and technical experience—if he will allow me to describe him professionally as a technician—as well as my right hon. Friend the Member for Renfrew, West said that they were certain that this would have a very great effect.

I think that that is true. I could not understand why the hon. and learned Gentleman the Member for Kettering kept saying to us during his speech by way of complaint that no cost was shown for this development this year. That, surely, is inevitable in the way accountancy works and company balance sheets and profit and loss accounts are prepared. I think that the real measure of the potential here is to look at the figures which my right hon. Friend gave in his speech for the cost in future years. To complain that it is no good because it is costing nothing this year, is, I think, with respect to the hon. and learned Gentleman, nonsense.

Mr. Mitchison

The reason was that I did not think it sufficient. This is an urgent problem, and more needs to be done than the things which are coming at the earliest twelve months or more ahead.

Mr. du Cann

Again with respect to the hon. and learned Gentleman, I wish that I could agree with him, because I like to agree with him when I can, but on what he has said I cannot, because I think that he is wrong.

It is a most important measure, this matter of free depreciation allowances. Even the New Statesman said that this was not too bad—which, judged by the English standards which some of us in this Committee profess, modest standards, I regard as high praise. Not only do we now have for the whole of the United Kingdom standard depreciation allowances which are probably more generous than those in any other country in Europe, but, in addition, we have special help for the development districts, the cost and influence of which can be measured perhaps by the fact that one other smaller European country, Sweden, which introduced such a scheme a few years ago—and hon. Gentlemen opposite, I think, are quite accustomed and happy to quote Sweden—found it too expensive to continue. There, of course, it is applied to the whole country. Here, it applies, rightly, in my judgment, to the areas which need help most.

The industrialist going to any of the development districts, including Falmouth, in the West—and why the hon. Gentleman the Member for Cardiff, South-East thinks that none of us on this side of the Committee knows anything about the West Country I cannot imagine—or anywhere in Northern Ireland, I would say particularly with reference to what my hon. Friend the Member for Belfast, West said, can write off 100 per cent. of initial costs in the first year plus 30 per cent. investment allowance on plant and 15 per cent. on buildings plus, if the project will create jobs—for that is what it comes down to—cash grants, as announced by the President of the Board of Trade, amounting to 25 per cent. of the cost of buildings and 10 per cent. on plant.

What I cannot understand, considering all of this, is why there are some people who say that my right hon. Friend's Budget is unimaginative.

Mr. Bence

Would the British Transport Commission be permitted to enjoy the benefits of this depreciation in development districts?

Mr. du Cann

I think that it certainly would. The first essential, surely—if the hon. Gentleman had been listening to what I said earlier he would have heard—is to put it in a position where it can earn a profit.

Mr. Mitchison

Do I understand that this free depreciation allowance depends in any way on the treatment of depreciation in companies' accounts? That was the suggestion which was made by my hon. Friend the Member for Gloucester (Mr. Diamond) last year.

Mr. du Cann

If I understand the hon. and learned Gentleman's question aright, the answer is, "No."

Our aim is to attract new firms into development districts by a policy of grants and to stimulate new investment. Therefore, the free depreciation allowance is a formidable incentive, so I am quite sure that it would be the desire of the Committee to pass this particular provision, and, indeed, the whole of the Budget, into law at the earliest opportunity.

Many hon. Members have commented, even during today, that we are discriminating quite heavily in favour of the development districts. That is completely true. I ask the Committee whether this is wrong. I believe it to be a very good principle that we should bring aid to those who need it most. The economy as a whole cannot realise its full potential expansion until regional disparities are reduced. The advantage Parliament is giving, if it so decides, to these areas must not be dissipated by extending their definition unjustifiably. I make that point deliberately in reply to what has been said about the admittedly very difficult problem of the areas.

A further point which I should like to make in answer to questions is that a company earning profits in another part of the United Kingdom would have every reason to set up a branch or new capacity in a development district, since the allowance could be set off against its existing profits while the new business got on tits feet, and I say nothing of the incentive to new businesses to start life there.

I have been asked what would happen when a district was descheduled. I was asked this question particularly by my hon. Friend the Member for Bodmin (Mr. Marshall). Circumstances may arise when unemployment in the area has fallen so much that this highly favourable treatment is no longer justified fat subsequent investment in new plant and machinery. I ask the Committee whether this is something to regret. I think not. What a transformation, what a happy achievement, that would be! The Committee may think that development districts are rightly named.

The hon. Member for Cardiff, South-East asked what would happen when unemployment in an area designated a development district fell below a certain level. He wondered whether firms which had already started putting in new plant and machinery—I think that this was his specific question—would find themselves unable to get the new depreciation allowance because a district had ceased to be a development district. As he suggested, there would be a number of complications of that sort, and we hope to make adequate provision for them in the Finance Bill. However, I can say at once that it is our intention to look after the sort of cases which the hon. Member has in mind.

Perhaps I can now turn to the other questions asked by my hon. Friend the Member for Bodmin. To answer him—[HON. MEMBERS: "Do not 'pull his leg'."] I am not "pulling his leg" I propose to give him excellent information. The answer to his first question is that capital expenditure on new mine workings in development districts will certainly rank for free depreciation. His second question related to the rights of the mineral operator. The depletion allowance for capital expenditure on mineral bearing land and mineral bearing rights will certainly go to the operator. Having satisfied my hon. Friend twice, I now have to disappoint him. His point about ships cannot be met, for reasons which I will explain more fully in correspondence.

Mr. Callaghan

Say that again.

Mr. du Cann

I will not say it again. The hon. Member can read it tomorrow in HANSARD.

The subject of Wiggins Teape was mentioned by the hon. Member for Hamilton and by the hon. and learned Member for Kettering. It was suggested by the hon. Member for Cardiff, South-East in his speech the other day, and again in his broadcast, that the Government should insist on sharing in the equity of the company. I appreciate that some hon. Members opposite have feelings about this. No doubt they have in mind the company's potential equity growth. What they absolutely fail to understand, to appreciate and fully to evaluate in the interests of the taxpayer, who is putting up the money, is that shares can not only rise in value and appreciate, but can also fall.

As to the Government taking an equity interest in this or any other company, I should like to say—and I am sure that I will have the support of my hon. Friends in this—that we would be flatly opposed to any backdoor nationalisation of that sort. Indeed. I go further and say that it is the responsibility of the Government, in making an investment sure, rather than that they should have a gamble, in the words of the hon. Member for Cardiff, South-East—[Interruption.] If hon. Members wish to interrupt, there is a valid way of doing so. [HON. MEMBERS: "Give Way."] I was not asked to give way.

The hon. Member for Cardiff, South-East suggested that we should have a gamble in the matter of the Government going in as a partner. But the Government's first regard must be security of interest and capital, and one gets this through a loan with a fixed rate of interest and not through an equity investment.

Mr. T. Fraser

As the hon. Gentleman has mentioned Wiggins Teape, perhaps I might refer him to the question which I asked. Three of these pulp and paper mill companies having dropped out of the negotiations, leaving only Wiggins Teape, what would have happened if this firm, too, had dropped out?

Mr. du Cann

When I began my speech I said that I was not going to talk about the past, but about the present and the future. I might have added that I was not going to talk about hypothetical situations. We are talking about the facts.

Mr. George Lawson (Motherwell)

What is the rate of interest to be charged for this project?

Mr. du Cann

This will be in the Bill and I think that the hon. Gentleman should look at that. He will get a better comparison with the equity position at that time. Why hon. Gentlemen opposite are bothering themselves about whether we should have an equity or a fixed interest investment in this company I cannot think. What matters is that we have done the trick, and we have got the company there. That is what matters more than anything else.

We accept the objective of growth not simply because it is fashionable to talk about growth, but for concrete reasons which are extremely important. The first is social. We can only improve the standard of life for our people and do more for them in various ways if we get growth. We can only further reduce the incidence of taxation on our people if we get growth. Right hon. and hon. Members may think that the real challenge in these days is the difference in the standard of living between ourselves in the industrialised countries and those for whom we in Britain have a particular responsibility in the under-privileged countries of Africa, Asia, and other countries of the world. We can only do more for those people if we get growth.

The right hon. Member for Huyton said yesterday that Britain is a second-class Power. We on this side of the Committee do not believe that. I prefer what was said by the right hon. Member for Belper (Mr. G. Brown), who said that he was proud of our country and wanted it to play a full part in the world. I believe that we have every right to be proud of what we have achieved in the past. We have every right to look forward to the future with confidence. I believe that our influence for good in the world is very much needed in these days. We can only influence the world if we get growth, if we are prosperous at home.

Mr. J. T. Price (Westhoughton)

Before the hon. Gentleman gets away with that smear, will he give way, according to our usual practice? We do not believe that Britain is a second-class country and neither does Mr. Harold Wilson—[HON. MEMBERS: "Order. Order."] I mean my right hon. Friend the Member for Huyton (Mr. H. Wilson). It is germane to the issue which is being debated that when the hon. Gentleman's right hon. and hon. Friends were in opposition they did not hesitate to go to America and decry this country in every possible way.

Mr. du Cann

I think that I shall leave the hon. Gentleman to debate that matter with his right hon. and hon. Friends.

The Budget is a lead to the nation. It will always respond with determination and vigour to leadership. If it is not a lead, let us look forward to seeing the Opposition vote against it tomorrow. I repeat that it is our objective to contain and conquer unemployment. We are confident of full success, and we shall be satisfied with nothing less.

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

Committee report Progress: to sit again Tomorrow.