BUDGET RESOLUTIONS AND ECONOMIC SITUATION

HC Deb 09 April 1963 vol 675 cc1110-226

4.13 p.m.

Mr. Douglas Houghton (Sowerby)

All Budgets look the worse for wear in the final round, but this one has come through better than many. Nevertheless, it falls short of the high hopes placed upon it in the dispirited ranks of the Conservative Party. They are so desperate that they are willing at present to clutch at any straw, provided that it is big enough. This one is not big enough. However good the right hon. Gentleman may be—and he is good—it takes more than a Chancellor of the Exchequer to make a Government. There must be a Home Secretary. There has to be a Minister of Transport and a Minister of Education.

Speaking on the Budget in Leicester, last Friday, the Leader of the House is reported to have said: I don't think the Socialists know what to make of it. They certainly cannot pick holes in the Budget. The Leader of the House is mistaken. We do know what to make of it. This Budget shows more plainly than any previous Tory Budget that private enterprise cannot separately or collectively organise the industry and economy of this country for steady growth, prosperity and full employment without subsidies, assistance and inducements. The present Chancellor fully acknowledges that. He is, in fact, edging a little nearer membership of the Labour Party. If these measures fail—and we hope for the nation's sake that they will not—he may be persuaded to accept the reaffirmed, revised and modernised version of Clause Four; and then he can apply for his party card.

Does anyone deny that since last Wednesday we have seen the Government standing on their head? The right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) did his best yesterday to convince the Committee that the Government have not really done a somersault, but that all that has happened has been a natural turn of events—and had he been spared he would have been doing much the same. Hon. Members opposite do their best to believe this, but not those on the Front Bench opposite. They know how different is their policy from that of the right hon. and learned Member for Wirral.

If any of my hon. Friends are in doubt about what this Budget means they are in fairly respectable company, because the judgments of the more intellectual weeklies over the weekend suggest that they have had some difficulty in making up their minds about what the Budget really means. The Economist said, "Half-speed ahead". The Statist described it as "A curate's egg for Easter". The New Statesman—much less a study in morbid psychology than it used to be—asked the question, "Between two stools?". The Spectator referred to it as "Expansion within limits".

Let us see what the Prime Minister makes of it. In his opening speech in the General Election campaign at Cardiff last Friday he is reported in The Times as follows: … Mr. Macmillan referred to Lloyd George's 'People's Budget' and went on: 'I would say that this new Budget could well be called the People's Budget in a new and dramatic sense, for it is based upon a plan which needs for its full success the general support of the people'. Talk about the Tories stealing our clothes! They are now pilfering the wardrobes of Liberal history. I do not know whether the Prime Minister remembers the "People's Budget" of 1909. He should do. An intelligent schoolboy should have been taking notice of these things. In case he does not remember, he can read a fascinating account of it in Chapter 4 of a book entitled "Mr. Balfour's Poodle", written by my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins).

That so-called "People's Budget" increased Income Tax, raised death and associated duties and contained the introduction of Supertax. Its crowning infamy was the introduction of the land taxes which created a parliamentary crisis and which eventually led to the Parliament Act. The "People's Budget" of 1909 was described by Lord Rosebery as, "Socialistic, inquisitorial and tyrannical"; by Sir Edward Carson as, "It is a monument of reckless and improvident finance" and by Balfour as, "Vindictive, inequitable, based on no principle and injurious to the productive capacity of the country."

The Second Reading of that Finance Bill took four days. The Committee stage lasted for 42 days. The Report stage took nine days and Third Reading occupied three days. It was eventually obtained on 4th November, after 72 days before the House of Commons—and we now talk about sending the Finance Bill upstairs in order to save two days out of 16. There were 554 Divisions before it was passed; and the Lords then threw it out. And that was the "People's Budget" that was!

It would take a wealth tax, a gift tax and a sharper capital gains tax in this Budget to make it a "People's Budget" parallel with that of 1909. The Prime Minister quoted Gladstone in that rather silly remark, "Let the money fructify in the pockets of the people". The pocket is the last place for money to fructify, as any wife will say. However, I think that I must leave the Liberal Party to ponder on the political implications of the Prime Minister's references to two Liberal statesmen in the course of a single speech at Cardiff. All I hope is that he will leave Philip Snowden and Stafford Cripps alone.

If we are to get this Budget in perspective, we have to get rid of the idea that the Chancellor has something to give away. He has nothing to give away. All the Budget concessions and reliefs are being financed out of borrowing and not out of surplus revenue. The borrowing requirement, which is the euphemism for a deficit, is estimated at nearly £700 million, as against £66 million last year. What this Budget does is to pay for our tax reliefs from our own savings. Our money must not fructify in the pockets of the people—it must buy Premium Bonds. In these conditions every tax concession must be justified mainly for its economic purpose, though obviously, considerations of equity and social policy cannot be set aside.

The Chancellor divided his Budget statement into two parts, and I thought it a welcome innovation. He referred, in the first part, to taxation proposals which were separate and distinguishable from the main theme. His own words were: … extraneous to the main theme …"—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 455.] The main theme was, of course, economic expansion.

The first of these proposals was the proposed abolition of Schedule A tax on owner-occupiers. I am not one to fight lost causes or a rearguard action, but I must do something that has not, I believe, yet been done in this debate—speak up for the tenants of rented accommodation. The abolition of Schedule A on owner-occupiers flies in the face of more than one Royal Commission, though that does not prove it to be wrong. Right or wrong, it is welcome to 6¼ million owner-occupiers, but there are over 9 million tenants.

In my judgment, we must not overlook the serious disparity in tax treatment now to be inflicted on the tenants of rented accommodation. The effect of this step in terms of tax relief has, I submit, been ignored or overlooked in all the tax tables I have seen, and in the speeches of hon. Members opposite. The principle of relative capacity to pay is to be thrown away.

I will give one example. A man on £800 a year, married with one child, paying rent of £100 a year, will have his tax reduced for this year by this Budget by £14 10s. Another man, also on £800 a year, married, one child, owning a house assessed at net annual value of £40 and paying £100 a year mortgage interest—same pay, same family, same outgoings—will get a tax reduction of £30 15s. 6d. As a result, in those circumstances, the tenant will pay more than twice as much tax as the owner-occupier—£39 as compared with £17. That is the kind of thing that the Radcliffe Commission had in mind when it unanimously recommended—

Mr. William Shepherd (Cheadle)

rose—

Mr. Houghton

I am sorry, I have a long way to go—the continuance of Schedule A on owner-occupiers.

I would remind the Committee that when this matter was first broached seriously in the House, the then Chancellor, now Lord Amory, said that he thought that the arguments were evenly divided. In 1961, the right hon. and learned Member for the Wirral admitted that if these concessions were made there would be a strong demand for a rent allowance. He referred to the demand which he felt sure would be made, and how difficult it would he to resist it. But, in 1962, when the right hon. and learned Gentleman gave a pledge to remove it in one or more instalments he did not say a word about tenants, and the burden they had to carry—many of them exploited and insecure, and paying a higher proportion of that income than do many owner-occupiers.

The Chancellor of the Exchequer has made no mention of the tenants, either. Will the Committee dismiss the claims of the tenants when these tax adjustments are being made, or are we to regard £48 million of revenue as the price for recapturing Orpington?

If the Committee likes to study the problem of the exemption of business premises owner-occupied, they will find some interesting considerations in paragraphs 829–832 of the Radcliffe Report. The right hon. Gentleman sprung a surprise on us when he proposed to exempt owner-occupied business premises. We had thought, I suggest, up to then, that it would be a matter of exempting residential owner-occupation.

Before leaving the present Chancellor's inheritance from his predecessor, I should like to ask the right hon. Gentleman the Chief Secretary whether he can tell us any more about business expenses. Last year, the right hon. and learned Member for Wirral had drawn up a new and more exacting form to be filled up by business executives regarding the provision of expenses, amenities, and so forth. He then said: … I shall consider the whole matter further in the light of the information that emerges from the returns in this new form. Has that consideration gone any further, and, if so, how does that matter stand now?

The Chancellor also referred to the suggestion of merging Income Tax and Profits Tax on companies, but I recall to the Committee that on 9th April, 1962, the right hon. and learned Member for Wirral said: We have got beyond the stage of general talk about the desirability or otherwise of a single tax and can now look at a possible scheme. I will report further on this to the Committee in due course."—[OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 972–84.] It rather looks as though the scheme has not met with acceptance amongst those who have been consulted, and that the Chancellor intends to think again. I am sure that the whole Committee is interested in seeing these discussions carried to a conclusion as early as possible.

I come now to the main theme of the Budget—expansion without inflation. Here, it is a matter of general surprise that the Chancellor has left indirect taxation entirely alone. I know that substantial cuts in Purchase Tax on selected groups of goods were made last November but, notwithstanding those cuts, we have today a wide range of goods on as high a level—or, in some cases, a higher level—of tax than four years ago. Clothing, for example, most domestic furniture, footwear, were all increased from 5 per cent. to 5½ per cent. In July, 1961, and then to 10 per cent. last year.

There is substantial tax revenue from these groups of goods, and strong complaints from the industries concerned of under-employment and falling-off of trade. Again, confectionery was brought into tax for the first time last year at 15 per cent. Many of the goods that are still in the tax range of 25 per cent. are durable consumer goods, particularly valuable as a base for exports and on which this punitive tax should not remain.

Another aspect is an economic one. The Chancellor can get speedier results from changes in Purchase Tax than in Income Tax, where there is always a time lag. The right hon. Gentleman may have up his sleeve the possible use of the regulator later in the year, but I suggest that that gives but little room for manœuvre in reducing Purchase Tax. Reductions in prices which reductions in Purchase Tax bring, help all those millions of people to whom reductions in Income Tax can bring no benefit. The truth is that the reliefs given to Income Tax payers are so small as to be almost negligible in the context of expanding consumption. I think that it would have repaid the Chancellor to have made big inroads into Purchase Tax.

I now turn to the Chancellor's reference to the added value tax, which could, of course, be an alternative to Purchase Tax. Surely he is not telling the Committee that he has not given serious thought to this before. How can this be regarded as extraneous to his main theme when an added value tax is being widely canvassed as an aid to exports? Anything to do with exports merits the most urgent and earnest consideration. The Chancellor said far too little about exports in his Budget statement.

Where are the authors of the booklet "The Expansion of Exports", who have been urging the adoption of an added value tax as a significant contribution to the export drive? Most advocates of this tax envisage that it will not only replace Purchase Tax, but replace Profits Tax as well. If that were the proposal, it would require a total yield of over £900 million a year to cover these two taxes, and that revenue could scarcely be obtained without spreading the tax far and wide, including foodstuffs.

Why are the Government only at this stage putting their thinking out on this added value tax, not to three wise men this time but to one? After all, had the Brussels negotiations gone well, we should now have been on the threshold of the Common Market. We should have been committed under Article 99 of the Rome Treaty to harmonisation of indirect taxation. Professor Neumark's Taxation Commission has produced a modified version of the French model of TVA for adoption by the E.E.C., which would have included Britain, yet the Chancellor is only now asking for advice on whether it is suitable for us. My hon. Friend the Member for Grimsby (Mr. Crosland) rightly expressed great disappointment that the Government appear to have been remarkably ill-equipped to cope with some of the obvious changes which entry into Europe would have imposed on this country.

Mention of the Common Market leads me to say that I agreed fully with the remarkably able and courageous speech of my hon. Friend the Member for Gloucester (Mr. Diamond) yesterday. After the tremendous build-up of entry into Europe as the only confident hope of keeping Britain prosperous, it is strange that the Chancellor said not a word about the consequences of the breakdown at Brussels. The way in which the Government turn their backs on defeat as if nothing had happened is the envy of those of us who are more sensitive to pain. They have done it twice—Suez and Brussels—and the Chancellor, in his Budget statement, says nothing of the economic consequences of our failure to get into the Common Market.

I come to Income Tax relief, still in the main theme. I said earlier how thinly the Income Tax reliefs are spread. They do not, of course, bring any benefit to about 2¼ million people who are above the exemption limit and are exempt from tax on account of allowances, nor the several millions more who are below the exemption limits and not in the field anyway. But many who are made exempt by these proposals will soon be taxable again as their incomes rise because past experience shows that personal allowances are changed only about once in seven years. When people do come back into the taxable field, they will take the rap at 4s. in the £ instead of 1s. 9d. on the first part of their taxable income, and 4s. is a fairly high marginal rate of tax to begin with.

This is what the reliefs mean in two sample cases. It means the equivalent to a pay increase to a married man with no children, earning £10 a week, of 4s. a week after tax; and if earning £20 a week, an increase of 5s.; but the £20 a week man will have his National Insurance contributions go up by 3s. in June. In the case of a married man with one child under 11 on £10 a week, this means net a little over 1s. a week. His National Insurance contribution increase will swallow it up. On £20 a week, the net increase is 7s. The Chancellor would have great difficulty in negotiating wage increases of those dimensions with any trade union in the country at the present time. I do not know whether the Chancellor expects people to spend these concessions all at once, but I find difficulty in judging them to be relevant to the Chancellor's main theme. They are all welcome; they are all overdue, and they have been reasonably fairly, though too thinly, spread. But, either in conjunction with these changes or in substitution for them, a big slash in Purchase Tax would have helped over a very much wider area.

I want to make a point about wife's special earned income relief. There seems to be some doubt as to whether a wife's special earned income relief is to be adjusted to tally with the new personal allowance for a single person. My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has had a number of letters querying this point, since no mention of it was made in the Chancellor's Budget statement. I feel sure that he would have referred to it had he not intended to keep the two in line, and an assurance from the Chief Secretary will be very welcome.

I pass to age exemption. The Chancellor has raised the limits for age exemption, but has reduced the actual tax saving by one-quarter. A single person, under the new exemption limit of £325, will get actually £2 13s. a year less in tax relief than he got previously, when the limit was £300. A married man, rising now to £520 exemption, will get £4 7s. a year less in actual tax relief than he got on the previous limit of £480. Why should this be, especially when in adjusting the small income relief the Chancellor ensures that a single person will get something like £2 14s. more in tax relief and a married couple £3 6s. more in tax relief than they got before, assuming that their income is wholly unearned? That is a point which is, I think, worth bringing out even at this stage so that consideration can be given to it during our later proceedings.

I think that the whole Committee will welcome the improvement in the child allowance. This is where tax relief should go. The proposed tapering provision for a child's income over the limit of £115 will, as the Chancellor said, give the Inland Revenue a good deal of trouble. I hesitate to remind him that the Royal Commission frowned on it. On these benches we have moved many a new Clause, with the skilful help of my hon. and learned Friend the Member for Kettering (Mr. Mitchison), to bring easement of the income rule without embracing the complexities of the tapering arrangements. But we can look at that later.

I come now to investment allowances. In this group of additional tax reliefs, which will in due course cost anything from £250 million a year upwards, we have probably the most massive aid to industry ever given in a single Budget. As the Economic Secretary pointed out yesterday, free depreciation in development districts is not restricted to the rate of depreciation written off in a company's balance sheet. Free depreciation is truly free. It is so free that a firm can claim 100 per cent. depreciation all at once in the first year irrespective of what it writes off in its balance sheet. This really amounts to an interest-free loan on the whole of certain of its capital expenditure. I do not complain. I am just drawing attention to this most valuable concession.

The industrial tax concessions as a whole are closely relevant to the theme of expansion. One hopes that they will stimulate private investment which has been falling for some time, but I must underline, if only in the interests of my own constituency, the problems of definition and of drawing boundaries between areas which are to benefit and those which are not. It is conceivable that some areas which are suffering, but not yet severely, may be plunged into distress by the magnetism of the scheduled areas offering these attractions for new businesses to go to them. Already, some areas which are on the brink of high and persistent unemployment are wondering whether their position will be substantially worsened by the new proposals. I am sure that the whole Committee will have to watch very carefully to see that this job is done as fairly as can be.

Will all in this Budget achieve its purpose? By itself, the Budget does nothing. It can work only through other agencies, and, if they fail to respond, the Budget itself fails. Here, I suggest, the Chancellor must have considerable anxiety. It is his last chance to make Tory freedom work. Private enterprise is now on trial in a community more sophisticated and less doctrinaire than in the past. The prevailing mood today is for more State intervention, not less.

This is abundantly true of the benches opposite. That is the astonishing thing. More and more responsibility is being thrust upon the Government for remedies and solutions. The Chancellor must be very thankful for the nationalised industries now. He has at least under his direct control the expansion of investment and activity there, for which in the private sector he must rely on the response and goodwill of the companies concerned. In the private sector, all the Chancellor can do is to nudge, push the elbow, guide the hand of others, and go round with an oil can with millions of pounds a year in it.

Ten years of complacency and inerita have taken their toll on the spirit of Britain. [HON. MEMBERS: "Oh."] It is no good hon. Members looking pained at hearing the truth. There is no doubt whatever that something in Britain has been sapped by the Government during the last ten years. They have failed to foresee and to meet the challenges of the time. The people of this country have already served them with notice of dismissal. Any self-respecting worker in their position would hand in his cards and go; but they intend to work out their period of notice, in the hope that the electors will change their minds.

But it is far too late for the Government to restore confidence by this grand sweep-up of measures pressed upon them unsuccessfully from these benches in years gone by. What is needed now is a rekindling of the spirit of enterprise and adventure and a reawakening of the national will. This, it seems, will be our job, because this Government can no longer do it. This discredited Government—we might as well have some politics in the debate on the last day; it has all been too cosy so far—

Sir Gerald Nabarro (Kidderminster)

It will not be in about a couple of hours from now.

Mr. Houghton

This discredited Government now consist only of tattered pedlars of quack medicines one after another offering us as a cure this year what we were told was poison last. The nation has finished with them. They do not know it, but the Government are done and finished. They might as well go.

4.46 p.m.

The Chief Secretary to the Treasury and Paymaster-General (Mr. John Boyd-Carpenter)

It is nine years since I have had the opportunity of taking part in the Budget debate. Perhaps that measure of quasi-virginity, coupled with the unfailing uncontroversial nature of all my speeches, will entitle me to claim, or, at least, to hope for, a little indulgence from the Committee.

On this the last day of the Budget debate, it is useful, I think, to examine the criticisms which have arisen during the course of it and, now, in the speech of the hon. Member for Sowerby (Mr. Houghton). Having heard most of the debate, I feel that the great majority of the criticisms have certainly not been what a former friend and colleague of ours who used to sit on that Bench would have described as very wounding. On the whole, the line of criticism has been either that the Budget measures are so good that they ought to have been taken before or, alternatively, that hon. Members opposite thought of them first. I have never known such a collection of claims to admit paternity as we have had so far.

I do not regard these, and I do not think that people outside will regard them, as very serious criticisms. All of us who have been any number of years in the House know perfectly well that, during Budget debates, Oppositions do—I think that it is their very proper function—put forward an enormous number of proposals sometimes to give rise to a debate. To claim that because some of those suggestions put forward at some time during ten or eleven years of opposition have, in fact, proved to contain in them something which, on development, could be of practical use seems really to adopt what I believe was the attitude adopted in the last war in anti-aircraft gunnery: one fired a great deal of stuff into the air, trusting by the law of averages that some of it would hit.

However, I am not at this stage much concerned, nor, I think, are people outside, much concerned, about whether these measures ought, in the light of hindsight and knowledge of events, to have been applied at some other time. The issue with which the Committee and people outside are concerned is whether the measures in this Budget are right for the country and for the development of its economy.

I claim that it has a more coherent structure and that its design and constituent parts are more closely related to its main theme of expansion without inflation which will last and can continue than was the case with any Budget that I remember.

There has been some criticism—the hon. Member for Cardiff, South-East and the Economist have made it—that this Budget is insufficiently expansive.

Mr. Richard Marsh (Greenwich)

Hear, hear.

Mr. Boyd-Carpenter

I notice that that criticism receives some support. In some measure, it is based on a failure sufficiently to appreciate the action which my right hon. Friend took in advance of the Budget. If one considers the measures which have been taken since last October and which, overall, put into circulation in 1963–64 about £150 million worth of purchasing power, and if one adds to that the additional £269 million released in that year in the Budget itself, one gets a fairer and more accurate indication of the degree of expansion for which the Budget provides.

It is a little startling to see described as over-cautious a Budget which moves from a previous year in which the out-turn was an overall deficit to be met from borrowing of about £66 million to a comparable figure to be met from borrowing of £687 million as insufficiently expansionist. I will accept that the overall figure is slightly smaller than the £721 million which is comparable in 1959–60, but, taking the change from the preceding year, I think that there is a great body of opinion which feels that this measure of expansion is about right.

No one, and certainly not my right hon. Friend, would claim to be able to demonstrate statistically the precise degree of release of purchasing power which is desirable in any particular year. As my right hon. Friend said, it is an essay in judgment. It is interesting to note that, whereas criticism has been made on the lines that I have indicated, namely, that the Budget is excessively cautious, others have hinted that it is excessively expansionist.

Mr. Marsh

Who has said that?

Mr. Boyd-Carpenter

Therefore, using the method of navigation which, I believe, is used in getting aircraft on to a runway in dirty weather, if the volume of sound coming in on both ears is about right it is generally a good indication that one is on course.

Mr. Marsh

Would the right hon. Gentleman tell us what economic authorities have suggested that the Budget gives too much away or is too expansive?

Mr. Boyd-Carpenter

It has not been suggested that it gives too much away, but it has been suggested in informed commentary outside that it is boldly expansionist. If the hon. Gentleman does not like that, he can look at the papers concerned.

The wide issues which were reviewed by my right hon. Friend—

Mr. Roy Jenkins (Birmingham, Stechford)

rose—

Mr. Boyd-Carpenter

Perhaps the hon. Gentleman will allow me to continue. I have a good deal to say. I will give way in due course to the hon. Gentleman, whose contributions to these debates I always respect, but at the moment I think that I shall serve the Committee best if I continue with the main argument.

The wide issues which were reviewed by my right hon. Friend, naturally and quite understandably, have reflected themselves in wide criticism. For example, on the day following the Budget, the General Secretary of the Trades Union Congress, Mr. George Woodcock, whom I think we all listen to with interest and respect, said: The substantial tax concessions the Chancellor has made will, on the whole, be of most benefit to those who are better off". I thought that I detected the same strain in the speech of the hon. Member for Sowerby, although he did indulge in the rather curious paradox of saying that the tax concessions were spread too thinly.

Let me take the argument as put very plainly by Mr. Woodcock. I do not think that it will stand up to an analysis of what is proposed. I take, first, the Income Tax proposals. The arrangement by which the personal allowances are very substantially increased by £60 and £80 respectively, and then the first reduced rate band eliminated and a small reduction made in the higher rates concentrates, and is intended to concentrate, the maximum relief at the lowest end of the Income Tax scale. It is, I think, a method of making—and here I differ from the hon. Member for Sowerby—a very substantial reduction in direct taxation in a way which gives most benefit at the lower end of the scale.

There is the consideration that it takes 3¾ million people out of the Income Tax range. As the hon. Member for Sowerby said, some of them will come back, and it is true that, probably, the amount which some of them are paying is not very large. But, none the less, a substantial section of people will be taken out of the Income Tax range altogether.

The significance is much greater if one thinks of the average industrial wage, which is now about £830 a year. A married man with two children under 11 years of age, which, I think, the Committee will agree is a normal-sized family, earning a little below that, now pays £27 7s. 11d. in tax. His tax will go down to £10 0s. 10d. A man earning £900 a year, a little above the average industrial wage, similarly placed with a wife and two children will have his tax reduced from £47 2s. 6d. to £28 8s.

I now go up the scale to the people with large incomes and take the £10,000 a year man with a wife and two small children. His relief this year comes only to £24 18s. 6d. I can, therefore, sustain the claim that these changes concentrate relief at the lower end of the scale.

May I illustrate the point in another way? The total income tax which would have been paid this year by all people with incomes of over £1,000 a year would have been £671 million if these changes had not been introduced. They will, in fact, pay £100 million, or 15 per cent., less. Those in the group above the £1,000 to £2,000 a year group would have paid £911 million. That figure will be reduced by £120 million. Therefore, of the total cost of all these Income Tax changes, which amount to £239½ million on a full year basis, £220 million goes to people with incomes below £2,000 a year. On the other hand, those in the £2,000 to £5,000 a year bracket pay £15½ million, or 3½ per cent., less in tax than they would have paid.

The change is illustrated more clearly if one considers what the effect would have been if my right hon. Friend had pursued the obvious alternative of making a modest reduction in the standard rate. I have already given the £800 a year man with a wife and two children as an example. If the standard rate were reduced by 3d. and the reduced rates, as in this scheme, were reduced by a similar amount, he would have benefited only to the extent of £2 17s. as opposed to the £17 7s. to which I referred.

I take further the criticism of Mr. Woodcock, because anything which he says deserves to be treated seriously. He went on to say: He has not, as the T.U.C. suggested, concentrated on helping those who have to depend on social benefits. That is a most remarkable criticism. As the Committee knows, and no one better than the hon. Member for Sowerby, changes in social security are not effected in the Budget. They are the subject matter of separate legislation. At this very moment, however, my right hon. Friend the Minister of Pensions and National Insurance is engaged in bringing into effect the very substantial improvements to benefit those who, in Mr. Woodcock's words, depend on social benefits which the House of Commons passed only a short time ago.

Indeed, the improvements in respect of sickness and unemployment benefit are already in effect. The improvements in respect of the long-term benefits—retirement pensions, widows' pensions, and so on—will come into operation on 27th May. They are substantial increases. The single rate of National Insurance benefit has gone up 10s. and the married rate 16s. 6d., whereas merely to restore the purchasing power from the level at which it started at the last improvement in 1961 would have required only 4s. 3d. and 6s. 10d., respectively.

What is, perhaps, even more striking is that these changes raise, not the cash value, but the real value of the single rate of National Insurance benefits by 55 per cent. during the Government's term of office and sickness and unemployment benefit by 79 per cent. in real terms. To take the case which is, perhaps, the most demanding, that of the widow with three small children, when the new changes operate at the end of May her benefit in real terms will have increased by 100 per cent., or approximately £4, during the Government's term of office.

In face of that, it is not right to say that either in the narrow context of the Budget or in the broader context of the general measures which the Government are taking, we have ignored those dependent upon social benefits. Of course, as the hon. Member for Sowerby pointed out, this entails an increase in contributions, although in general, if one compares the amount of the increase in contributions, a man on the average industrial wage, not contracted out, pays a weekly increase in his contributions of 1s. 10d. This is a relatively small increase compared with the tax improvement. In any event, I imagine that there are few people, either in the House of Commons or outside it, who would not rather pay a contribution to receive a substantially increased benefit than simply pay by way of taxation.

The hon. Member for Sowerby cast, understandably, the nostalgic tear of an old Revenue man on the grave of Schedule A. He made the point of the comparison, as the result of the abolition, of the effect of the Budget on the owner-occupier as compared with the tenant. The validity of that argument depends upon whether one accepts that the position from which we were moving was itself fair or sustainable.

The hon. Member would not, I am sure, seek to argue that one should not correct an anomaly or a defect in the tax system because, at the time one effects the change, one gives a bigger improvement to those who had previously suffered from that anomaly than those who had not. Like my right hon. Friend the Chancellor, I have found Schedule A a very unsatisfactory tax.

Sir G. Nabarro

Hear, hear.

Mr. Boyd-Carpenter

It is a tax, as my hon. Friend the Member for Kidderminster (Sir G. Nabarro) has more than once pointed out, which comfortably-off people with proper advice, who spend a good deal on the maintenance of their houses, legitimately rarely pay or pay in any substantial degree. Less well off people, however, who, for one reason or another, are not in that position, have had to pay and have found it onerous.

I am very glad that in implementing the proposals originally put forward by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), my right hon. Friend the Chancellor has been able to go—after an earlier interjection, I hardly dare say the whole hog, but at least the whole way, in correcting the tax system by eliminating Schedule A. The hon. Member for Sowerby was a dignified but solitary mourner at its grave.

The hon. Member asked about the analysis of business expenses. Probably he was not present when, at Question Time today, my right hon. Friend answered a Question on that subject, when he said that the analysis of the results was continuing. The hon. Member for Sowerby also had a little fun about TVA. I notice that he did not tell us what were his or his party's views on that subject and I deduce from that, perhaps, a lack of enthusiasm.

Mention has been made—it was originally made by my right hon. Friend and there was considerable reference to it by the hon. Member for Grimsby (Mr. Crosland)—of the subject of the universities and of higher education. The hon. Member for Grimsby said that there was need for more rapid spending on all forms of higher education. I am sure that the hon. Member, who follows these matters, has followed the fact that we are at present undertaking the biggest expansion in higher education which the country has ever seen and that we are making funds available for it.

In financial terms, expenditure on the universities has risen from £36 million in 1951–52 to over £140 million in the current year. The number of students has risen from 83,500 to 116,000 this year and we have every intention of reaching the target of 150,000 in 1966–67 and then of going beyond that. The Committee will, however, appreciate that universities are not, like factories, producing a mass-produced article. There are limits, quite apart from finance, in the speed with which they can be expanded, and the speed in particular in which the number of students can increase without detriment to standards. This in considerable degree, as much as the money available, is the limiting factor.

The Government, however, are anxious that financial limitations should not restrict the possible development of university expansion. The Vote for 1963–64 gives for capital expenditure, for building, £38 million as against the original estimate for last year of £26.4 million. On 19th March, I announced to the House the revision of the building programme with increases for starts in 1964 and 1965.

I should like now to turn to the recurrent grant, which is the most important—as, indeed, the largest—of all the Government's provisions for the universities. The Vote for the current year provides £66.4 million compared with £51.5 million for last year. These figures reflect the increased provision made and announced previously for the quinquennium which began on 1st August last year. My predecessor, the present Home Secretary, told the House a year ago in April that there would be a review of the university situation in, say, two years' time in the light of the programme of expansion towards the 150,000 target, the level of costs, and so on.

The Government have considered the matter in the light of the great importance which we and, I believe, the Committee attach to university expansion. I can today announce that we have decided to advance the review to which my predecessor referred so that any additions to grants can take effect for the next university financial year, which begins on 1st August next. I have already asked the University Grants Committee for advice as to the precise provisions to be made, and I hope to be able to make a statement to the House very soon.

The universities are not the whole story of higher education, however. There is an enormous proportionate advance in the colleges of advanced technology. There are 10,000 students in these today, compared with none eleven years ago, and we hope that there will be about 15,000 in five years' time. Taking higher education as a whole—universities, colleges of advanced technology and teacher training colleges—the increased number of places in the programme on which we are working is impressive, and meets a great deal of what the hon. Member for Grimsby called for.

In all three, there were 120,000 places in 1951–52. There are now 212,000 and on present plans there will be 288,000 in 1966–67. Our intention is to continue the expansion of existing universities and to press on with the development of the new ones announced in the last year or two and with the expansion of colleges of advanced technology and teacher training colleges, all of which combine to produce the biggest expansion of higher education this country has ever planned and has ever set out to attain.

My right hon. and learned Friend the Member for Wirral referred yesterday to the growth in public expenditure. One example of that expenditure is the higher education I have just referred to. My right hon. and learned Friend is quite right in saying, however, that the expenditure for the current year shows a large increase over last year's. The supply expenditure is 9.4 per cent., or £527 million, up, and comes to the formidable figure of £6,139 million. Several comments, incidentally, have been made on the effect on the beneficiaries of tax concessions of increased rates, but the biggest single item of this increased central Government expenditure, apart from defence, is the figure to which my right hon. and learned Friend himself referred—the £109 million of grants by the Exchequer to the local authorities.

I agree with my right hon. and learned Friend, however, that this is certainly not a rate of increase in expenditure which any one could contemplate continuing indefinitely, and I agree with him—although I want to say something about this—that it is not particularly easy to use public expenditure and the turning on or off of this expenditure as a means of helping to reflate the economy. I agree that taxation is a quicker and more flexible instrument from that point of view. On the other hand, some hon. Members may remember that in the debate on public investment on 27th November I referred to what could be done through public expenditure to deal with the present economic situation.

I think that it makes sense, when resources and labour are available, and when there are useful things which will have to be done sometime, to use those resources and labour to do these things now. A very good example is shipbuilding. The Admiralty has for some time had in its programme a fleet replenishment ship of about 19,000 tons and a fleet tanker of 33,000 tons. They were not due to be built for some little time, but we brought them forward and placed the orders on the North-East Coast some months ago. That is one example—and there are others—of what can be done by bringing forward, in such an economic situation as the present, useful and valuable things which have to be done some time and doing them while manpower and resources are available.

I agree with what I hope was implicit in the speech of my right hon. and learned Friend that we have to be careful, in bringing forward these projects, that the expenditure, so far as is possible, is like the ships, of a once-for-all nature, and that it should not involve continuing liabilities which might unduly inflate the permanent level of public expenditure. Examples of this were referred to yesterday.

The hon. Member for Hamilton (Mr. T. Fraser) questioned why the new rates of grants for the clearance of derelict sites in areas of high unemployment were subject to a time limit. One of my hon. Friends pointed out to him that it was the whole essence of the present situation that these things should be done quickly, and that one of the best ways of seeing that they were done quickly, while resources were available, was to give an improved rate of grant for a limited period.

There was a great deal in what my right hon. and learned Friend said about using Government expenditure to build up the infrastructure of industry. If I may say so, I hate that word "infrastructure".

Mr. Archie Manuel (Central Ayrshire)

Then why use it?

Mr. Boyd-Carpenter

I am using it because, in due deference to my right hon. and learned Friend, he used it. It is not a bad thing, when one is replying to a point which an hon. Member has made, to use the same language as he used so that it is clear that one is doing so.

Owing to the rather curious form of the Budget accounts, to which my right hon. Friend also referred, some of the provision for the infrastructure of industry comes above the line, some below the line and some of the investment is not taken in the Budget at all.

But, here again, in all these three classes, it is a fact that we have been using public finance and the power of the public purse in the present economic situation to improve the services which serve industry and which are essential to its efficiency. Electricity investment is a case in point. This year the total electricity investment is up by £114 million to a total of £550 million. That, of course, fits in with the indication in the N.E.D.C. Report of the necessity for securing adequate supplies of electricity for the expansion that is to come. Similarly, there has been an increase of £13 million in investment in the gas industry. Both of these are examples of what my right hon. and learned Friend has in mind.

It is possible, to some extent at any rate, to marry these concepts of the proper provision of services for industry with the needs of the development areas. Last month I announced a further increase in electricity investment—about £7½ million—over what had been previously announced, the greater part of which was to be spent in the North-East and other areas of development, together with similar provision for gas. My right hon. Friend the Secretary of State for Scotland made a similar announcement, embracing £6½ million, in respect of the generation and distribution of electricity in Scotland.

These matters have two aspects. They help in some measure to provide a general stimulus to the economy. They help specifically to overcome the problems of the areas of high unemployment both directly by the work they give and—more important—indirectly by the attraction which they give to those areas from the point of view of inducing industrialists to set up business there. Therefore, I can claim that a considerable item in the increased expenditure to which my right hon. and learned Friend referred is along the lines which he suggested.

My right hon. and learned Friend asked what progress we had made with implementing the Plowden Report. I am sure that he will agree that we owe a great deal to Lord Plowden for his extraordinarily valuable Report. We have made a good deal of progress with the work which my right hon. and learned Friend and my predecessor initiated. First, following the suggestion of my right hon. and learned Friend there is now machinery for looking at public expenditure as a whole over a period of years ahead and in relation to prospective resources. My right hon. and learned Friend, as Chancellor, instituted the first surveys two years ago and there is now well established interdepartmental machinery for doing this on an annual basis.

Secondly, there is the problem, in the light of these surveys, of providing that the public services shall have a proper and satisfactory programme of development consistent with the claims of each other and other claims on public resources and without allowing them to take too large a share. As the Committee knows, there is already and has been announced a basic plan for the expansion of certain services. The long-term road programme is a case in point; the big expansion in the hospital programme is another, and the current expenditure on health, as has already been announced, is to increase at 2½ per cent. in real terms a year. That policy and those principles are capable of further extension over other services. It is important—and this is the point which I leave in reply to my right hon. and learned Friend the Member for Wirral—that we should in this way get the priorities right and secure that the aggregate of public expenditure is not increased excessively.

The purpose of the Budget has been very clearly explained by my right hon. Friend. It is to help to give us an efficient, modern, competitive economy. No Budget by itself can restore full vigour to our economy, or secure steady, sustained and unchecked growth. That depends inevitably on the response of our people as a whole and both sides of industry in particular to the opportunity which the Budget gives.

Here I differ very strongly from what was said by the hon. Member for Sowerby in the concluding moments of his speech. I do not accept the reflection which he made on the spirit of the people of this country. On the contrary, I think that, given the opportunity which this Budget does give, they can make very great progress in the year ahead in restoring the strength and vitality of our economy. We have one great asset which we have gained, perhaps from the troubles and trials of the last year or so. It is a much wider understanding of the need for an incomes policy and the need for restraint and the need not to provide ourselves in advance with things before we have earned them. I think that there is a far wider understanding of that than there has ever been before.

Given that understanding, given the massive impulse of additional purchasing power which the Budget will liberate, given the fairness as between one section of the community and another with which it is constructed, we can claim that the Budget lays down the broad strategy for a national advance, that it offers to our people, whose spirit is as good and better than ever, an opportunity which I for one have not the slightest doubt that they will take.

Mr. Houghton

Will the right hon. Gentleman answer my question about the earned income of wives?

Mr. Boyd-Carpenter

I am not sure which question the hon. Member has in mind, but my right hon. Friend, who apparently has, assures me that the answer is yes.

5.23 p.m.

Mr. E. Shinwell (Easington)

I gathered from the right hon. Gentleman's speech that the Budget has afforded him complete satisfaction. That is not altogether surprising. Apart from his exalted position at the Treasury, he has never since I have known him—and that has been for several years—deviated from the straight and narrow path. No adventure, no risks, no undue excitement for the right hon. Gentleman. I also gathered that the Budget has satisfied hon. Members opposite.

Sir G. Nabarro

The right hon. Gentleman has not heard me yet.

Mr. Shinwell

If it affords hon. Members opposite satisfaction, they are welcome. For myself, I regard the Budget, in the context of the national economy and particularly in respect of our National requirements over the whole economy, as of little consequence. Of course, this is nothing new. I have had the advantage of listening to Budgets from various Chancellors of the Exchequer for more than 40 years. They are nearly all the same, even when we have had Labour Governments. They are ready to give away money with one hand but only too ready to take it back with the other.

Moreover, there is nothing original about the debate except in this respect, that in no speech—and I have listened to many and read most—has there been any recognition of the fact that since the beginning of the century and through successive Governments, Tory, Liberal and Labour, we have had recurring crises, recurring periods of trade depression and recurring periods of unemployment. Those are inescapable facts, but of the history of trade recessions there has been hardly a word.

Whenever we are faced with a crisis, as over the past two or three years—and I do not place the whole blame on the Government, because I believe that the problems which concern us are inherent in the system itself—whether it is a crisis of rising unemployment or a trade recession or the threat of it, the same formulae are brought out—expansion, advance factories, capital investment in the areas of high unemployment.

I ask myself the question and try to provide the answer: when the advance factories are provided, what are they to produce. Moreover, can I be informed of the answer to a question of some substance? When they engage in production, where are their goods to be sold? There appears to be no advantage, except as a mere sop—

Mr. Manuel

Palliative.

Mr. Shinwell

Not even a palliative. It is a sop. There is a distinction. There appears to be no advantage whatever, except as a mere sop to those who are in a weakened and worried condition and who are pleading for help of some kind or another, but there is no real substance. I do not object to expansion. I do not detect a substantial difference on this matter of expansion and the need for it between the Opposition and the Government, except in degree. The Government say that they have provided a large measure of expansion, and we say that it is all very well but we want more. At the end of the day, the question is, what for? What is the purpose and what are likely to be the consequences?

That brings me to the corollary, to the subject of exports. Almost every hon. Member who engages in this disputation about the national economy parades the virtues of exports. I do not seek to oppose the view that exports are essential but if we produce commodities, manufactured articles, or whatever they may be, in the engineering or any other sphere, whether they be capital goods or consumer goods, where are we to sell them?

We are told that we can sell more of our goods if we are more competitive. What does that mean? It means greater efficiency in production, higher productivity, and a reduction in costs. It has been suggested in certain quarters that it is desirable to prevent any rapid increase in wage rates, because if this were to happen it would militate against the prospect of increasing our exports. I shall not argue about that. It may be right or wrong in certain circumstances to adopt either an increase in wage rates or any modification of them. It all depends on the circumstances. The question is, where can we sell the goods that we produce?

We are told that we can become even more competitive because of this Budget. I await results, but,—and I ask that the parenthesis be noted so that there shall be no misunderstanding about what I say and mean—in the absence of an increased volume of consumption in capital and ordinary consumer goods throughout the world, an increase of exports from this country could have the effect of beggaring some of our neighbours, and in any event they are doing the same thing. Ever since I can remember taking part in debates on exports—and that goes back over forty years—the thought which has occurred to me—and I ventilate it again now—is whether it is wise to beggar our neighbours. Of course we can improve our position by doing so, but by weakening and worsening the position of our neighbours, our position is also worsened.

I cannot understand why—and I expected this to come from the Government benches—nobody has referred to the proposition which has been made that the more powerful nations of the world should come together and consider whether, by the provision of credits, or some other form of help, we can increase the demand in the backward and under-developed countries, and even in those countries which regard themselves as less backward and more civilised—some of the European and South American countries—so that they might be provided with the necessary essential facilities to raise their consuming power and purchase goods from this and other countries who are anxious to export. I see no other solution to the problem, but if any hon. Member can advise me of an alternative I shall be only too glad to hear it. Certainly the Budget provides no solution for a permanent improvement in our export position.

I hope that some notice will be taken of the concept which I have just mentioned, and which was to some extent fortified by the speech of the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) yesterday when he referred to the need for a Commonwealth economic development scheme. We have abandoned the idea of the Common Market, although occasionally I find hon. Members on both sides of the Committee somewhat nostalgic about it. I do not want to say too much about that. No one wants to be offensive to people who have been humbled. I leave it at that, but there is something which can be done to revive Commonwealth trade. Here is the opportunity to do something, and the proposal put forward by the right hon. and learned Member for Wirral should be adopted by the Government, not merely in theory but in practice.

I come now to the problem which has confronted the Committee from the outset of this debate—the problem of the depressed areas. We talk about depressed areas as though we were hearing this expression for the first time. Many years ago the late Lord Dalton, then Hugh Dalton, along with others, was appointed by the Labour Party to go around the country and investigate the problem confronting the depressed areas, and even before Lord Dalton entered the political field some of us were associated with this problem.

Perhaps I might venture a little per- sonal history, not because I particularly want to, but because I think that it has some relevance to this debate. I remember way back in 1908—and I mention this because my hon. Friend the Member for Sowerby (Mr. Houghton) referred to the Lloyd George Budget, which I not only read but lived through—unemployment being on a vast scale. In those days there were no Ministry of Labour or Board of Trade statistics. There was large-scale unemployment, as a result of which we had unemployment riots all over the country, and I modestly say that I had a share in some of them, as a result of which I found myself in difficulties.

The Lloyd George Budget was brought in not because Lloyd George was anxious to produce it. I can almost quote his words to the Liberal Party in 1908, when he said that the Government must produce measures of social reform because they were afraid of this new party which had emerged in the political life of this country. He was, of course, referring to the Labour Party. That Budget was produced not because of Keir Hardie, or Robert Blatchford, or Ramsay MacDonald, or George N. Barnes, but because Victor Grayson had won an election. The Government were worried about that. The revolution had arrived. There was militancy in the air. Indeed, most Governments are compelled, partly by the force of public opinion, partly because of a change in economic conditions, and partly because of the need to maintain good will in the country, to introduce measures of social reform.

On this question of the depressed areas, last week I heard a speech to which I should like to make particular reference. Strangely enough, it was the speech of the hon. Member for Louth (Sir C. Osborne). I am sometimes allergic to the hon. Gentleman. I do not care very much for him, though I cannot give a reason for that. I have not the slightest doubt that he does not case very much for me.

Sir Cyril Osborne (Louth)

Well, the right hon. Gentleman is wrong.

Mr. Shinwell

All contributions gratefully received!

The hon. Gentleman often indulges in mischief. But I admired the speech which he made on Thursday. It had substance, argument and content. It contained a good idea, the right idea. In his speech—I took particular notice of what he said—the hon. Gentleman referred to the fact that one of the problems confronting this country—and, indeed, all the capitalist countries, even the United States, "God's own country", with its vast resources and unlimited wealth—is the inescapable fact that because this is the machine age, the age of modernisation, rationalisation, organisation, we are able to produce far greater quantities of goods with less labour. That is not an original idea, I must tell the hon. Member, because several hon. Members on this side have mentioned the matter during debates on the unemployment situation.

Sir C. Osborne

Solomon wrote 2,500 years ago that there is nothing new under the sun, and so I do not claim it as new.

Mr. Shinwell

Naturally, if Solomon said it, who am I to argue? I am only a descendant of Moses.

In his speech the hon. Member for Louth said something so pregnant with meaning, so substantial, so relevant to the situation in which we find ourselves, that the Government must really take notice. I wish to relate it to the position in the areas where there is a high figure of unemployment, the North-East, Merseyside, Scotland and even other parts of the country. I am sorry to have to say this to the Government, because some of my colleagues may not agree with me—I know how anxious they are in the North-East and other parts of the country to have this benefit of advance factories and more capital investment and a "shot in the arm" from time to time. But because they are so concerned about the situation, and because I also am concerned I say to the Government that all the advance factories will make no effective or substantial contribution to the solution of the problem.

I will tell the Government why. Let us consider the position in the North-East, on Merseyside or on the Clyde. There the workers rely on heavy industry. It is possible to establish zip fastener factories or wood-working concerns, or clothing concerns, in those areas. But to do so does not touch the fringe of the problem. Such factories may employ a certain amount of female labour. If industry is directed from the South to those areas, and unless there is an increased volume of demand and increased trade the South stands to lose, and in the long run that is no solution.

What would help on the Tyne, on Tees-side, on Merseyside in the North-West and on the Clyde would be a revival of shipbuilding. A few moments ago there was present in the Chamber an hon. Member who represents a Belfast constituency and who often speaks about the unemployment situation in Northern Ireland. I see in the Press—I was glad to note it—that there is likely to be an order placed in Northern Ireland for an 80,000-ton oil tanker. That, by itself, would not seem to mean very much. But the ramifications and repercussions, the ancillary and subsidiary trades and organisations created as a result of this order will be substantial. If in the North-East we could have orders for several ships of substance—not smaller ones, although the smaller ones would do if we cannot have larger ones—it would make all the difference. It would help marine engineering and it would help the steel industry. The order placed with Harland & Wolff in Belfast for an oil tanker is likely to mean an order for 20,000 tons of steel from Scotland, so it helps Scotland. That is the sort of thing which is wanted.

I know that to produce ships, to place orders for ships on the Tyne, the Tees, the Mersey or the Clyde would be impracticable at present, because the volume of tonnage in the world is so vast as to far exceed cargo demands. But it might be possible to adopt the scrap and build policy in operation seven years ago. That could be done. If we could get rid of many obsolete vessels and build new, modern, up-to-date vessels with high speeds—as they are doing in Japan, in the Scandinavian countries and to some extent in West Germany—if we could emulate those countries by the provision of more credit, and the provision of financial help, it would affect the whole area. It would help the steel industry and the engineering industry. Then the advance factories might be of value if they produced consumer goods on which the workers in the heavy industry could spend wages and buy the goods they wanted. It may be asked where are the credit facilities to come from.

Sir C. Osborne

I agree with what the right hon. Gentleman is saying. But would he apply his mind to the real problem behind the shipping problem? There is twice the capacity in the world for replacing the shipping of the world. If we increase our capacity the rest of the world could swamp us. How can we deal with our problem in view of the bigger world problem?

Mr. Shinwell

I have said over and over again in shipping circles—I do not wish to repeat myself—that without a vast increase in the volume of international trade there is no solution. But I suggested earlier that there might be a consortium of the great Powers and of some of the smaller countries, to consider the provision of credit facilities of various kinds for the backward and under-developed countries to provide a consumer demand which in the long run would have the effect of improving trade, and shipping would be bound to benefit.

It may be asked where all the finance is to come from. The Government have been giving money away. I do not complain of that. But do not let us forget that we are proposing to spend about £400 million on Polaris submarines in the next five, six or ten years. With £400 million we could revive the shipbuilding industry and many other industries. I accept the need for defence, because I believe that some form of security is desired by the people of this country—even though they are not quite sure that it means actual security. But they imagine that it does, and why should we destroy their peace of mind? But I believe that if the Government could afford to provide credit facilities which are essential and revive the shipbuilding industry in the way I have indicated, it would have a far greater effect than all the bits and pieces contained in this Budget.

Mine is not a Budget speech. The abolition of the Schedule A tax and the relief to those with low incomes and all the rest of it is all very good in its way. But it does not touch the fringe of the problem. How is it to be done? There must be planning on a larger scale. What is the N.E.D.C. doing after all? There is talk about a 4 per cent. growth in production, but I notice that the Prime Minister talked about only a 3½ per cent. increase in incomes. I cannot relate the two figures. If we are to provide consumer demand, we must have something which is relevant to the rate of growth, otherwise the whole thing will get out of balance.

No doubt whoever replies to the debate may be able to enlighten me. I shall be glad to have elucidation of these points, but do not assume that this Budget is the end of all things, or anything like it. It will require greater effort on the part of the whole community—I even go so far as to say perhaps a greater amount of discipline by everyone concerned—but a solution must be found.

5.50 p.m.

Sir Alexander Spearman (Scarborough and Whitby)

The right hon. Member for Easington (Mr. Shinwell), who looks so active and speaks with such vigour, surprises many of us when he gives his experiences of 60 years ago. I have known him for nearly 20 years, but I have never known him in better form than today. He knew all the answers, and, of course, he has a streak of modesty. It might surprise the Committee to know, if he will forgive my repeating a personal conversation, that he once said, "I was the best Secretary of State for War in the last five, and that is not saying much."

Though it seems a long time since half-past three on Thursday for one who has heard almost every speech in the debate on the Budget, I should like to refer to the opening speech for the Opposition made by the hon. Member for Cardiff, South-East (Mr. Callaghan). I should like to say how glad I was that he made his views clear. I hope that he was speaking at any rate for the majority of his party when he said that he was completely opposed to devaluation. By making his views clear I think he did an important service. I think devaluation could be justified only when our costs were so much above those of our competitors that the only hope of bringing them down would be to have a deflation so great as to involve almost inter-war unemployment figures, but that is not the position today.

We are competitive today and with reasonable moderation and restraint we shall remain so. It is said that hon. Members opposite are advised by two Central European economists, Mr. Balogh and Mr. Kaldor. Mr. Balogh wrote a most effective letter to The Times on 19th March. I should like to quote one sentence because I have never before had occasion to quote with approval what Mr. Balogh has said, and I am not likely to do so again. He wrote that: Devaluation … would lead to a steady increase in wages and costs cancelling such temporary advantage as would be permitted to accrue to us by the retaliatory moves of foreign countries. The other adviser, Mr. Kaldor, also wrote letters to The Times, more than one, recommending devaluation. I think that those letters, taken in conjunction with the singularly unwise article in the National Institute Review—not for the first time—did about as much harm as any one unimportant man could easily do. I hope that hon. Members opposite in future in these matters will continue to be advised by Mr. B. and not by Mr. K.

Mr. Houghton

We have far more advisers than those two.

Sir A. Spearman

That is a little reassuring. I agree with one thing said so often on both sides of the Committee, that more growth would solve many of our problems. It would enable us to raise with safety the standard of living. I am convinced, and always have been, that it would strengthen and not weaken the £; provided this was real growth. I mean by that growth of capacity to produce, not just a once and for all taking up of the slack. There is a big difference. This is what we did in 1951, 1955 and, to some extent, in 1959, with very unfortunate effects on our balance of payments.

I go further and agree that we ought to get more growth than we have, but I make this reservation. It would be quite impossible, despite what hon. Members opposite say, for us to get the same rate of increase as many European countries have achieved in recent years. First, they started from a much lower level; it is easier to double one's pace if one is walking at two miles an hour than if one is walking at four miles an hour. Secondly, they had reserves of labour that were not available to us. Thirdly, countries like ours and America, which have been industrialist for a long time, tend to spend more on services where the increase in production is always much slower.

The real question is not whether we should get more, but how we are to get it. The Leader of the Opposition and the hon. Member for Cardiff, South-East say that we should run the economy very fast and keep it very fast. I do not think I should be misinterpreting their view if I said that they thought that is how to get maximum growth, through avoiding waste of our resources and providing the encouragement to maximum investment. But how do they reconcile spending at the rate they envisage with stability of prices? How do they propose to avoid inflation? Whenever we have tried to run the economy full out before we have always had that.

They do not tell us that; they talk about an incomes policy. How is it to be enforced? By exhortation? If the balance between national resources and money incomes is right I accept that appeals to moderation will help, but I do not think they will do any good at all in conditions of excess demand. Is it controls that hon. Members opposite are proposing? If so, what are the controls? I remind them that in 1951 neither exhortation nor controls secured the balance and they had rationing at that time.

Perhaps it is planning. They often talk about what can be done by better planning, but just what do they mean? If they mean planning how much we can afford to spend, I accept that. But that is what every Government with varying success have tried ever since the war. If they mean better exchange of information on future projects I accept that. But that is what the N.E.D.C. is trying to do. Hon. Members opposite ought to tell us more specifically what they mean by planning. If it is detailed planning of what is going to be produced and where, that requires accurate forecasting. Accurate forecasting means projecting into the future experiences of the past, but the past does not always help. It is the essence of a free system that everyone, consumers or producers or investors, shall be able to behave as differently as they may choose.

That is why it is possible to estimate accurately in future only if one has control over what people buy; that is, if one goes back to rationing. One of the last things the Labour Government did was to set up the Ridley Committee to estimate what future consumption of fuel would be. It told us that in 1961 coke and manufactured fuel would be up by 41 per cent. It was down by 1 per cent. It said that gas would be up by 27 per cent. It was down by 4 per cent. It said that oils would be up by 82 per cent. They were up by 249 per cent. That was a Committee composed of what was thought to be the best technological brains in the industry and by one of the party's favourite Socialist economists, Professor Lewis.

I believe it is practical to run the economy full out if the Government have the will and the power—which I hope it never wild have—to fix wages and direct management and men where they are wanted and if they have infallible judgments as to what ought to be produced. I think it would be practical to run the economy full out if everyone in industry, from directors downwards, were selfless saints. I do not foresee that. I believe that the fundamental mistake made by hon. Members opposite is that they always assume that people are what they would like them to be—and a pretty dull world it would be—instead of what they actually are. I believe that many of us would sacrifice our lives for our country, but precious few of us will sacrifice the prospects of more wages or more profits.

In conditions of inflation—we have had quite a lot of experience of these—all experience shows that industrialists tend to do these things. First, they do not use their resources to the maximum efficiency when they can sell easily. A study of recently issued company reports will show what has happened as a result of a little pressure on profit margins. Useful reorganisations have taken place in the last few months. They let costs rise when demand is so great that they know they can put the cost of extra wages, however excessive, on to the price of the goods they sell—and when the trade union leaders know that industrialists are going to do that, they are bound to press the employers. Secondly, they tend to hoard labour which they cannot fully use. In the last year we had the interesting fact that the most flourishing expanding industries—oil refineries, chemicals and plastics—have all got rid of many men; they have been producing more things with fewer men.

Finally, they tend to choose that type of investment that will maximise production, regardless of cost, rather than that which would be most economic. In recent reports the chairmen of three steel companies have said that, as a result of their experience in the last year, they are now going to cut their costs and change their methods of operation to those which will be most economical.

I want to quote one sentence from an article by Mr. Burn in Lloyds Bank Review. Mr. Burn, as hon. Members may know, was The Times industrial correspondent and is now the Director of the Economic Development Office set up by A.E.I., General Electric, English Electric and Parsons. Mr. Burn says this: If we are to strengthen our position economically in an international setting we must concern ourselves more with the pattern and quality, and less with the quantity, of investment. I return to my main theme, which is how we can get more growth. Broadly speaking, there are two diametrically opposed views, each involving a different policy. First, there is the view held by the majority of Members on both sides of the Committee that the main factor is investment. If that is right, we must expand demand all we can so as to encourage industry to set up new plant and machinery. Of course I agree that new investment is important. We cannot get progress without it. Our record there is not so bad as hon. Members opposite sometimes imply. It is up by 80 per cent. in real terms since they were in office. We are now spending 19 per cent. of the national income on this, whereas it was 15 per cent. But above all, I believe that it is not amount but quality.

I should like to quote once more from Mr. Burn, who says this: It is certain that our domestic product could have grown as much, and might even have grown more, with a smaller fixed investment in manufacturing industries in 1960–61. 1961 was a period in which several manufacturing industries here and in other countries invested not wisely but too much. But I believe that the main factor in more growth, at any rate at this time, is not how much investment, but how we can get more enterprising management, better labour relations—I include in that getting rid of restrictive practices on both sides—and more shifts to work the existing machinery; that means more com- petition. I have no doubt that it is the spur of competition which will achieve those things far more than the exhortations of all the orators in the country.

I think that this is to some extent borne out by the Economic Report. I personally do not think that we should place a precise interpretation on all these figures which we are given. I think that they are pretty rough sometimes. But paragraph 63 contains an interesting one. It says this: between the middle of 1960 and the autumn of 1961 … there was little change in output per operative hour. That was a time when demand was very high. The paragraph goes on to say that— between the fourth quarter of 1961 and the fourth quarter of 1962 —a time when there was surplus capacity—output per man hour rose by 4 per cent. Now capacity to produce has grown sharply and I think that to a great extent credit is due to my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) for his policies which brought about that position. Because capacity has risen, I am sure that the Chancellor of the Exchequer is right to increase demand, to release more purchasing power. But because I believe that the economy runs best, and in fact only runs efficiently, with some but not too much, surplus capacity, perhaps about 5 per cent., I hope that the measures my right hon. Friend has taken will not increase spending so much as to push up production in the next 12 months from now by more than 5½ per cent. My guess is that that is just about what could be safely done.

If my diagnosis is at all right that it is more enterprising management rather than more investment that we need and that the remedy is more competition rather than more exhortation, I would say how thankful we must be that we have not been governed in the last few years by right hon. and hon. Members opposite. I do not say that the Tory Government have been perfect, but right hon. and hon. Members opposite have made it clear time and time again that they would run the economy at full speed and then depend upon controls to push on a brake to avoid a crash.

In conclusion, I should like to take up the words of the hon. Member for Sowerby (Mr. Houghton), who was in a strangely aggressive mood today for such a moderate man when he said that we must have some more politics in the debate. He said that there had been 10 years of inertia and stagnation. All through these debates hon. Members opposite keep on saying that this country compares so badly with any other industrial country. If that is true, they are right to say it. However, we must remember that it is not only the responsibility of the Government. It is that of both sides of industry. Let us face it if it is true.

If it is not true, I should like to put this question to right hon. and hon. Members opposite. Is making these wild statements, if they are wild, as I shall try to show that they are, really doing the Government much harm? Is it doing the Labour Party much good? Is it not certain that disparagement of the country is doing the country harm?

In his opening speech the hon. Member for Cardiff, South-East said this: … it is humiliating, when the O.E.C.D. reports are produced year after year … to see where we stand …"—[OFFICIAL REPORT, 4th April, 1963; Vol. 675, c. 643.] The hon. Gentleman said that we are last but one in a list of 20. The hon. Gentleman did not point out that our comparison in that review in 1955–60 was far better than it was between 1950–55. The hon. Gentleman has a very good memory. He can hardly have forgotten that in the later period the Conservative Government were in complete control, but in the earlier period for part of the time we had a Socialist Government and for part of the time we were recovering from the blunders of a Socialist Government. The United Kingdom was one of only three countries which did better in 1955–60, than in 1950–55. The O.E.C.D. report, "Policies for Economic Growth", page 16, column 5, gives the annual percentage of growth per employed person as this. Seven countries grew at the rate of between 3 and 4½ per cent., Austria being at the top, with 4.4 per cent. Four countries grew at between 2 and 3 per cent.; the United Kingdom was within that group, and three countries grew at under 2 per cent., including the United States and Canada.

Mr. Chambers, the chairman of I.C.I., spoke in Cardiff a few weeks ago and said: The rate of increase in real income per head during the last eleven years is slightly greater in Britain than in the United States. He added: The real value of social benefits is up by 60 per cent. Since the Labour Party gave up in 1951 production has gone up in real terms by 33 per cent. Output per man hour was 1½ per cent. then while it is now 3½ per cent. I do not claim that there is any basis here for complacency on the part of my hon. Friends, but the picture I have painted is not quite the one we are so often told about by hon. Members opposite. I do not say that we can be satisfied with everything we have done; but I do think that there is quite a lot about which we can be gratified.

6.11 p.m.

Mr. David Ginsburg (Dewsbury)

The Conservative Party won the 1951 General Election on a "dash for freedom" slogan. Listening to the earlier part of the speech of my old sparring partner, the hon. Member for Scarborough and Whitby (Sir A. Spearman), I felt that he rather feared a dash for expansion at the present time.

The respective policies of the present and the former Chancellor of the Exchequer have been a constant theme in this debate, although there is one point which I do not think has yet been touched upon; that is, this Chancellor's personal involvement in some of his predecessor's mistakes. I hope to develop this theme further but I should like, first, to say something about the former Chancellor's policy.

Hon. Members will recall the broad basis of argument adopted in our debate so far. We have said that last year's Budget was far too neutral and that a stimulus to consumption was needed. The then Chancellor felt the contrary. There was some discussion in Committee yesterday about what was said at that time and it is worth recalling that the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) said: By this time next year total personal spending may well be up by 4 per cent. in real terms—a very large rise in relation to the average experience of recent years. In total, therefore, the increase in home demand over the next twelve months looks like being substantial."—[OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 965.] We now know that, in this respect, there has been a monumental miscalculation. Consumption, which was the guts of the forecast of the right hon. and learned Member for Wirral, is likely to be only 2½ per cent. up on last year. The fact that the Government could have made this error with all the expert knowledge behind them and at a time when the financial journals, quite apart from the Opposition, were predicting otherwise, is not an academic matter.

I agree that these things are not entirely forecasts and that they involve exercises in judgment. Nevertheless, it is serious if the raw material for an exercise in judgment is so misleading. In this connection—and I have spoken on this subject in previous Budget debates—it is interesting to consider the availability and otherwise of Government statistics. Let us consider, firstly, the question of speed in statistics. We need more up-to-date figures. They need not be comprehensive and they could even be summary figures. I should have thought that, steering the ship of State, the Chancellor would sometimes like to know where he is this week or the week before and not where he was six months ago.

One hears a good deal about the sort of statistical services available in the United States and this makes one rather disquietened about the type of statistical information available now in Britain. This leads to the need for better figures. We have had, for example, extensive technical revisions carried out in the balance of payments statistics: one set of revisions in 1962 and another more recent set. The revisions in 1962 had the effect of showing that the crisis in the £ in 1961, to which the right hon. and learned Member for Wirral reacted, was not as serious as was thought.

Similarly, we have had revisions carried out of the balance of payments statistics more recently. These show that the position of the £ is rather stronger than the Government thought hitherto and, therefore, the Government are able to go ahead and reflate. I should have thought that on both of these counts, speed and quality, it would be useful to know—and I hope that the Chancellor will state his intentions about this—what the Government have in mind to improve our statistical services.

It is one thing for the former Chancellor, the right hon. and learned Member for Wirral, to have gone wrong in April, 1962, because his miscalculation was bad enough. It is more serious for the new Chancellor to have repeated the errors of the old. The Committee will appreciate that the new Chancellor, having assumed the reins, was in a position of some political embarrassment and, perhaps, that a decent time had to elapse before he could disengage himself. However, it might profit hon. Members to study more of the words used by the then Chancellor when he took over, for he said: My predecessor predicted this year a substantial expansion in the economy. … The present position is that exports are rising, and rising well, that public expenditure is also rising, and rising vigorously. In regard to consumption, the rise which we have anticipated has fallen a bit behind what we thought. He went on to say that the Government had to weigh all the factors and added: … and my own judgment is that it is still by no means certain that our estimates will be falsified It may well he the case that the growth of consumption in the second half of this year and the arrival of the re-stocking movement will produce the vigorous expansion in the economy for which we are looking It that does not happen, we shall do something about It."—[OFFCIAL REPORT, 26th July, 1962; Vol. 663, c. 1854–5.] The Chancellor effectively waited until November before doing something about it and, clearly, what he did then was not enough or he would not have needed to act now.

As I will try to show, "too little too late" is a fair criticism of the Chancellor's policy. After all—and this should be emphasised—had he had the courage to act in July—and he had some of the facts necessary for that judgment—the economy would have been in a far healthier state and we would not have had the unemployment we have had this winter. The failure of the past raises two main questions concerning, firstly, the policies of Conservative Ministers and, secondly, the economic doctrines of the Exchequer.

Pride in the incorruptibility, loyalty and dedication of the British Civil Service is no reason at all for not querying some of the most hallowed of institutions. After all, the Prime Minister initiated a major change of Treasury structure, parallel with his St. Bartholomew's Eve massacre in the Cabinet. As tributes are very rightly paid to our officials for the excellence of their negotiating skill at, say, Brussels—I remember how frequently that was mentioned in the House—some reflections about the Treasury's attitude to growth are justified today.

It may be that the structural reorganisation of the Treasury will, in the long run, create a more buoyant frame of mind in Great George Street, but the fact remains that the Treasury's approach to growth is very cautious and, in present circumstances, it requires an exceedingly buoyant Chancellor to overcome it—a Chancellor perhaps even more buoyant than the present one. I should like to give two examples of this. First of all, I want to read from an article by the city editor of The Times, who is not an ill-informed commentator or a partisan in such matters. He has stated: Already the council"— that is, the N.E.D.C.: in its short existence, has come down upon a number of official toes in its determination to introduce some long-range planning of the national economy. For instance the Treasury economists have let it be known in several ways that they have not changed their view that an appropriate growth rate for the nation is somewhat lower than the council's 4 per cent. a year target. That is a very grave statement, and one worth thinking about.

Secondly, in relation to the Treasury's attitude to growth I want to draw the attention of the Committee, and of the Chancellor in particular, to the evidence, both written and oral, that the Government are tendering to the National Incomes Commission, especially that tendered in connection with the Scottish building and plumbing wage claim. I would urge hon. Members to read that evidence, and the cross-examination by Sir Geoffrey Lawrence of, for example, Mr. Maude of the Treasury, and Professor Cairncross, the Government's economic adviser. It is not being unfair to anyone to say that when one reads the written data and the oral statements, one finds a substantial degree of caution shown by the Government's economic advisers. Is it surprising, when one has this climate all around, that even after this Budget there is considerable doubt that the Government mean business when they talk of 4 per cent. growth?

I next want to quote from something said before the Budget, and from a source not particularly friendly to this side of the House. In his annual speech, Sir Julian Pode, chairman of the British Iron and Steel Federation, said: The Industry therefore welcomes wholeheartedly the Government's acceptance of the National Economic Development Council's 4 per cent. growth rate. But a long-term growth rate at 4 per cent. cannot be made up of a lot of short-term growth rates of 2 per cent. The Government should now prove its commitment to growth by bringing about faster expansion this year. When one considers all that, it is clear that a firmer gesture committing the Government to growth is needed.

The fact that the Government's sincerity and determination are still doubted is interesting. Last week, the Economist had the headline "Half-speed Ahead", while the Statist referred to "A Curate's Egg". That is the sort of reaction from the financial Press. What is needed is an even more urgent move to raise the level of people's spending and so to create what I would call a head of steam in the economy. Here I refer the Committee to the article, mentioned before, by the National Institute of Economic and Social Research, and I would, in particular, refer the Chancellor to what has been written about the multiplier effect of a fresh injection of spending on the economy. The article adduces a lot of evidence to show that reductions of indirect taxation will be far more effective as an immediate stimulus to the economy than would, say, reductions in Income Tax.

My criticism of the Chancellor's measures is that the element of what I would call "delayed-action charge" is too considerable. For example, there is to be an enormous reflation next year—an enormous amount of investment next year—and even more the year after—but I still submit in all seriousness that the immediate trigger that will take effect in the next few weeks, as is vitally necessary for the economy, will set off too small a charge. The charge is certainly smaller, when one looks at the economy in real terms, than it was in 1959.

The Chancellor spoke of the exercise of judgment, so he can still think again on some of his strategy, which is, and I think that I am not being unfair to him, to pack the full weight of his concessions, and certainly their effect, two years hence and not at once. That could have two effects. On the one hand, it might be too prudent, when the result of this strategy would be that we should not reach the N.E.D.C. target two or three years hence. On the other hand, it could have the equally dangerous effect that the Chancellor would be committed to an expansion two years ahead, when we might be in balance-of-payments difficulties.

The sensible policy would have been to have gone much more for early inducements to spending at this immediate, present time by concessions on Purchase Tax, on beer—and, if necessary, despite some of the difficulties, on the Tobacco Duty. I am convinced that such concessions would have found their way into people's pockets very much faster than the concessions that have been given. Incidentally, there is another reason why I think that the Chancellor should heed my words. Hire purchase has not been as buoyant an element in the improvement of the economy as the Government and their advisers expected. It has certainly not been as buoyant a factor as, say, the increase in bank advances.

Again, if the Chancellor will re-read the Bulletin of the National Institute of Economic and Social Research, he will find this interesting point: Credit sales change with cash sales unless there are sharp changes in credit terms. If that is true, the case for an early and further direct stimulus to consumer spending by a relief of indirect taxation, particularly Purchase Tax, is reinforced.

Two further reasons should be adduced for a policy like this. First of all, there is equity. Despite the Chancellor's efforts to be fair—and I fully accept that he has sought to be fair in this regard—I am sure that he will accept, too, that there are millions of people—there are certainly many thousands in my constituency—who do not benefit from his Budget. For example, there are millions of people on low wages. Secondly, there are industries that have suffered over the last two years from the Government's economic policies and, in particular, from the measures of the right hon. and learned Member for Wirral. Among these are the textile and clothing industries.

Therefore, while welcoming what has been done for the development districts, I must repeat what has been said by my hon. Friend the Member for Sowerby (Mr. Houghton), that what the Government are doing now will make more serious the problem of some areas, based on our older industries, which do not have a wide choice but a very narrow choice of employment, and yet are not development districts.

We have our problems, for example, in the heavy woollen industry—the problems of low wages, long hours, long travel to work and, indeed, migration. All these problems have been neglected by the present Government. There are also financial problems which will arise, for example with regard to the wool textile industry, from the implementation of the N.E.D.C, Report. N.E.D.C. provides for substantial re-equipment and capital investment in wool textiles, investment which may not be readily financially forthcoming from some of the family firms which constitute the industry.

The Chancellor has made very generous gestures concerning the development districts. But other older industries will have their economic problems, too, and it would be very reassuring to know how the Government will canalise the necessary finance to help the older industries of this country to reach their N.E.D.C. target. The real test of an expansionist Budget is this: does it put money in people's pockets? The Chancellor has taken a cautious step forward in this regard. Let him now have the courage of his convictions and really take a bold step forward.

6.31 p.m.

Sir Gerald Nabarro (Kidderminster)

My right hon. Friend the First Secretary to the Treasury said that every Budget is an essay in judgment. I think that my judgment is as good as his. We shall fall out a good deal in the course of my short intervention in this debate on that account, but in matters of judgment one should not make enemies. I concede that there is a great deal that the Chancellor has done in this Budget which is useful to the economy and which will help what there is evidently unanimity in the Committee upon, namely, the desire for growth in our economy.

My first principle in life since boyhood has been never to look a gift horse in the mouth. Two hundred and sixty nine million pounds is a pretty lucrative gift horse and one which I shall not therefore oppose or criticise in any way. It adds in substantial fashion to the additions to purchasing power which progressively since Guy Fawke's Day the present Chancellor has been bringing in. It contributes, in my judgment, with what he did before his Budget statement, a total rate of growth which might be measured at something between 3 per cent. and 5 per cent. That is as accurate as any forecaster could get his figures.

But I claim that the emphasis in the debate since the Budget statement has been in the wrong place. Practically every hon. Member who has spoken in the Committee has talked about levels of unemployment, regional incipient unemployment, but very little reference has been made to the malaise that is spread today over practically the whole of British industry. That was expressed first in these terms, I think, six months ago—the under-employment of men and machines. The easy one to quote, of course, is the steel industry working at 72 per cent. of capacity. The Minister of Power, if arguing with me, would say that it ought not to work at more than 95 per cent. capacity. If that is so, it is working at about one-quarter below capacity, and it is equally true to say that the steel industry cannot be brought to full capacity unless all the consumer industries in this country have the demand for their products quickened. The point that I am endeavouring, however inadequately, to make is this: if we really wish to sell more British goods on the markets of the world, it is absolutely imperative that we work our economy at a far higher level than it has been worked in the last year or two, and ensure that there is not the amount of underemployment in industry that there is today.

There has not been a glamourous reception from industry for the Chancellor's Budget. [Interruption.] Let me finish my speech. This is only the preamble. The hon. Gentleman is impetuous. We cannot sell British goods competitively on world markets and cause our present level of £4,000 million of visible exports to rise substantially unless our resources of men and machines are much more adequately employed than they are today.

Sir A. Spearman

My hon. Friend said that the steel industry was running at 72 per cent. of capacity in this country. Does he not agree that as it is running at only 75 per cent. in Western Europe this is not a peculiarly British failing?

Sir G. Nabarro

Because Western Europe is not doing so well does not mean to say that British industry should not be doing so well. I am sorry to quarrel with my hon. Friend so early in my speech—he is a nice chap—but really he is talking arrant nonsense. On the same principle as he has enunciated it could be said that because the United States has a high standard of living and a level of unemployment running at 6 million we should import the same level of unemployment to this country. That would be about as sensible as my hon. Friend's intervention.

The Chancellor has injected in terms of tax relief £269 million into the economy. The manure is sprinkled over a huge acreage. The rate of growth from that manure will be commensurately meagre. I would like to have seen a far more generous dressing of manure in anticipation of a larger growth rate. I may say that I have not been unduly ambitious in this context and I am not producing it today as an innovation. I have been writing and saying it consistently since last January. My estimation—a Budget is always an essay in judgment—of the figure needed was a total tax relief of about £400 million, but with certain increases in taxation, which I shall deal with in a moment, for the inequitable conditions of our taxation arrangements today scream aloud for reform. All that we have had since 1952 have been statements of pious intentions that tax reforms will follow in ensuing years, but never time or trouble taken to cause the reform to take place in the particular year in which the Budget is presented.

The Chancellor's favourite word in his Budget statement is "vigorous". To quote a few examples at random, in the OFFICIAL REPORT, column 470, he refers to "vigorous economy", in column 472, to "vigorous expansion", and in column 476 to "vigorously expanding British economy". I do not complain about the use of the word "vigorous" so long as it is not used too often, but it got awfully monotonous listening to all that, especially as I could see that at the end of the road we were not going to have a vigorous expansion judged in the context of the amount of money injected into the economy. But I cannot look a gift horse in the mouth. It is a gift horse; it is £269 million, and although not adequate, it is a good deal better than in the last Budget and the Budget before.

Now, a word about exports.

Mr. Ginsburg

rose—

Sir G. Nabarro

I did not interrupt the hon. Gentleman once. I will allow an intervention, provided it is a short one.

Mr. Ginsburg

The hon. Gentleman said that it is a good deal better than the last Budget. I remember what he said on the last occasion, because I followed him then. He said what a good Budget the last one was.

Sir G. Nabarro

Yes, of course. When the hon. Gentleman has been in his place as long as I have, man and boy, he will know that every Budget statement must be attuned to the economic and financial conditions and requirements of the moment. This Budget goes in the correct direction. The Budget of my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) last year also went in the correct direction—

Mr. Marsh

In the opposite direction.

Sir G. Nabarro

—though it might have been an opposite direction because conditions and requirements then were very different.

I was about to talk about exports. Leading journals in this country have been singularly unenthusiastic about what my right hon. Friend has done in this connection. In its leading article of 4th April, The Times said: But he"— the Chancellor of the Exchequer— has done little for exports (the President of the Board of Trade may fill in some of this gap today). On the following day, 5th April, The Times in its leader said: One of the notable omissions both from the Chancellor's speech on Wednesday and the President of the Board of Trade's speech yesterday was any precise idea of what rate of export would be needed to sustain the four per cent. rate of growth now so firmly accepted by the Government. … Mr. Erroll deliberately refused to be drawn on the point in yesterday's debate when specifically asked by Mr. Callaghan what export target he was hoping to reach. 'I am not in a position to commit myself to a target at present'. I am not very fond of targets. Generally, they are misproved in practice, but all this talk about a vigorous expansion of the economy, saying that the rate of increase in exports must be at a level higher than the rate of expansion in the economy, together with the fact that the Chancellor has said that he wants a 4 per cent. rate of expansion in the economy, connotes that he should be a good deal more specific as to the rate of increase in exports which he seeks.

Is my right hon. Friend nodding dissent now?

The Chancellor of the Exchequer (Mr. Reginald Maudlin)

Just nodding.

Sir G. Nabarro

Just nodding. I am sorry. I thought that my right hon. Friend was nodding dissent. I cannot understand why both my right hon. Friends the Chancellor and the President of the Board of Trade are such retiring creatures in this Chamber in saying that they cannot give any target far the increase in exports.

There is a very valuable sector of the bureaucracy known as the Treasury Information Division. It is not so retiring as the head of the Department himself, because in a publication which arrived on my desk the day before Budget day called, Trade Expansion, Looking Ahead—New Series, No. 1, the Treasury Information Division said in its concluding words: Exports must increase by 5 per cent. a year—from £3,863 million in 1961 to £4,940 million in 1966. If that has been put out by the Treasury Information Division, why does the President of the Board of Trade refuse to confirm figures of that kind when asked a direct question in this Committee? I am one of his principal aides and assistants in the endeavour to increase exports. It would have been far better for the Chancellor of the Exchequer to acknowledge the validity of the statement by the Treasury Information Division, and use it in his speech.

I said that British industry was singularly unenthusiastic about what the Chancellor has done for exports. The National Association of British Manufacturers said: … we doubt whether the changes in direct taxation will provide speedily enough the stimulant to the economy and to exports which is so necessary at the moment. We are disappointed in many other respects.

The Economist had even more pungent phrases to employ. It said: Nothing has been done in this Budget to solve the problem that exports, art the present Sterling exchange rate and under the present tax system, are uncomfortably unprofitable things for most British firms to increase. That is about the measure of it. Our larger industrial companies do very well in export markets. It has been said over and over again by Cabinet Ministers from this side of the Committee that our problem with exports is to persuade the medium-sized and smaller firms to go out and seek foreign markets and sell abroad. It is those firms which require the incentive and encouragement.

I say frankly that I was very disillusioned and disappointed when I heard the Chancellor say that he proposed to set up yet one more committee to try to judge whether a system of T.V.A., or a turnover tax, or some variant of that form of taxation used on the Continent, to replace Purchase Tax and/or Profits Tax, with a suitable abatement of tax in respect of direct exports, would be satisfactory for us. We have discussed these matters in the House of Commons, and they have been widely canvassed throughout the country, for at least the past three years. I spoke in the Committee stage of the Finance Bill, I believe at random, in 1961—

Mr. Cyril Bence (Dunbartonshire, East)

Very much at random.

Sir G. Nabarro

If the hon. Gentleman jeers, perhaps he would prefer me to say that I have not looked up the date. That is what I meant, of course. In the Committee stage of the Finance Bill two or three years ago, I opposed my hon. Friend the Member for Peterborough (Sir Harmar Nicholls) who at that time wanted a relief of Profits Tax based on export performance. I opposed that proposal because it is a contravention of our international treaty obligations. But remission of a form of turnover tax is not a contravention. No one can say that it is. It is a system practised by five out of the six E.E.C. countries, which we were seeking to join. I do not believe the words of my hon. Friend the Economic Secretary—he said this the other day—that the influence would be only marginal. I believe that the influence would be powerful to the smaller and medium-sized manufacturer. If our principal European competitors resort to a system of this kind in order to maintain a high and growing level of direct exports, I see no reason whatever why British manufacturers, expected to be competitive, should not have similar facilities made available to them.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

My hon. Friend said that exporting is not really very profitable or very easy. Does he think that even greater expansion at home at present will make it easier? Surely, it would have the effect of making it more difficult by making the home market easier.

Sir G. Nabarro

No. The countervailing effect would be that, if there were any substantial general increase in production, this would lead to a lowering of costs. It is the under-employment of British industry today which is at the nub of our problem, but this no Treasury Minister has yet admitted. The underemployment of men and machines today presents an even graver problem than regional unemployment. In my judgment, the lack of export tax incentives offered in the Budget is a grave disappointment.

Now, a few words about manufacturers' costs. There are endless increases in the costs of the manufacturer, as has been manifest during the past year or two. When the present Government took office in 1959, the level of Profits Tax was 10 per cent. It moved to 12½ per cent. It moved again to 15 per cent. It has been increased by one half in a period of four years. National Insurance contributions have risen. Postal rates have risen. Local rates on Industry have risen enormously.

Here I wish to correct at once my right hon. Friend the Chancellor of the Exchequer, for what I thought was a disparaging statement in his Budget speech. I wish particularly to correct what he said about the level of industrial taxation in this country. This is the passage: People often talk as if all companies actually paid a rate of nearly 54 per cent of their commercial profits. But, in fact, no industrial company could pay tax at such a rate unless it failed to buy a single piece of new equipment in the course of a year for any purpose including replacement. The effect of the investment allowances is that the average rate of taxation on industrial profits will not now exceed 48 per cent."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 490.] I see the Chancellor of the Exchequer nodding. What he forgot was the fact that companies are now paying huge sums in local rates. [HON. MEMBERS: "Oh."] It is no good expressing surprise and saying "Oh". Local rates are local taxation and a direct emolument of general industrial taxation.

Mr. Douglas Jay (Battersea, North)

They are a charge against profits.

Sir G. Nabarro

I will come to that in a moment. Yes, they are indeed a charge against profits.

A famous steel company in the North-East a few days ago estimated that the local rates alone had added 10s. per ton to the cost of finished steel.

Mr. Shepherd

They were getting a subsidy before then.

Sir G. Nabarro

They were getting a subsidy on rates. I do not object to the rerating of industry. I object to the misrepresentation of the aggregation of industrial taxation. It is true, as the right hon. Member for Battersea, North (Mr. Jay) said in an undertone a moment ago, that local rates are a charge against Income Tax and Profits Tax for purposes of assessing liability, but, in my judgment, the influence of local rates at an average over the whole field of industry and in all parts of the country and in all manufacturing industries is of the order of 6 per cent. of profits before tax. If 53¾ per cent. represents the total of Income Tax and Profits Tax before capital allowances, it follows that the figure referred to by my right hon. Friend the Chancellor is probably nearer 51½ per cent. than 48 per cent. I think that this increase in local rates must be taken into account because of its heavy incidence when the Treasury considers taxation on manufacturing industry.

I said earlier that the total amount of concessions in taxation should not be judged in isolation from possible increases. I reject absolutely the Chancellor of the Exchequer's statement about a comprehensive gambling tax. My hon. Friend the Member for Southend, East (Sir S. McAdden) and myself put this point last year to the then Chancellor of the Exchequer, first, on grounds of equity and, secondly, on revenue grounds. We were promised that the matter would be carefully considered. Twelve months have gone by, and all the information required about gambling turnover is now readily available. It was presented by the Churches' Commission on Gambling on the day of the Budget, and I have no reason to believe that their estimates are incorrect.

The Commission estimated that the total turnover in gambling was £762 million in 1961 and £853½ million in 1962 and that it is probably now a good deal greater and is still rising. I believe that the Chancellor this year should have taxed all gambling turnover—and I repeat, turnover. If a man stakes the same sum of money ten times over he should be taxed on it ten times over at 16⅔ per cent., or 2d. in the shilling. My right hon. Friend is muttering. He does not like me saying this sort of thing. I do not like omissions in his Budget.

Mr. Maudling

I am trying to follow the mathematics of it. I should have thought that a tax of 10 per cent. imposed sixteen times would make a tax of 160 per cent.

Sir G. Nabarro

Certainly in the aggregation, but I do not mind if it is a tax on turnover, as it would be in this case.

Consider the ingredient parts of this huge sum spent on gambling. These are the figures. In 1962, £540 million were spent on horse racing, £115 million on greyhound racing, £85½ million on football pools, £60 million on fixed odds football pools, £30 million on bingo, £15½ million on Premium Bonds—which, of course, could not be taxed—and £7½ million on fun fairs. To raise a laugh in his Budget, my right hon. Friend talked about one-armed bandits. One-armed bandits are found in fun fairs generally and in gambling establishments as well, but they fall into the £7½ million category in a total of £853 million.

I have very much bigger fish to fry. I am after—and I make no bones about this—the untaxed sectors of gambling. Football pools today are taxed at 33 per cent. and the revenue estimated from them for this year is £35 million. Greyhound racing is taxed at 10 per cent. and the revenue estimated from it for this year is £7½ million. Greyhound racing and football pools are singled out for discriminatory treatment. They yield £42½ million in tax. But horse racing, the proliferating betting shops, fixed odds betting, Crockford's and chemin de fer, bingo and the rest, escape. Why should only two forms of gambling be taxed and the remainder escape? That is what I mean by lack of equity.

I believe that the Chancellor has neglected to collect a potential sum of £100 million in taxation. If its collection led to a diminution of gambling in this country I would cheer, and I am sure that many other men and women would cheer with me. The growth of gambling in Britain is cankerous. It is a boil on the body economic. I dislike in principle and in equity the habit of Conservative Chancellors of the Exchequer taxing necessities and the incomes of individual workers and of failing to tax activities such as gambling which contribute—and I hope that the Chancellor will note these words—not a jot nor a title to British export. If he says that bloodstock exports amounted to £4 million last year, my answer is that the corresponding imports amounted to £2½ million. He has, therefore, a net gain of £1½ million on bloodstock in the balance of payments position. But he leaves unattended to and neglected £860 million plus of gambling turnover. What fertile fields for a future Nabarro Budget!

Mr. W. R. Rees-Davies (Isle of Thanet)

My hon. Friend is very entertaining on this matter, but does he realise that his conception of turnover is entirely erroneous in his whole conception of gambling? Is he seriously suggesting that a person who in the course of an afternoon on a racecourse has perhaps seven or eight bets of a couple of shillings should pay a substantial tax on each bet struck, for that is the turnover to which my hon. Friend refers—not what people win or lose in the outcome but the amount involved in every bet? Does he realise that he will be one of the most unpopular people in England if he supposes that we could bring in such an inequitable tax of that nature?

Sir G. Nabarro

I am not concerned with personal popularity. I am concerned with fiscal ethics and fiscal equity. That is much more important to me than popularity on a racecourse. I shall still wager my modest few shillings at the Springhill point-to-point next Easter Monday.

My right hon. Friend the Chancellor turned my right hon. and learned Friend the Member for Wirral upside down in his Budget statement by refusing to abolish the increase in fuel oil duty imposed by my right hon. and learned Friend two years ago. I am snow-white in this context. I divided the Committee on the Finance Bill on 16th May, 1961, against my own Government. I had to get a Liberal to tell with me. Only nine Members voted against the Government. Two were Conservatives including myself, three were Liberals and four were Labour Members. The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) voted with me on that occasion, and the late hon. Member for Rotherham voted we me when it was realised that the impact of this additional duty on fuel oil to protect coal would have a most damaging effect on industrial costs of certain products, including steel and ceramics.

The Chancellor of the Exchequer of the day, in 1961, proclaimed over and over again, "This is only for revenue purposes. This is not to protect the coal industry." I was amazed at the explanation produced by the present Chancellor that he could not abolish the duty because it would make coal face more severe competition from fuel oil and that it might derange or upset the Coal Board's finances. That is a dreadful reason for maintaining discriminatory fiscal treatment. One might as well argue that to make the railways pay, the petrol duty used in road vehicles should be doubled. It is a dreadful economic reason. Ministers continuously preach that industry must get its costs down. I do not, therefore, favour taxation on raw materials of industry, including fuel, which deliberately raises costs.

One reason that the Chancellor might care to note why our steel industry is not doing very well is because 6s. 9d. per ton has been artificially added to the price of finished steel, in the instance of Dorman Long, on the North-East Coast, on account of the fuel oil duty alone. The Chancellor should have abolished this duty and paid for it out of the tax on gambling or other additional revenue which I will deal with in Committee on the Finance Bill.

I cannot look a gift horse in the mouth. I accept with gratitude £269 million of tax reliefs. They are not enough to produce the vigorous economy that we desire. I deplore the fact that the additional fuel oil duty on industry is to be continued, that there is no comprehensive tax on gambling, that there is no special fiscal incentive for exporters and that the rate of growth to which we are looking forward may well be negatived by the fact that we have not taken sufficiently dramatic and dynamic action in this Budget.

7.3 p.m.

Mr. Edward Milne (Blyth)

I have no wish to comment on the fratricidal address which the hon. Member for Kidderminster (Sir G. Nabarro) has just delivered to the benches opposite or to comment on his savaging of his right hon. Friend the Chancellor of the Exchequer during his remarks. The type of speech to which we have just listened indicates that the rumour that the hon. Member was being called to the Conservative Central Office is nothing more than a rumour, but it has certainly exploded the myth that this is a good and popular Budget which has revived the flagging fortunes of the Conservative Party.

The maximum publicity has been given to the Chancellor following the announcements of last Wednesday and it has been backed up in speech after speech from the benches opposite. It has certainly acted as a morale booster to apprehensive Tory Members of Parliament in marginal constituencies, some of whom prior to the Budget could be seen furtively withdrawing their more treasured possessions from their desks and lockers, but who, having seen the Budget, have no doubt considered returning them again.

I want to make one or two comments on the purpose of the Budget as outlined by the Chancellor of the Exchequer when he opened the debate. Since then, together with a number of other hon. Members, I have watched figures flit in and out of the Chamber, make their speeches and disappear from our ken. This is only the third Budget which I have sat through, but that seems increasingly to be becoming the pattern of Budget debates in the House of Commons.

In this Budget, the Chancellor wanted to achieve a rate of growth described as the 4 per cent. target. To back up that objective, he wanted to set a limit of something like 3 or 3½ per cent. on wages and incomes. He made an eloquent appeal of the need for more skilled men and the need to increase the speed at which men can acquire new skills and tackle their tasks. Then, he complained about the availability of manpower, especially of skilled manpower, which, he said, set the limits to our capacity to increase production.

That is the type of thing which hon. Members on these benches, from various parts of the country, have been pressing upon successive Presidents of the Board of Trade and Chancellors of the Exchequer over the last five or six years. The failure of the Local Employment Act to engender new life into the underemployed areas of Britain is a measure of the Government's weakness in tackling the problems which the Chancellor now calls upon us to do.

The hon. Member for Kidderminster referred to a gambling tax. I am certainly in accord with him on at least this point. On looking over the various Sunday papers to read the assessments of the Budget, one could not help noting that one of the most significant articles in any of the Sunday papers last week was an article in the Observer, headed "Round the clock at Crockford's". Crockford's is not a place that is visited by Northumberland miners, by Belfast or Clydeside shipworkers or by any of the other people who are doing the useful work of the community. In that article, a police solicitor at Bow Street is reported to have talked about the staggering profits that were being made. The figure given was something like £10,000 a week.

As the article went on to say, if a person was not satisfied with Crock-ford's, he could go on to Mr. Aspinall's elaborately decorated club at 44, Berkeley Square, or somebody who felt even more jaded than visiting those premises could nip over, apparently, to Hamilton Place and look at Les Ambassadeurs, where, we are told, the record loss is in the region of £100,000 in one night.

The Observer is usually fairly well informed on these things and, no doubt, the points which it has made are adequate even to inspire the Chancellor of the Exchequer to look at the question of the colossal sum that could be drawn in from a tax on gambling, backed up by some of the best authorities in the country.

Again, if one considers the present state of the country and how money is too easily made, one needs only to look at the evidence given in a recent famous court case, when a well-known industrialist was reported to have said that because the price of his shares on the Stock Exchange went up by 3d. in one day, he was £75,000 better off than before. This makes nonsense of the Chancellor of the Exchequer asking for the increase in incomes to be limited to 3 or 3½ per cent. This is where the measure of the failure of the Budget is indicated, in that it fails to give to the community a sense of purpose or the feeling that fairness is being exercised by the Government in all aspects of wage earning. The Government cannot appeal to industrial workers to withhold wage claims while other people are making colossal sums without lifting a finger.

It has been said that the Chancellor is releasing a tremendous amount of spending power on the consumer goods market that will benefit the community and the economy. But, of course, there are other deductions from wage packets besides Income Tax. Comparing the Income Tax concessions he has announced with the increase that will be faced by wage earners in their National Insurance contributions, one finds that the vast majority will he paying out mare in July than they were last July or in July, 1961.

Taking the Chancellor's own figures in the White Paper as a basis, a man with a wife and one child, earning £14 per week, in 1959 paid 14s. 4d. weekly in Income Tax and 9s. 11d. by way of National Insurance contribution—a total of 24s. 3d. In 1962 his weekly Income Tax had been reduced to 14s. 1d. but his National Insurance contribution had risen to 14s. 11d. so that the total takeoff from his wage was 29s. This sort of rise in total take-off is repeated throughout most categories, and the difficulties will be increased as a result of the Chancellor's action rather than decreased. The claim that his Income Tax concessions are releasing a terrific amount of extra expenditure is a myth. It does not bear examination.

The Government have made announcements about assistance to areas of high unemployment. As the hon. Member for Kidderminster said, none of us will be guilty of looking a gift horse in the mouth, and I will certainly not complain about another advance factory being sited in my constituency. But the Government should come clean with the people and show precisely what their policy entails.

This will not be the first advance factory promised for my constituency. We got one following the debate on unemployment in the North-East in July last year. That factory will provide jobs for 70 people but it will not be ready until next autumn and the one which the Government promised us yesterday—it will cover 10,000 sq. ft. and provide a further 30 jobs—will not start until the first one has been completed.

So, over a period of 2½ years—and the customers have not yet been found for them—the advance factories for my constituency will have provided about 100 jobs. That is not to be sneezed at. It is a welcome contribution. But it is only a drop in the bucket towards a solution of the problem.

It is no use continually reminding us that such-and-such has been done until we examine the nature and extent of the problem. It is no use Lord Hailsham beating the big drum in the North-East while Conservative Members from the North-East make frenzied efforts to show that here is the new Messiah who will lead the area out of the unemployment wilderness. The signal failure of the Government and of the Budget is that they do not measure up to the needs of the second half of the twentieth century. It is a piecemeal Budget which is not fitted to the nation's requirements.

Last year the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) was criticised because he placed a tax on soft drinks and sweets and similar commodities. It is unfortunate that his successor has not seen fit to remove some of those impositions. We are grateful for much that has been done in giving assistance to deal with local unemployment, such as increased grants for the clearance and rehabilitation of derelict sites. Bat, having spoken of the length of time it has taken the Government to get advance factories going, I am disappointed that in the case of these grants, welcome as they are, the Government expect the local authorities to place tenders for them inside nine months.

If the Government impose on local authorities in the North-East a condition that tenders must be placed within nine months, are we not entitled to ask the Government to impose a discipline on themselves and get ahead with advance factories within a nine-month term? There is surely equity in that demand. If it is right for the local authorities to do the job inside nine months it is equally important for the Government to tackle their contribution at the earliest possible moment. That is not an unfair challenge—they who give quickly give twice. The Government now have the opportunity to remove some of the difficulties we have outlined.

This is not a new problem. It has existed for a considerable time and has increased over the years. Seaton Delavel and Blyth were scheduled as development districts in 1961. The present Chancellor, who was then President of the Board of Trade, intervened in the Blyth by-election in November, 1960, to say that the Government regarded as urgent and important the job of tackling unemployment and the problems arising from pit closures in the area. The problem was regarded as urgent and important in November, 1960, but we are still discussing it as a problem in the Budget debate of 1963. Even in this debate the measures outlined for the North-East are still insufficient to do more than touch the fringe of the problem for 12 or 18 months ahead.

The Budget is not merely something which gives and takes. It ought to be something which provides a stable economy. In that sense, this Budget has failed and we say, as we said last year, that the Government's failure to provide a Budget which matches the needs of the times indicates that they ought to give way and give place to others who are more ready to accept the challenge.

7.20 p.m.

Mr. Maurice Macmillan (Halifax)

I cannot really agree with the hon. Member for Blyth (Mr. Milne) that my hon. Friend the Member for Kidderminster (Sir G. Nabarro) has exploded any myth about any Budget. Perhaps it is rather more accurate to say that my hon. Friend exploded. I leave it at that. I counsel both him and the hon. Member for Blyth not to overestimate the effect of catching in the tax net the marginally disreputable activities of marginally disreputable people, especially, as so often happens with the Treasury, if a lot of comparatively innocent small fry are caught as well.

The strictures with which the hon. Member for Sowerby (Mr. Houghton) started his speech would apply more accurately to the Liberal Party than to the Tory Party. After all, we on this side of the Committee have never been laissez-faire Liberals and if it is true—and it may be so in some senses—that this Budget falls between two stools, they are the stools of Manchester school Liberalism and Fabian Socialism, and it is thereby the happy mean of a true Tory Budget.

I hope that the hon. Member for Sowerby will forgive me if I do not follow him into his excursion into economic history. When he got back from there to the present day, I thought that he seemed to view the prospect of deficit budgeting with almost the same horror as an American Congressman, and I wondered whether the recent visit of his right hon. Friend to the United States had had any effect on his economic thinking in this respect.

For the first time I must thank the Chancellor of the Exchequer—and I am especially pleased to see that it is my hon. Friend the Economic Secretary to the Treasury on the Front Bench—for the help which he has given to small savers in particular by reducing the Stamp Duty. We have been pressing for its abolition for some time, and I hope that my right hon. Friend will not think us ungrateful if we continue to do so and also perhaps to have it changed round so that it is paid on the sale rather than the purchase of securities. That indicates not any lack of gratitude, but rather that we consider that there is still the need for other measures, which I will not specify this evening but hope to raise during later stages of the Finance Bill, and that we feel the arguments are still valid, especially to anyone who claims to believe in a property-owning democracy. So much is said about this and so little done. It is rather like the words of James Russell Lowell—"To mean yes and say no comes naturally to women". We take it from this that a Chancellor may mean yes but it is the Treasury which says no.

I am also grateful for other arrangements which will be particularly useful to the smaller and medium-sized exporters of my constituency. I do not pay very much attention to the claims of hon. Members opposite to have thought of them first. Three of these measures, including those for improving credit facilities and insurance risks, and for modernisation and efficiency through depreciation grants and investment allowances, were in my election address of 1959, and I am very grateful to the Government for taking somewhat belated notice of my advice as well as that of hon. Members opposite. The main point, as my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) said, is that it is the extent to which managements take advantage of these arrangements successfully on which a great deal of our future economy will depend.

I could wish, with others, that we could have had some form of export incentive. In pressing for this, it is worth remembering that an added value tax is in fact a device for making practically everything which is sold more expensive at home in order to make it cheaper abroad. However carefully the Treasury have studied this internally, there may be something to be said for having some kind of further inquiry throughout industry, both management and trade unions, about the likely effect on individual concerns as well as on the economy as a whole.

I know that an added value tax would mean a total reform of our tax system. Personally, that is another reason for me to welcome it, but I fully appreciate that other hon. Members, on either side of the Committee, might not take that view. I must place on record how sorry I was not to be able to hear the speech of my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) and how pleased I was, on reading it, for once to be able to agree with him. I have attacked him very frequently in the past and it is a great pleasure to be able to praise him today. Last year, he gave some indication that we were to have a very careful look at the whole of our tax system and I hope that this evening we shall have some assurance that it is to happen before too long.

I do not think that too much can be made of the failure, as it is said, of the Treasury and of Chancellors of the Exchequer to assess the situation accurately. My hon. Friend the Member for Scarborough and Whitby and Mr. Harold Wincott in the Financial Times today and countless other people have given examples of earlier failures of the experts to guess right and the somewhat crude methods of forecasting which we have at our disposal, no matter which party is in power.

It is fair enough in a political debate to blame the Government for the failure of their experts. We did it when we were in opposition and I do not really blame hon. Members opposite if they do it now. But there is a serious point in this because their solution to our problems depends entirely on the accuracy of their information, and if they get it wrong, it is the country which bears the loss, whereas if we make mistakes at least part of it is borne by the individual owners of businesses.

Mr. J. J. Mendelson (Penistone)

And by the unemployed.

Mr. Macmillan

It is borne by the unemployed in either case.

The hon. and learned Member for Kettering (Mr. Mitchison) had a rather curious method of solving the problem. He was rightly concerned with the level of unemployment in his constituency and proposed to compensate for the failure of private industry there by public enterprise, which I imagine in this con- text meant starting shoe factories. The most relevant criticism of that came from his right hon. Friend the Member for Easington (Mr. Shinwell), who was very persistent in asking where these goods were to be sold, in his case from advance factories, or, in the case which the hon. and learned Member quoted, from the State-run shoe factories. This is not a problem which can be solved by nationalisation or by starting public enterprises to fill a demand which has not been sufficient to keep private enterprise going.

Mr. G. R. Mitchison (Kettering)

I am much obliged to the hon. Member for Halifax (Mr. Maurice Macmillan) not only for giving way now, but for doing me the considerable courtesy of telling the that he intended to make some comment. If he will look at what I said yesterday, as I have been looking at it, he will see that these two things are entirely separate. My comment about the boot and shoe industry in Kettering and elsewhere was simply taken as an instance of the way in which unemployment is now spreading south to the Midlands. In another part of my speech and in a totally different connection, I said that I hoped that hon. Members opposite would not object to remedies for unemployment which depended on starting publicly-owned industries in places where there was unemployment. The two things are entirely separate. The unemployment which I mentioned happened to be short-time unemployment.

Mr. Macmillan

I apologise to the hon. and learned Gentleman if the juxtaposition of the two things led me to attribute to them a cause and effect relationship which was not there. It still does not alter my case that if there is not a demand for the goods, no amount of public enterprise can sell them except at subsidised rates.

Mr. Shinwell

Or private enterprise?

Mr. Macmillan

I will come to that in a moment. The ownership of industry in this context is irrelevant. I do not say that this problem does not apply to private enterprise. Of course it does. I merely say that the ownership of industry is irrelevant to this problem.

If the calculations go wrong, the ownership of the equity must add to the taxpayer's burden one way or the other. I regard this as a back-door way round Clause Four which will bleed private enterprise slowly to death without having the decency or the courage to give it the coup de grâce of a humane killer. As the Economic Secretary said last night, whatever the problem may be, this sort of hostility to management and those on whom so much of our prosperity depends does not contribute anything to its solution. I think that it was Dr. Beeching who said that nationalisation solves no old problems and creates many new ones.

I turn to something which might help the problem of growth rather than these sort of suggestions which I have tried to show are irrelevant. My new accord with my right hon. and learned Friend the Member for Wirral does not go quite as far as to agree with his agreement with the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), both of whom referred to the expansionary effect of Government expenditure as against tax concessions in the recovery of the economy. My right hon. and learned Friend thought that this was dangerous, largely because increased Government expenditure tends to be irreversible while tax concessions are reversible. Since I do not quite share the feeling of the hon. Member for Sowerby that the element of social justice in the Budget was a secondary consideration, I feel it only right to try to keep a balance between the private and the public increase in purchasing power. I take the view that this is what the Chancellor has succeeded in doing.

Quite apart from the once-for-all nature of certain types of expenditure—the point made by my right hon. Friend the Chief Secretary—there is the division of public expenditure into the three groups which the Chancellor has mentioned at some time—that of industry productive in the commercial sense, which brings a fairly fast return that of productive in the longer term and that of the purely social importance, which perhaps brings no direct return. Our capacity to grow depends partly upon getting correct the balance between these forms of expenditure.

In most senses the position of this country as an exporting nation and our rate of growth must be governed by overseas considerations, and we have the difficulty into which all businesses get of when to spend money on expansion with no immediate return and how long it is possible to tolerate an increase in overheads before this can bring about the increase in turnover necessary to justify it.

It is very difficult for us in this country to avoid stop-go problems as long as we have this problem exacerbated by a permanent conflict between our banking and our trading interests. Whoever else may be a new convert to this view, I do not think that those of us who have spoken in economic debates from this side of the Committee in the last four or five years can be said to be new converts.

The right hon. Member for Easington put his finger on the heart of the problem when he pointed out that it all depends on the expansion of markets and the creation of new demand. That was the view taken by the Organisation for European Co-operation and Development. Various speeches and policy statements in, and records of, this organisation show clearly that it was their intention, an intention I understand to be shared by the Government, to use investment and aid to the backward countries to enable those countries to increase their prosperity, to produce goods and eventually to become a new market offering new demands for our goods.

There is, however, one problem—the purchase of goods from them. My hon. Friend the Member for Oswestry (Mr. Biffen) made a contribution in this respect when he talked about the changing structure of our industries. Surely it is necessary for this country to import more of the products of the unsophisticated economies, however difficult that may be for certain sections of our industry. We can then turn round and export to them the capital goods which they cannot make—and cannot buy unless they have sold their goods here. This meets the point which the right hon. Member for Easington made. I think that he may find himself in some degree of conflict with the hon. Member for Nelson and Colne (Mr. S. Silverman) on this subject, but it is a balance which must be struck, because it is a serious conflict, and on an honest solution of it depends our capacity not only to expand ourselves but to play our proper part in expanding the economies of the backward countries.

In this context, and at this time at least, the Chancellor has accepted that the expansion of our exports requires an expansion of home demand. I think that this may involve the import gap which I have described and a period during which our imports exceed our exports before we can develop our exports market. It is urgent to find a solution to this problem of financing imports in order to preserve our reserves, to finance our raw materials, to ensure that such money is not lost and to avoid the eventual risk of devaluation.

Something has been said during the debate about being able to ride out the storm. As my right hon. and learned Friend the Member for Wirral said, this is difficult, and particularly if the attack comes not through imports and exports but through our banking and through our position of providing a reserve currency for the sterling area. I think that the debate has made it clear that import controls do not provide the right solution. For one thing, they limit our expenditure on the very things which we want to get in order to be able to pay out sums which we do not wish in the least to pay and which bring nothing in return.

In the words of the National Institute's Economic Review, Both the British and the United States Governments are hoping to achieve a permanent increase in growth rate. Both are held back by the fear that the early stages of faster expansion will worsen the underlying balance of payments position, which is already unsatisfactory. In both countries the balance of payments risks arise only in part from the effects of imports and exports. The larger reason in the early stages is the risk to international confidence on which the strength of the two reserve currencies depends. The Chancellor has accepted that risk, and, with respect, I think that the time has come for him to consider new measures to meet it and to repeat the initiative which he took last year, unfortunately not with great success, in the United States. This time it should be a political initiative, because it seems to me that this is another case in which technical effort can be frustrated by lack of political will, as we have seen only too clearly in Brussels recently, and also in which a strong political effort can overcome the technical problems involved.

To me this problem is made all the more urgent by the failure of the negotiations for British entry to the Common Market. I have always felt that it was in monetary policy that we had most to gain and the biggest contribution to make. With great respect, no Commonwealth economic conference can help in this problem, for the Commonwealth countries and the needs of their economies are very much a cause of the strain which providing a reserve currency has placed upon us. I think that this is primarily a problem to be solved with the United States of America in the terms outlined by the National Institute's Review. It is a problem which primarily we share with the United States rather than with the Commonwealth or with the European countries because we provide the reserve currencies in which the greater part of the world's trade is done.

This suggestion was made by the right hon. Gentleman the Leader of the Opposition in a speech in New York shortly after he visited Washington. Perhaps that is some indication that it would not be too badly received in certain circles there. I made a similar suggestion some weeks ago, also just after visiting Washington, in a speech at St. Louis. I wondered when I read what the Leader of the Opposition had said whether we had both had a similar experience shortly before making our respective speeches.

I agree that our capacity to borrow depends really not on our liquid or current reserves but on our assets. If we are to use that capacity then those reserves must not be dissipated but must be kept for purposes which enable us to re-earn the money spent or borrowed. I agree with my hon. Friend the Member for Scarborough and Whitby that such re-earning requires the full support of management and of unions and the leadership of the Government.

I think that in this Budget my right hon. Friend the Chancellor has at least established a claim to that support, and I hope that he gets it, because, without it, I think that we shall be in grave difficulties. With it, I have complete confidence that this problem which I regard as the main inhibiting factor to our growth can and will be overcome.

7.43 p.m.

Mr. J. J. Mendelson (Penistone)

The hon. Member for Halifax (Mr. Maurice Macmillan), who has just contributed to the debate, has, of course, made a num- ber of points on our export problems and our international position which are probably common ground. He started, however, by telling the Committee of the considerable differences that existed, in his belief, between the grave consequences of a wrong forecast by experts when the Conservative Party is in office as compared with when the Labour Party is in office. The hon. Gentleman said, and I thought that it was a particularly flimsy point for him to make because in the rest of his speech he had such a close texture of argument to present, that when the Conservative Party is in office and forms the Government the wrong forecasts of experts only have the consequence, to a large extent, of leading to the loss of money by private enterprises. But the hon. Gentleman failed to say that the two most serious consequences of the failure of the Government to make a reasonable estimate of the economic future of the country are, first of all, paid by the unemployed themselves, secondly by those on short time and, equally important, that the whole country pays the price in wasted resources.

It is really illegitimate in a Budget debate to make a propaganda statement of that kind, because when we look at the wastage of resources which occurred in 1962 we must not accept the average figures, as, for instance, the figure used by the hon. Member for Kidderminster (Sir G. Nabarro), in whose speech I found a great deal of interesting facts. He said that the steel industry had been working at only 72 per cent. of its capacity. That is an average figure, but there are sections of the steel industry where the wastage of resources has been far more serious.

A fortnight ago the managing director of the English Steel Corporation in Sheffield said that his order books throughout 1962, taking the year as a whole, did not allow the English Steel Corporation to employ more than 60 per cent. of its resources and that since the beginning of the year the improvement had been one of only 5 per cent. In fact, in some of our most modernised factories and in some of our technically best-equipped concerns the wastage throughout 1962, and continuing into 1963, was far more than that indicated by these average figures.

A fortnight ago the Machine Tool Manufacturers Association published a statement in which it warned the Government and the country that unless there was an upturn in economic demand and investment it would not be able to guarantee the maintenance of the present position as far as employment in the machine tools industry was concerned. As the Economic Secretary and the Chancellor know very well, steel and machine tools are excellent barometers for judging the general economic position of the country. If there is an upswing in public investment or in private investment the machine tool industry knows about it at an early stage because any decision to embark on a new process of production or on new investment will normally mean retooling and some of the earliest orders will go to the machine tool industry. Therefore, we have reason to be gravely concerned by this announcement of the Machine Tool Manufacturers Association.

That is the real crisis which the country has to face. The situation is made all the more dangerous by the fact that in the steel industry we have seen a great deal of technical renovation and modernisation, which has been carried out with the support and approval of practically all of us. It is a matter of great concern to the country that after such a period of modernisation we should find, as a direct result of the Government's economic policy, that some of these resources were not used last year. Indeed, there is not much sign yet whether they will be used to a larger extent in the coming year.

My main purpose for intervening in the debate is not so much to add to the general discussion as to concentrate on certain types of areas that are not going to be directly affected by some of the major measures in the Budget because they are not scheduled as development districts. But before I come to that matter, I wish to make a few comments on the course of the debate so far.

It was a singlar experience for all hon. Members to listen to the speech of the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) who was the Chancellor of the Exchequer when the Budget for 1962 was introduced. I think that the right hon. and learned Gentleman might have honoured the Committee with a little more attendance after having made for the first time a contribution to our debates, considering the fact that he was the architect of a great deal of the economic misery and wastage from which we have been suffering since he introduced his last Budget. It has been singularly difficult to get to grips with the right hon. and learned Gentleman.

For instance, my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins), who by common consent is very knowledgeable in these matters, made a very interesting speech yesterday afternoon in which he criticised in many ways the contributions made by the right hon. and learned Gentleman both when he was in office and when he made his speech yesterday, but there was no one to reply to my hon. Friend. I think it ought to be put on record that the responsibility of the right hon. and learned Member for Wirral is such that he ought to be here more often, that he ought to intervene in our debates more often and give hon. Members more opportunities to argue the case with him.

Yesterday we heard the right hon. and learned Gentleman agree with practically everything that his right hon. Friend the present Chancellor of the Exchequer introduced in his Budget. While I have a certain amount of sympathy for party loyalty—I can understand that a Minister who has lost office in unfortunate circumstances might not wish to upset the party and might wish to show that he is a loyal party man—I think that beyond the necessity for party loyalty there is the need for the nation to be able to judge what past Governments have been doing so that it can judge what the present Government are doing.

I think that it would have been more helpful if the right hon. and learned Gentleman had done more to defend his policies instead of being so over-eager to agree with the policies which the Chancellor introduced this year. This gave the Chancellor a comfortable time, and he probably liked it, but I do not think that it contributed very much to the enlightenment of the Committee or the country.

I do not want to go over the ground again. It is obvious to all the people who write about these matters, notably the Economist, that there is a big contrast between the ideas underlying this Budget, and those underlying last year's Budget. It would be a waste of time to go into the details again. The gravamen of our charge against the Government is not that facing a certain situation last year they made a mistake in estimating what the future held for us and therefore produced a wrong Budget, and this year they saw the light and produced a right one. The gravamen of our charge is that the signs were there last year and were accumulating when the right hon. and learned Gentleman introduced his Budget. Not only did he introduce that Budget, but there were a number of measures preceding the Budget and following it which were bound to aggravate the situation and lead to the damping down of production.

It was not only professional economists who appreciated the position. I remember travelling to Sheffield and sharing a table with a number of industrialists and directors of engineering companies just after the right hon. and learned Gentleman introduced his Budget. I asked them what they thought of the Budget, and they told me that they were gravely alarmed about it. They hoped that before the effects of it and the policy pursued by the right hon. and learned Gentleman percolated to their industries a change would have occurred, but they were gravely disappointed. The effects did percolate to their industries, and they suffered under-employment and wastage of resources just as did people in other industries.

I want to move on from a general discussion of the general philosophy underlying this year's Budget to discuss certain areas which are not scheduled areas, but which are suffering from considerable short-time working and employment. I am glad that the Chancellor of the Exchequer is in the Chamber, as indeed he has been during most of the debate since he introduced his first Budget. I am particularly glad that he is here, because what I have to say refers very much to past policies for which he was responsible as President of the Board of Trade, and to new policies for which he is now even more prominently responsible in his position as Chancellor of the Exchequer.

I am referring to the serious contrast which is bound to arise very soon between some of the areas which are scheduled and some of the areas surrounding them, or in some cases a little distance removed from them. I repeat the argument which I put to the right hon. Gentleman when he was at the Board of Trade when he introduced the Local Employment Bill. Together with some of my colleagues I moved a number of Amendments designed to look ahead and to enable certain areas which were not scheduled areas to receive consideration so that we could have more diversification of industry in those areas, and so that we could have a policy which would look ahead beyond the immediate high levels of employment.

The suggestion I made then, and which the right hon. Gentleman accepted in principle though he refused to act on it, was that we should look ahead to the day after tomorrow. The right hon. Gentleman, with a charming smile, accepted the slogan, but said that at the moment we had not the resources to deal with areas other than those which were affected by high unemployment. We are in grave danger of acting only when it is too late, and then bringing in a crash programme which leads to the immediate encouragement of investment in certain selected areas, but not at the best possible time, because it is often too late and leads to decisions which may have adverse effects on other parts of the country which they would not suffer if long-term planning was the order of the day.

I refer in passing—and I do this with particular interest because the Financial Secretary to the Treasury is present—to the expansion of the motor car industry in Halewood. I do not live very far from Doncaster. Recently a number of people from the Ford Motor Company in Doncaster have presented me with details of what I consider to be an extremely serious situation. The Ford Motor Company, with the encouragement of the Government, is expanding on Merseyside, and, of course, everyone supports that policy, because we all have a responsibility to deal with the high level of unemployment and short-time working in that area. We welcome the expansion that is taking place there, but, the Ford Motor Company has announced that the Doncaster plant is to be closed and 2,000 people will be declared redundant.

In the absence of the right hon. Gentleman the Minister of Labour, I do not want to go over the ground again, but the fact is that he was very ill-informed about the immediate intentions of the Ford Motor Company. About ten days ago, in reply to a Question, the right hon. Gentleman said that no final decision had been taken about the future of this plant at Doncaster. But, while he was making that reply, notices were being typed announcing the dismissal on 28th June of this year of 800 of the 2,000 workers at this plant. It was only after I pointed out that this notice had been posted that the Minister of Labour said yesterday that he would accept my facts and look into the matter to try to deal with it.

The Minister's first reply revealed the shocking failure of communications between him and this firm, which has been encouraged to expand in one part of the country. Admittedly this expansion is to take place in an area of high unemployment and short-time working, but the firm apparently did not inform the Minister in advance of its intention to terminate the employment of 800 people in Doncaster. When we urge the Minister to deal with a situation like that, and when he says that his officers are available for consultation, one expects very little from such consultation, because it is apparent that the information which ought to be made available to him is provided only after the firm has announced what it proposes to do. I quote that as an example of what is happening in Yorkshire, part of which I represent. I quote it as an example of the uselessness of having a crash programme from time to time instead of having a policy which looks ahead to the day after tomorrow.

I turn from the general to the more particular. When we look at some of the areas which are dependent on major heavy industries, either extractive or manufacturing, there is no need to tell the Chancellor of the Exchequer that some of the unemployment there is a direct result of recent economic policies, but some of it is, of course, the result of modernisation and technical development, and some must be the result of the decline in the demand for certain commodities. It is therefore foreseeable—and seeing this problem should present no difficulty either to the Treasury or to the Board of Trade—that those areas will have a continuing problem of short-time working. They will have a problem of recurring redundancy, even if, as we hope, some of the measures now introduced, and some future policies in a certain direction, will cure some of the immediate difficulties in some of the more modern industries. For instance, in Sheffield—and this applies to South Yorkshire as well—we find that the position in the steel industry is still very bad. Some firms are still working only to 65 per cent. capacity. Recently about 800 engineering maintenance men at one large steel works were put on short-time, with one week off in five. Because of unemployment in engineering and heavy forging, short-time working generally has shown a slight tendency to increase in recent weeks. A more substantial rise in short-time working is bound to occur soon in a heavy engineering firm and 1,000 employees will be involved.

The position is similar in the cutlery, silverware and distributive trades, and in machine tool production. The Chancellor will have no difficulty in agreeing that the recent report of the Machine Tool Manufacturers' Association about immediate prospects was one of the most disturbing statements in the last twelve months. In all these cases, for instance in the silverware and cutlery trades, there has been a gradual increase in unemployment in the last few months, and a further deterioration is possible. I have made detailed inquiries in south Yorkshire and in the Sheffield area, and in my own constituency, including Stocksbridge and Chapeltown, into part of the area in the immediate Sheffield environment and into other parts of south Yorkshire—Doncaster, for instance—and I am disturbed by the fact that there is a developing tendency on the part of a number of firms to dismiss members of the staff.

Unemployment and short-time working is equally tragic for any section of workers. But, as we all know, and as the Chancellor knows, firms are not easily driven to dismissing members of their staff who may have been working with the firm for 25, 30 or 35 years. I have reports of quite a number of staff members being dismissed at the age of 50 and 55 with little prospect of finding similar work. What is equally disturbing is that there are a considerable number of skilled people who are losing their jobs in the construction industry. The position will be improved when building construction picks up again. But I am reliably informed that in some cases skilled men as well as labourers will find it difficult to get employment immediately.

During a recent visit to Sheffield, the Minister of Labour was asked whether he would include that area among the scheduled areas which would then enable particular consideration to be given to it as outlined in the Budget. The right hon. Gentleman replied with a firm "No". On the present terms of reference that was the only reply which the right hon. Gentleman could give. But I have described the problem is some detail as it relates to an area with which I am familiar. But similar problems are arising in many other parts of the country and it is a problem which the Chancellor will have to face. I hope that we, shall have a reply about it tonight.

Will the right hon. Gentleman repeat the mistake he made over the Local Employment Act when he refused to consider the necessary policies for looking at the day after tomorrow; when he refused to consider giving substantial Government aid and encouragement which would have led to the diversification of industry in some areas where industry is declining? Will the right hon. Gentleman repeat that mistake in the policy which will follow the passing of the Finance Bill and the acceptance of the proposals in the Budget statement? Or will he accept the point of view of those who urge a new course of action upon the Government?

It is a matter which brooks no delay. It cannot wait. It is no use merely hoping for a change of Government. Time is passing and the situation is getting worse. It is the responsibility of the Government in office to accept the prompting of those of us who have urged them to decide on a policy in addition to the policies announced in the Budget regarding development districts and to say that they will make a survey of the heavy industrialised areas. A great deal of the information they need is already at their disposal.

We urge the Government to make a substantial survey when they will find that in a number of industrial areas there is a marked absence of new growth industries. Therefore, according to what one can foresee, it will be more difficult in those areas to keep up the level in the rate of growth. Some of the newer industries are not represented in these areas, and it will be more difficult to absorb the labour released from some of the older industries. Special consideration should be given to those areas, and special aid in one way or another should be forthcoming to encourage industry to go to those parts of the country.

This brings me to the question of retraining, about which the Minister of Labour made an announcement yesterday and which formed an important part of the Chancellor's Budget speech, although he did not spend much time upon it. Retraining has been referred to as something which needs the co-operation of the trade unions. That co-operation will be required. But in a number of speeches made by members of the Government and hon. Members opposite who support the Government, the attitude of trade unions has bean misrepresented.

As was said by the Minister of Labour, trade union leaders support the idea of retraining schemes. But the right hon. Gentleman also said that some of the unions concerned were hanging back. He did not give the reason for the hesitation. But these trade union leaders are saying, "We should like to agree to increased retraining schemes and we think it useful to deal with the problem of redundancy in this way in addition to the other ways in which it should be dealt with. But we must be reasonably certain that in those areas where there will be a number of retraining schemes there will also be new industries available to give employment to men who have completed the retraining process".

It is important that the attitude of these trade unionists—some of them leaders at the local level—should not be misrepresented. With my hon. Friends, I am wholeheartedly in favour of obtaining the fullest co-operation from the trade union movement in these important schemes. But we shall not make a good start towards securing that co-operation if we misrepresent the point of view of honest men who are worried that if they support this policy it may result in disappointment in the long-run.

This is particularly relevant to the theme of what I have been saying so far, that areas not at present scheduled and not likely to be scheduled must be considered from this point of view. It is not good enough to have retraining schemes and retraining centres in these areas if at the same time the Government do not encourage new and additional industries to come to the areas where retraining is taking place. I have been trying to say that the Government must not assume that with the programme they have announced so far, they have done half enough to deal with the serious general problem of underemployment and the wastage of resources we have been suffering for some time. The Government must particularly keep in mind that by introducing such new encouragements and allowances in the scheduled areas there is grave danger that many parts of the country may join in a scramble to be recognised as areas in need of assistance.

That is not a policy which will result in good economic results in the long run. The Government must have additional policies to allow for those areas which have short-time working and high unemployment figures but where unemployment is not sufficiently high to enable the area to be scheduled. I know that were the economy to improve in the next few months these areas would be affected by that improvement. But there is no sign yet of such an improvement being likely to take place in the very near future. At best if it happens, as I hope it will, it will be a slow process. This makes it all the more necessary to couple the policy initiated with the policy which I and others have suggested.

I have deliberately concentrated on this particular type of problem and the types of measures which are needed. Much more could be said on the general philosophy underlying the Budget. There are certain measures which ought to be common ground and which are essential to the economic wellbeing of the country under whatever Administration we have. Because of that I urge the Government to look again at this problem and to give a positive answer when the Chancellor winds up the debate.

8.10 p.m.

The Earl of Dalkeith (Edinburgh, North)

I hope to make a short intervention: I trust, therefore, that the hon. Member for Penistone (Mr. Mendelson) will not expect me to follow every point in his interesting speech. I take up one point he made in relation to my right hon. and learned Friend for Wirral (Mr. Selwyn Lloyd). I think the hon. Member was a little unfair, because my right hon. and learned Friend has been in the Chamber for a considerable part of the debate.

I am glad to have the opportunity of expressing my gratitude and congratulations to the Chancellor on his Budget, which I think will be seen more clearly as the weeks go by to have been a brilliant Budget. As well as congratulating him on his imagination and breadth of vision, I should like to think that some of the credit is due to the Secretary of State for Scotland for his determination in seeing that justice should be done to those parts of the country where unemployment is higher than in other parts, such as has happened in parts of Scotland.

I also welcome the signs that the Treasury is itself moving towards a more flexible attitude in accepting the principle of fiscal discrimination on a geographical basis. That is particularly important and is something which I have been urging for some time. I mentioned it particularly in the debate which followed the Brussels breakdown. It is only by regional stimulus that we can be sure of having expansion in those parts of the country where it is needed most without—or perhaps it is better to say with the minimum of—inflation. I attach great importance to the definition of those regions. I am glad to hear that regional studies are being carried out. This was announced yesterday. I hope that the boundaries will be reviewed in an intelligent and flexible manner because in the past some of the development district boundaries have erred on the side of being a little too restrictive.

My hon. Friend the Member for Kidderminster (Sir G. Nabarro) was quite right when he complained that we were suffering from under-employment of men, materials and machines. But I am sure that the Chancellor has been right in emphasising the necessity for priorities to help those areas which must be helped first. What he has done in this Budget effects a colossal improvement on the Local Employment Act. I hope that the pipeline will be bigger, better, smoother and faster flowing than in the past. Hon. Members opposite have frequently engaged in picking holes in the pipeline and have tended to try to show that nothing ever comes out of it.

Mr. Ellis Smith

Are there holes in the pipeline?

The Earl of Dalkeith

I understand that when the Local Employment Act was first introduced in 1960 the forecast of jobs coming out of the pipeline was 55,000. I understand that by May, 1962, seven months before the end of the forecast period, no fewer than 51,000 of those jobs were under way and had been provided by the industries concerned. So I do not think that this is such a laughing matter. Private industry must be encouraged in this way. Nationalisation cannot be any substitute for private enterprise in this respect.

I also welcomed yesterday's announcement about advance factories. Those should certainly be a help, as also the training centres will be. I was most interested to hear what the hon. Member for Penistone said on this. I was delighted to hear that he and so many of his hon. Friends will support this scheme. It was my impression that certain trade unionists, particularly in the North, expressed strong disapproval of these schemes. We must have the two things happening together, the men being retrained and the provision of new industry simultaneously. It is a question of having both planned together.

Mr. Mendelson

The noble Lord will remember that I said that some people in trade union circles had been doubtful and hesitant about the scheme only on the ground that they were not certain that the Government would provide the factories for the people who were trained to work in new trades. In principle they are not opposed to retraining.

The Earl of Dalkeith

I hope that this Budget will give the assurances for which those people were looking. I am sure that they can be reassured.

I have been interested to notice how much time has been spent in this debate in discussing last year's Budget. The more one thinks about it and the more deeply one considers it, the more clearly does one realise that keeping the economy poised between boom and slump, inflation and deflation, is a razor-edged balancing act. Perhaps from the long term point of view inflation is the more dangerous of situations into which we can get. By nature we are all expansionist-minded. Therefore it is right that there should be some body of opinion in this country which can exercise a controlling and restraining influence upon our natural instincts.

Because of inflationary pressures of recent years, I think it false to suggest that this is a Budget which we should have had last year, as has been suggested so many times in this debate. It is clear that had we gone on in the way we were going over the last two or three years there was the very real danger that we would have priced ourselves out of a large part of world markets and the consequences would have been appalling. A great deal of speculation goes on about what would have happened had last year's Budget been different. It is easy to be wise after the event, but I do not think we can criticise too severely last year's Chancellor for taking the situation as he then found it.

It may be that we can suggest that the economic regulators might have been brought into force a little more quickly than they were to stimulate the economy and get it moving again. I am thinking particularly about Purchase Tax reductions, motor cars, reduction of Bank Rate and so forth. We could argue about that until the cows came home. I have little sympathy with hon. Members opposite when they urge that this would have been a good Budget for last year. When they were in power I was always amazed to see how light-hearted they were about problems of inflation which had disastrous results. It seems that some of them have still not learned their lesson from those days.

Very largely because of last year's cautious Budget of consolidation we are now able to enjoy the expansionist theme of this year's Budget. When we look back over these periods we shall be able to see that the short, sharp spell of higher than usual unemployment was probably a relatively small price to pay to insure against much greater and more massive long-term unemployment which would inevitably have resulted following the failure of our exports.

I turn to consider various individual points in the Budget. There are one or two in respect of which I am rather dis- appointed. First, I had been looking forward very much to the introduction of a gambling tax. As one who campaigned vigorously last year on behalf of greyhound racing, which to my mind had been unfairly singled out, I was full of hopes that something would be done this year and I am extremely disappointed that my right hon. Friend has not got round to doing it.

Again, I am sorry that the Chancellor of the Exchequer has felt unable to take any action in respect of heavy fuel oil. However, I appreciate the Chancellor's reasons. I am glad to note that the reasons are probably of a temporary nature, by his own admission.

A point where I would like to see something done in a positive way is a reduction in the tax on diesel oil, particularly for public service vehicles. At this time such action could have had a very valuable effect on the economy, particularly now that we are studying the Beeching proposals. I am sure that my own constituency would strongly support me in any plea I make in this respect. I was a little surprised that my right hon. Friend the Chancellor did not jump at an excellent suggestion I made that the tax should be reduced on fuel used by all vehicles in Scotland, for two very good reasons. The first reason is that it would stimulate the tourist industry. After all, this action is taken in France and Italy. Secondly, it would help to encourage manufacturers who have to send their goods a long way to the industrial markets of the Midlands. I am very sad that my suggestion was turned down flat. I hope that my right hon. Friend will reconsider it.

I turn now to some points which deserve special welcome. During speeches on previous Budgets and in debates on previous Finance Bills we heard a great deal about depletion allowances for United Kingdom minerals. I am delighted that this has at last been recognised and that the Chancellor of the Exchequer has acted. I am rather surprised that nobody so far has even bothered to say, "Thank you".

The proposal in respect of the Fort William pulp mill should be warmly welcomed. I believe that this is a personal triumph for my right hon. Friend the Secretary of State for Scotland. As one who has an interest in growing trees, which I declare, I am in a position to see that this is a logical sequel to Government investment which has been going on for the last forty years in Forestry Commission woodlands. Very considerable sums of money have been invested. But for a scheme such as this, which will make sure that we can utilise the timber, previous investment would have been largely in vain. It is a very important addition to the nation's economy from the point of view of our balance of payments. Only 8 per cent. of all the timber this country uses is grown in this country. A great deal more could be grown at home. We spend no less than £200 million a year of foreign currency on obtaining our timber. This proposal will undoubtedly encourage much fuller use to be made of our natural resources.

The greatest welcome of all will no doubt be accorded to this proposal because of its employment potential. It will bring a new lease of life to a very large part of the Highlands of Scotland, and the security it will provide for many years to come will mean that it will do more than any other single venture to slow down the drift of population to the already over-congested industrial areas.

While on the subject of forestry, I would like to urge my right hon. Friend to tread with extreme caution in relation to Schedule B taxation on woodlands. I would remind him that in 1949 one of his predecessors—Sir Stafford Cripps—had this in his Finance Bill, but, as soon as the dire consequences it would have on the forestry industry directly and on the national economy indirectly were explained to Sir Stafford, he tabled his own Amendment deleting it from the Finance Bill. I hope that my right hon. Friend will think very carefully about what he is doing here.

The most important thing of all that I have to say is that the Government have now opened the door wider than ever before to industrialists to expand in areas where they are most needed. It is now up to business men and industrialists to get cracking themselves, to exercise a spirit of initiative and adventure, and, if necessary, to take the odd risk. This applies to all United Kingdom business men, not just to those who are already in Northern Ireland, Scotland or the North-Fast. We must remember that private enterprise is on trial by the people. If industrialists fail to take advantage of the magnificent offers which the Government are now making to them, they will largely have themselves to blame if they find themselves the victims of Socialism, direction of industry and nationalisation. What a cruel pity it would be for the rest of the population if they were to suffer these things purely because of the lack of initiative and enterprise of the business men who could and should take the plunge.

8.27 p.m.

Mr. Harry Gourlay (Kirkcaldy Burghs)

The noble Lord the Member for Edinburgh, North (The Earl of Dalkeith) warned the public against Socialism. He said that industrialists would have only themselves to blame if they found themselves the victims of Socialism. He must realise that it was a Socialist Government in 1945–51 which laid the foundations of the Welfare State on which the present Government have been able to build. Therefore, the people will not pay any attention to the bogy men which the noble Lord tried to introduce into the political scene.

The noble Lord also alleged that we on this side mocked at the pipelines. Considerably fewer jobs have come out of the pipeline than we were consistently promised by the Government Front Bench had been put into it. There are, therefore, some reasons why we should have some hesitancy in believing what the Government tell us about the efficacy of the pipeline. Before the pipeline was started there were about 30,000 people unemployed in Scotland. The pipeline has now been in operation for several years and the number of unemployed in Scotland is about 125,000, excluding the tens of thousands of Scotsmen who have left the country in the meantime.

The Earl of Dalkeith

The hon. Gentleman has suggested that the figure I gave of 55,000 jobs forecast in 1960 was incorrect. I should be very grateful if he would tell me what figure was forecast, if my figure was incorrect.

Mr. Gourlay

I am not suggesting that the figure given by the noble Lord was incorrect. I am talking about the facts as we know them. Fewer jobs have come out of the pipeline than we were told were being put in.

The noble Lord also mocked at nationalisation and public ownership and said that it could not be a substitute for private employment in the underdeveloped areas. The first thing the Government do when they want to boost the economy is to turn to the publicly-owned gas and electricity industries and create additional capital investment. Thus, without those industries the Government would not be in a position to prime their pump as effectively as they can.

I would also like to give the lie to what the noble Lord said about the Labour Government of 1945 to 1951 being lighthearted about inflation, for nothing could be further from the truth. This brings me to his remarks about the Fort William pulp mill. All of us in Scotland welcome this great development. We have been told that negotiations have been in progress for about five years and that one firm has accepted the Government's offer of about £10 million to go to that part of Scotland. I wonder at what level the Government decided to give in to Wiggins Teape. Would they have been prepared to go to £11 million, or would they have gone on haggling until their own figure was accepted? If this firm had not been prepared to accept the Government's offer, what would have been the alternative?

We have forests, the hydro-electric scheme and the railways under public ownership in that part of Scotland, enabling the Government to make these arrangements with the firm which is about to create a pulp mill at Fort William. The Budget can best be described as a skilfully designed pre-election Budget which is being sold by the Chancellor to the British electorate with an expertise in window dressing which makes even Colman, Prentice and Varley look like amateurs in the art of selling worthless policies.

Many people are being led to believe that the Income Tax and other reliefs in the Budget are designed principally for those in the lower income groups. An analysis of the reliefs—which I welcome so far as they go—indicates that by raising the tax exemption limit, raising personal allowances, the abolition of the tax rate of 1s. 9d. in the £ and the reduction of the 6s. 3d. rate to 6s. and the 4s. 3d. rate to 4s. brings about a result which allows about £108 million in relief to be spread among 4 million people, whereas the smaller sum of £78 million will be spread among 17½ million people.

The Financial Secretary to the Treasury (Mr. Anthony Barber)

I would like to clarify one point which may be of interest to the hon. Member. The total of £186 million—that is, the changed personal allowances and reduced rate bands—means that 40 per cent. of the cost will be in respect of those who earn below £1,000 a year and 50 per cent. for those who earn between £1,000 and £2,000 a year.

Mr. Gourlay

I am well aware of the figures which were given this afternoon by his right hon. Friend and the fact that people earning less than £1,000 a year will pay £100 million a year less tax and that those earning between £1,000 and £2,000 a year will pay £120 million less. This means that £220 million of tax relief goes to people who are already earning a high income. The majority of people in my part of the country have wage levels which are nothing like that.

Having give the crumbs to the lower income groups the Chancellor intends, next July, to take the crumbs back by way of increased National Insurance contributions of 1s. 1d. a week. This reveals that very little real benefit will be derived by those earning between £10 and £12 a week. Many of my constituents have "take-home" wages much below this.

In the "little Budget" of July, 1961, the former Chancellor said that he was taking restrictive measures—the pay pause, and so on—to strengthen the economy. It is worth remembering that at that time there were about 350,000 unemployed. Today, as the result of the economy having been strengthened by the measures adopted at that time, we have a post-war all-time high of nearly 900,000 unemployed. By these figures can be measured the success of Tory policy.

In the debate yesterday the former Secretary of State for Scotland said that the policy of the then Chancellor in the Budgets of 1961 and 1962 was right and had made is possible for the present Chancellor to make tax reliefs this year. A number of hon. Members opposite have repeated that sentiment today. Here we have stated in unmistakable language by a former member of the Cabinet the Government's Budget strategy, which shows that this year's Budget is deliberately designed as a "give-away" Measure to coincide with General Election year. Since so many Tory Budgets have resulted in unemployment we are right on this occasion to criticise it and to say that we expected a really inspiring Budget. That is, perhaps, even more the case in this year of national productivity. Productivity obviously cannot be increased as it should be with such a high level of unemployment. Unless this problem is tackled with vigour and determination, unemployment will grow like a snowball.

The Income Tax reliefs give no increased spending power to the unemployed and those relying on sickness benefit or National Assistance. It is no use the Treasury telling us that the benefits will be increased in the coming months, because when the increase is given it will not allow people suffering from long-term unemployment and on National Assistance the opportunity to purchase the goods they require. Shops in the development areas suffer considerable loss of business, compelling them to reduce their staffs, and the snowball of unemployment grows at an alarming pace. Hence the need to tackle with the drive and energy of a wartime operation the black spots of unemployment growing all too rapidly in my constituency and elsewhere.

The right hon. Member for Renfrew, West (Mr. Maclay) and the noble Lord the Member for Edinburgh, North spoke of the new principle in the Budget of tax-anon according to geographical position. While the Chancellor has broken new ground, I do not think that he has been quite bold enough in his tax concessions to the development districts. Some of my hon. Friends may not entirely agree with me in thinking that the free depreciation is not additional tax relief, but merely gives to the industrialist the choice of when he would prefer the relief to which he would normally be entitled over a period of years.

Had the Chancellor, in addition to the free depreciation proposal, given a tax holiday—perhaps even a 100 per cent. tax holiday—in the first year in which an industrialist opened a factory in a development district, reducing the relief to nil over a period of two or three years, he would have given some real incentive to industry to seek new pastures in areas of high unemployment. A limited tax incentive scheme would have had to be designed to give additional assistance to existing industries genuinely expanding in the development districts.

That brings me to Purchase Tax—an indirect tax that hits the small wage earner harder than it does most people. Those on low wages, and the unemployed and disabled, have to purchase the necessities of life—clothing, shoes and furniture—in the same market as the man on £1,000 a year, without getting any advantage from the Budget. In the motor-cycle and scooter industry, no less than six factories have been closed in the last year or two, causing considerable redundancy. The production rate of motor scooters is almost 37 per cent. below the 1961 rate, yet this is the form of transport that the less affluent members of society are forced, by economic circumstances, to use.

Nevertheless, the rate of Purchase Tax on scooters is the same as that on the most expensive motor cars—the Rolls Royce, the Daimler and the Bentley—whose purchasers have, in the main, a tax concession through their expense allowance. Where is the justice of such discrimination? When we look at the record, we find that in October, 1955, those cars carried a 60 per cent. rate of Purchase Tax, which is now reduced to 25 per cent. In 1955, scooters also attracted a 30 per cent. rate, and that too has been reduced—but only by 5 per cent., to 25 per cent. A good case can be made out for the Chancellor to look again at this aspect of Purchase Tax policy.

A constituency problem of considerable importance is the contraction of the linoleum industry, which will have tragic consequences for many families unless immediate remedies are found. Only a few years ago, Kirkcaldy was a thriving, forward-looking community, with practi- cally no unemployment. It now finds itself in an acute industrial position. The town's three basic industries were textiles, coal and linoleum, but as a result of the closure of the new Rothes pit—which was to have attracted more labour and to have brought great wealth to the community—and the contraction of the textile industry, unemployment has seriously increased over the past few years. Last week, the closure of a large linoleum factory was announced. That will mean a loss of over 600 jobs, at least, and the figure might rise to as many as 1,000.

In March of this year, I led a deputation representative of the linoleum manufacturers and the trade unions to the Economic Secretary to appeal for removal of Purchase Tax on linoleum and felt based floor coverings. The deputation was received most courteously, but there is now great disappointment in the burgh that the Chancellor has not removed the 10 per cent. Purchase Tax, which would have cost him about £1¾ million. This, added to the Budget deficit of £687 million, would never have been noticed. I do not claim that this in itself would have saved the industry, but the concession would have assisted the home market, which is an essential base for the export market, because about 32 per cent. of the linoleum goes abroad.

I also make a plea to the President of the Board of Trade, who is not with us tonight, for the removal of the 15 per cent. import duty on linseed oil. This is one of the main ingredients in the manufacture of linoleum. The removal of this duty would be of enormous benefit to the industry in lowering manufacturing costs, because the European firms with which it competes in the export market can purchase their oil supplies cheaper than British firms. The closure of this linoleum factory in August, through the centralisation on production in Staines, which is already an over-congested area with considerable labour difficulties, will raise the level of unemployment in Kirkcaldy from 8.4 per cent. to 11 per cent. The figure for 1960 of unemployment in the same district was 3.9 per cent. The scheduling of the area as a development district has so far been singularly unsuccessful, as those figures so graphically demonstrate, and none of the jobs from the pipe-line have so far gone there. It is the duty and responsibility of the Government to provide the opportunity to work, and I regret that the Chancellor's proposals are quite inadequate to meet the challenge of the development districts.

A great flourish was made when the President of the Board of Trade visited Scotland some time ago to open the industrial estate at Donibristle. We have been told that a number of inquiries had been made by firms about this industrial estate, but so far no jobs have resulted. It is an ideal site on the main railway line which, fortunately, Dr. Beeching is not proposing to touch at present.

There will shortly be the attraction of the Forth Road Bridge, except that the Government are to use the deterrent of tolls. It has been said that tolls on the bridge will not prevent industry coming to that area, but they will certainly not attract industry, which is what is required at the present time. Let the Government be bold, take heed of responsible public opinion in Scotland and give industry the attractions which a toll-free bridge would command.

The Government should also bear in mind the car factories established at Bath-gate and Linwood. Donibristle estate would be an admirable site for some of the car component factories. If we have the bridge without tolls this would obviously be an added attraction for those factories being set up in that part of Fife.

With regard to the clearing of derelict sites under the Local Employment Act, I should like the President of the Board of Trade to deal generously and expeditiously with any application from the local authority when it wishes to demolish the empty linoleum factories. The present buildings are old, with few load bearing walls, and quite unsuitable for modernisation to suit modern industrial practice. In fact, with the considerable rate burden on the people living in the area, I would consider this an ideal opportunity for the Board of Trade to exercise its own powers and clear the site for the authority.

While I welcome the Chancellor's statement about leaving the tax on fuel oil for industrial use and relating it to the need for sustaining the coal industry today, I hope that the Government will do all that they can to insure a speedy decision to make the new power station in Scotland a coal-fired station. I hope that the Government realise how fundamental this decision is for the future economy of Scotland. In fact, if it is taken, it will not mean additional jobs in Scotland but will merely ensure that the miners presently employed there will have security of employment for some time to come. A relaxation in the tax on fuel oil, especially for public transport, would have been a worth while measure, I believe, to stabilise transport costs.

We all hope that the Chancellor's optimism will be justified and that his Budget measures will be effective in creating economic expansion without inflation and in removing on a long-term, not a short-term, basis the ravages of unemployment. However, the history of successive Tory Governments shows that their economic policies have been a complete failure except in their ability to stop the economy between elections and then change the red light to green when they seek a return to power. This, I am convinced, the electors are now more than ever determined to prevent at their next opportunity.

8.46 p.m.

Dame Irene Ward (Tynemouth)

I hope that it will be counted as a good mark in my favour that I have sat here throughout the debate with the main object of thanking my right hon. Friend the Chancellor of the Exchequer for one proposal in his Budget which, until now, has passed without comment. Like my noble Friend the Member for Edinburgh, North (The Earl of Dalkeith), I am very surprised that no one has conveyed to my right hon. Friend the thanks of the Shipbuilding Conference for his decision, which will favourably affect ship repairers and dry dock owners.

Yesterday, I received from the Shipbuilding Conference a note in which I read with great pleasure the following sentence: The doubling of the annual allowance for industrial buildings and structures meets the representations made by the ship repairers in respect of dry docks. We are all very grateful for it.

In my constituency, there are the most important dry docks in the whole country. My right hon. Friend will understand how much I welcome the concession. When I returned to the House of Commons in 1950 and was in opposition, one of the first jobs which I was asked to undertake—at 6.30 a.m.—was to move an Amendment on these very lines. Since then, in co-operation with several of my hon. Friends who are interested in dry docks, I have moved Amendments on four other occasions, nearly always at about 6 or 6.30 a.m. This final victory only emphasises what I have thought for a long time, that it takes at least 12 years to win a battle. But the victory, when it conies, is nevertheless very welcome, and I am delighted to commend my right hon. Friend for what he has done.

Having prefaced my short speech with a commendation, naturally I now turn to one or two criticisms. As everyone has, I congratulate my right hon. Friend on his imaginative financial policy for the development districts. We have long asked for special financial arrangements of one kind or another, and all of us in the north of England, as my hon. Friend the Member for Newcastle, North (Mr. R. W. Elliott) said at Question Time today, greatly appreciate the forward move which my right hon. Friend has made. But I hope that the Chief Secretary will forgive me if I ask him to convey to my right hon. Friend and to the other Ministers concerned the fact that these new financial concessions will be effective only if there is a readjustment of the boundaries.

May I give one illustration of what I mean from my own constituency? One of the extraordinary things which the Ministry of Labour does in assessing unemployment figures is always to run two or three areas together, and my constituency—consisting of North Shields and Whitley Bay—is aligned with Wallsend. We come in a group which is called North Tyne, East. The unemployment figure in that region at present is 6.8 per cent., which is very high indeed.

I noticed that my right hon. Friend the Chief Secretary this afternoon rightly drew attention to the fact that one of the actions of the Government to help shipbuilding areas which are suffering from a high level of unemployment was to bring forward some of the naval construction, for which we on the Tyne are very grateful. But may I point out to my right hon. Friend that if the naval construction goes to Wallsend and to the south bank of the river, as indeed it will, where it will help the unemployment situation enormously and will lead to the reemployment of men in their traditional trades, the result will be that my area of North Shields will not get any benefit from the ship repairing. Although this will reduce the overall unemployment figure for the area, it will not help either North Shields or Whitley Bay.

When I contacted the Ministry of Labour about linking all these areas together, I was told that it was done because there was so much interchange of labour between Wallsend, North Shields and Whitley Bay. But this is a very old-fashioned idea, and if my right hon. Friend the Minister of Labour lived in the north of England he would know that there was a great deal of cross-traffic between the shipbuilding yards from the north bank to the south bank of the Tyne and from the south bank to the north bank. Most of the people in Whitley Bay go to Newcastle-upon-Tyne to work because Whitley Bay is, in the main, a dormitory area. I therefore feel that the north bank of the Tyne is not in a very happy position.

I rang up the secretary of my right hon. Friend the President of the Board of Trade this afternoon to find out the figure of unemployment which attracts the development grant, and I was told that it is confidential. That makes me wonder on what basis development districts are scheduled. I do not understand, for instance, why Merseyside, which is a river entity, should be scheduled as a development district and Tyneside, which is also a river entity, should not be so scheduled. If we do not know on what basis these districts are scheduled, then we are in no position to say to my right hon. Friend that the allocation of these new financial inducements to industrialists to go to development districts is based on a fair dispensation of finance.

I also point out, because I want to put it on the record, that when the Tory Members of Parliament went to see my right hon. Friend the Prime Minister in December and pointed out one or two things to him—following, of course, the appointment of a special Minister; and we were delighted to have Lord Hailsham so appointed—we also pointed out that we must have a redrawing of boundaries. The Prime Minister agreed with that. He agreed with the point of view that we put forward, and subsequently Lord Hailsham has also agreed. Therefore, I am now wondering—because this all flows from the co-operation between my right hon. Friends the Chancellor of the Exchequer and the President of the Board of Trade—when the views of the Prime Minister and of Lord Hailsham, who has special responsibility for our area, are to be put into operation. It would be very disappointing to the North-East Coast if, after having had such magnificent recognition as to bring about the appointment of Lord Hailsham, we cannot have the full benefit of the financial arrangements which my right hon. Friend has indicated in his Budget.

I am sorry that I must raise this next point, but it is tremendously important. I notice that my hon. Friend the Financial Secretary, who answered my Question this afternoon, is no longer present. I think, however, that we must try to find a better basis for dealing with those who now come out of the category of taxpayers. I am delighted about this and about the increased concessions to people who live on small fixed incomes, although the Chancellor could have gone much further.

I always feel that there is something a little unjust in talking about the theme of the Budget as being expansion without inflation. I know that my right hon. Friend the Chancellor has acted humanely, but I put this point to him. By giving Income Tax concessions to those living on small fixed incomes, and taking great pride, as my right hon. Friend has every right to do, in removing a large number of people from the need to pay Income Tax, it seems most extraordinary to indicate that, although my right hon. Friend has an expanding Budget without inflation, the people who were at the lowest income level should ever have contributed to inflation. That was absolutely untrue. Inflation could not be created by people living at the lowest income level who have to pay the high prices which they have to pay for fuel, for gas and electricity, for rates and for almost everything else. All those people are spending their money—and they have very little of it—on the necessities of life.

Therefore, to talk about an expansionist Budget in relation to those people, who certainly have found themselves in great difficulty and will continue to do so until we do something to relieve them of their rate burden, is not a very fair way of trying to propound the theme of expansion without inflation. I am not criticising unduly the Surtax reliefs which were given some years ago, but it is true to say—I want to put it on the record—that when those in the higher income bracket get an Income Tax or Surtax concession, the tendency is to spend it on the prosperous and happier things of life. A person in that position is not concerned with coal, gas or electricity bills. I hope, therefore, that my right hon. Friend, when talking about the small fixed income group, will assure us that their case will not add to the inflationary pressure we all want to avoid.

I come now to a very difficult matter. I want to know how much the Income Tax relief in respect of National Insurance contributions will cost. Last time I asked a Question about this, my right hon. Friend the Chief Secretary said that is was about £34 million. I assume that with the additional reliefs it must have gone up quite considerably. I suggest that the total cost of reliefs in respect of these contributions is about £40 million to £45 million—a very large sum.

What will happen to the small income groups? Will they have to pay the full increased contribution rates without benefiting from the tax concession? I have tried to raise this matter many times and I hope that the Committee will bear with me. I have always thought that the House as a whole never really understood the problem, since most hon. Members have to pay Income Tax and most therefore get the relief which is shown every month on the little slip indicating that their salary has been paid.

But what is the good of relieving people of Income Tax and then making them pay higher National Insurance contributions? There must be a large number of people who will be less well off than before because of this. It is a very difficult question and I hope that my right hon. Friend will tell me in no uncertain terms that if some people are found to be worse off because they do not qualify for Income Tax relief in respect of National Insurance contributions, he will find some way to make it up to them.

If he were to do that, I could say wholeheartedly how much I welcome these concessions to those living on small fixed incomes. But unless I get such an assurance I shall have a sense of injustice on behalf of these people, and I am sure that my right hon. Friend does not want that. I shall say no more tonight except to thank him for the concession on the dry docks and the help that is being given to the areas of high unemployment. I hope also that we shall see the boundaries redrawn. Finally, I remind him again that I want something cone about those who are technically supposed to benefit from the Budget but will not do so.

9.5 p.m.

Mr. Douglas Jay (Battersea, North)

This debate has been enlivened by some excellent maiden speeches, by the rather gloomy spectre of the ex-Chancellor, like Banquo's ghost returning to the feast, and by the conversion of the hon. Member for Kidderminster (Sir G. Nabarro) to Socialism. I know that the Chancellor's total reversal of his predecessor's policy is supposed to show that we have now entered a brave new world of expansion, and the hon. Member for Portsmouth, Langstone (Mr. Stevens) told us that there were wonderful novelties in this Budget.

Is it as new as all that? The Chancellor told us at the start of his speech: The theme of this Budget is expansion …"—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 454.] Six years ago, in April, 1957, the present Minister of Defence in his Budget speech said: Expansion must be the theme …"—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 982.] Whether the Chancellor's words are brave or not, they are certainly not very new.

The Budget of April, 1957, which started with those inspiring words, ended only five months later with a 7 per cent. Bank Rate and the worst deflation we had had in this country since before the war. We are now told that all this stop-go and stagnation have come to an end. It is true that the previous Chancellor has gone and the present Chancellor and the Prime Minister have stopped, but I shall believe in the reality of this change when the present right hon. Gentleman's Budget has had as long as it took to show up the Budgets of 1962 and 1957.

In any case, I do not see how the country can have very much confidence in the forecasts of this Government until we have had some explanation of the incredible blunder made last year. So far we have had none, in the Budget speech, or in White Papers, or in the posthumous apologia of the ex-Chancellor yesterday. What the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) seemed to forget in his speech was that almost everybody, except himself, believed last year that an expansionist Budget was necessary. The National Institute of Economic and Social Research in February, 1962, before last year's Budget, said: The prospect would probably leave the margin of spare capacity in the British economy at the end of the year— that is, 1962— as ample as it is now—and unemployment may be higher. I said myself, without claiming any special knowledge or special profundity: … the Chancellor is now giving a new deflationary twist to the economy … which I should have thought—unless there are really strong expansionary forces which nobody seems to be able to detect except the Government—can only result in another year of stagnation if not of decline."—[OFFICIAL REPORT, 11th April, 1962; Vol. 657, c. 1353.] We are not being wise after the event at any rate.

Despite all this, the then Chancellor insisted on giving another turn to the deflationary screw to the tune of another £100 million and he defended it in these words: By the end of 1962 … the cumulative effect of all the factors … could result in too great a call on our resources if we do not keep the balance right."—[OFEICIAL REPORT, 9th April, 1962; Vol. 657, c. 965.] In fact, by the end of 1962 we had a sharp drop in production and nearly 900,000 unemployed. Incidentally, this was to have been the first year of Conservative planning.

It is no wonder that last night the Economic Secretary preferred to talk about the future and not about the past, and no wonder that the Government have now abandoned the Economic Survey with some estimate of the future and given us purely a report describing the previous year. A miscalculation of this order is no joke for the country. It has meant not merely keeping hundreds of thousands of people unemployed unnecessarily, but a really calamitous loss of production.

The latest index for industrial production for January of this year, seasonally adjusted, was the lowest figure since August, 1959, and was six points below January, 1961. Even ignoring the January figure on account of the severe weather, the December figure, seasonally adjusted, is not merely 5 points below that of July, 1961, when the right hon. and learned Gentleman started this deflation, but lower than the average for the whole of 1961 and 1960. Indeed, we are now back where we were in January, 1960, more than three years ago.

For the past nine months industrial capacity and manpower have been under-employed by at least 10 per cent. on average. I have even the hon. Member for Kidderminster with me when I say that they have been under-employed. [HON. MEMBERS: "He is not here."] I had his oratorical support earlier. The fact that they were under-employed by at least 10 per cent. means lost income in terms of goods and services for the country of over £1,000 million in the last nine or twelve months.

The cost of this miscalculation is vastly, indeed immeasurably, greater than all the tens of millions of £s here and tens of millions of £s there which we discuss for weeks on end in the Finance Bill and on the Estimates. But even that is not the full measure of the damage done by the miscalculation a year ago. Not merely did production fall but private industrial investment fell, too, as a result, by nearly 20 per cent. The cost of the 1961–62 deflation is not merely £1,000 million lost production but also less productive capacity in the future than we might have had. The evil which Tory Chancellors do, I am afraid, lives after them. And I fear that the final verdict on the Chancellorship of the right hon. and learned Member for Wirral can only be that it has done fully as much harm to the country as did the Suez expedition.

I will, however, at least say that this experience has taught us one lesson. Two years ago the right hon. and learned Gentleman made a £80 million cut in Surtax, and he justified this on the ground that though it might not be very fair, it would be a marvellous incentive to production and exports. Since he announced that Surtax cut, production has been more stagnant and exports have been more sluggish than at any time in this country for twenty years. Indeed, production is lower than it was when the cut was announced two years ago. At least we can say of the previous Chancellor that he proved to the world beyond serious doubt that all the Tory arguments about Surtax and incentives are no more than the hypocritical rubbish which every honest person always knew them to be.

The present Chancellor tells us that all this stop-go, all these mistakes and all this deflation are over and that at long last he accepts the N.E.D.C. target of a 4 per cent. advance this year. But why only 4 per cent.? The N.E.D.C. and O.E.C.D. target was supposed to operate from 1961. It was supposed to operate from a point of full employment. As we now have at least 10 per cent. of capacity unemployed and as we have stagnated for three years, the output target this year should clearly have been more like 10 per cent. and the guiding light for incomes more like 7 per cent. or 8 per cent. If one has fallen half a lap behind in a race, one does not catch up by running from that moment onwards at the same speed as others in the race.

In a rather striking sentence of the Budget speech the Chancellor admitted the contention of the National Institute that a 3½ per cent. increase in output this year would not reduce unemployment at all. He said: … we have spare capacity and present trends of demand do not seem strong enough to ensure of themselves a full enough employment of our resources in the coming year. Our capacity to produce would be rising about as fast as demand."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 472.] If that is true, surely the £400 million tax reliefs for which the National Institute called over and above the increase in Government expenditure, would be needed to achieve full employment, and the 4 per cent. rise in output at which the Chancellor is aiming is bound to leave us with serious unemployment next winter. On that argument and on his own showing, the Chancellor is budgeting for continued unemployment throughout the year—unless, of course, the idea is to make a cut in indirect taxation suddenly through the regulator when the Prime Minister has decided on the date of the General Election.

However, the Chancellor deserves some credit for the details if not for the totals of his tax reliefs. He has at any rate selected the method of relief through the personal allowances for which we asked so loudly last year and which he and his hon. and right hon. Friends unanimously voted against. But the right hon. Gentleman has really gone a pretty pitifully short distance in the right direction. It was really scandalous that before the Budget a single person was paying Income Tax on £4 a week and a married couple on £6 a week. Even now, after all the Chancellor's concessions, the single man still pays on £6 a week and the married couple still pay on £10 a week.

Of course, at the same time as Income Tax is coming down we are all going to pay more in National Insurance contributions, rates, railway fares and postal charges. The single man now earning £6 or £7 a week not merely still pays Income Tax but pays a National Insurance contribution at the rate of 11s. 8d. a week, and 14s. 1d. a week if he has contracted out, and a large range of indirect taxes. This is, I believe, a totally unfair burden to impose on the smaller, and, indeed, the smallest incomes of any kind and it shows how far Tory policy has gone in shifting the burden of taxation away from the higher incomes and company profits and on to the mass of wage earners.

The main instrument for doing this has been, of course, the weekly National Insurance contribution. While the Chancellor is boasting of his tax cuts, the Minister of Pensions, at his behest, is raising the National insurance contribution this year, excluding the Exchequer share, by £178 million, which is very similar to the amount now given away in taxation. The Chief Secretary said today that people, of course, get increased benefits for their higher contributions. That would be a perfectly valid argument if the contribution was any longer actuarily related to the benefit. But it is no longer so related, because, in a large measure, the contribution is a tax, and as such an exceedingly unfair one.

Mr. Geoffrey Stevens (Portsmouth, Langstone)

Before the right hon. Gentleman leaves that subject, would he be good enough to let the Committee know something about the total cost to each individual of what I might call the "Crossman plan"?

Mr. Jay

Certainly not on this Budget. I am talking about the existing National Insurance contribution, but I can assure the hon. Gentleman that any such plan introduced by the Labour Government will be much more fairly related to incomes than the present system. Indeed, by simultaneously raising the contribution and lowering tax even by the allowances the Chancellor is, in fact, increasing the burden on those at the very lowest end, as the hon. Lady so rightly said, of the income scale and relieving it on those higher up.

The right hon. Gentleman could have avoided this perfectly easily had he added two other reliefs—had he reduced the 10 per cent. rate of Purchase Tax falling on clothes, boots and shoes and furniture back to 5 per cent. and if he had postponed the rise in National Insurance contributions until next year. I believe that both these proposals would not merely have made the whole policy much fairer but that they would have been a good piece of planning in a year of exceptional unemployment. In any case, it is rather a swindle that Purchase Tax on clothes, shoes and furniture should have been doubted at a time when it was really unnecessary on the ground of mopping up purchasing power and then maintained at a time when Purchase Tax on motor cars and other things was halved.

I can assure the Chancellor of the Exchequer that the depression in textiles and in the furniture and boot and shoe industries has been every bit as severe this winter as in the motor industry and that at present it is even more severe. I think that the very least the right hon. Gentleman should have done would have been to reduce that 10 per cent. to 5 per cent.

It was quite a change to hear from the President of the Board of Trade in this debate. All through the long winter months with regional unemployment at the highest figure for 20 years, and for which he is mainly responsible, the right hon. Gentleman never made a speech in this House. He handed over the job of talking to Lord Hailsham and to the Minister of Labour who in his speech yesterday audaciously announced three revolutions and then said that they would all require legislation.

I thought that the speech of the President of the Board of Trade was singularly out of tune with the situation in the hard-hit areas. In the right hon. Gentleman's speeches everything is all right. Nothing is wrong. The Prime Minister is in Admiralty House, and all is right with the world. Indeed, who would have guessed from his speech that we had three-quarters of a million unemployed, and one of the worst export years for 10 or 15 years? However, we have at last had some action to deal with unemployment in these areas—announced in April and still needing legislation—to counter the unemployment which existed as early as December. If this is really necessary why was it not done before?

We were continuously told throughout the winter that no new powers and no new action was needed. We are now to have free depreciation allowances for all firms, old and new, in development districts, applying to all investment, for replacement or otherwise, in plant and machinery, and also 25 per cent. for building grants and 10 per cent. for machinery grants. It is curious that at the same time as all this was being prepared the President of the Board of Trade was reducing the Board of Trade's estimate for expenditure in development districts this year from £41 million to £24 million. We should like to know whether this stands. Is less money to be spent despite all this ambitious talk, or are we to have a further estimate? I think that some time fairly soon we should like to know.

If all this money is to be spent in this way, I think that at least some conditions ought to be laid down. First, these financial aids must not become a substitute for firm control of expansion in the congested areas. If they did, we could spend a lot of public money and not get any more employment into the needy areas. I was not at all convinced by the reply of the President of the Board of Trade yesterday about the Ford expansion at Basildon.

Secondly, if we are to do this, we must get back to large homogeneous development areas instead of the present ridiculous bits and pieces. It will be intolerable to have one sort of Income Tax system on one side of the Tyne, and another on the other side; to have one sort in Paisley and another in Glasgow; or one sort in Birkenhead and another in Liverpool. The right concept is broad development areas which we use all these measures to equip and modernise in all the necessary ways.

Thirdly, these grants must not be treated as a substitute for positive development of estates and the building of factories by the Government. I am a little sceptical, because while all this is being talked about, the Government are still actively hampering the industrial estate companies from getting on with the job of building factories and clearing sites in these areas. Surely if we are to spend, say, £1 million of public money, it would be better to spend it positively building a new factory which will provide new employment and perhaps incidentally earn a rent for the public funds, rather than subsidise the replacement of assets in some existing factory which would have been replaced anyway?

The President of the Board of Trade was as cheery and jolly about exports as he was about the development districts. The Times compared him to a breezy parson making a late night religious broadcast. But even so he would not venture beyond worthy sentiments, even as far as accepting N.E.D.C.'s modest target of a 5 per cent. increase per year in exports. Here even the Chancellor of the Exchequer was in advance of him. He said that the attainment of a 4 per cent. growth rate needs an even greater increase in our exports. I suppose that this means at least 5 per cent. But is it really too much to ask the Ministers mainly concerned to get together and decide whether or not they accept even the N.E.D.C. export target? Would it be rather too audacious, in 1963, to get as far as some broad export target for the main industries?

Two things that strike me about this export problem are first, the smallness of the gap between success and failure. N.E.D.C. wants a 5 per cent. annual increase and we have got 2 per cent. The difference, 3 per cent., is only about £100 million a year, or less than half of 1 per cent. of our national income. If we could switch to exports each year an amount equal to half of 1 per cent. of the national income it would represent the whole difference between success and failure in our economic policy. I cannot believe that it is beyond the wit of administrative economists and businessmen in this country to achieve that.

The other remarkable feature is, as has been said today, that something like 30 per cent. of our exports come from no more than 40 firms. A vast number of small and medium-sized firms contribute extraordinarily little. Is not this exceedingly strong evidence that these smaller firms have not the know-how, the technique and the resources to carry out a difficult job of organisation? If they had, would not they, probably quite easily, be able to contribute this extra £100 million a year? I ask the Chancellor and the President whether it is really impossible for the Government to work out some plan for industry, for instance, a central selling agency for each industry which would mobilise a great number of these smaller firms?

Are the Government proposing to do nothing at all to produce practical proposals to develop Commonwealth and E.F.T.A. trade? The President of the Board of Trade said that the Government would talk with Commonwealth and E.F.T.A. Ministers. But apparently no British plan or British proposals are to be laid before them. Of course, characteristically the right hon. Gentleman treated the Brussels breakdown as something that did not matter very much. It was not of very great importance and we should all go on nicely as before. The right hon. Gentleman did not seem to think that any action had to be taken about it. I agree with the right hon. and learned Member for Wirral that we need a stronger Commonwealth and E.F.T.A. co-ordinating body whether on the lines of O.E.C.D., or N.E.D.C. as the right hon. and learned Gentleman recommended.

Is this even being considered by the Government in order to get at least one step nearer freer trade in the Commonwealth? Could not we offer—to give one example—to sweep away the remaining tariffs on Commonwealth goods and to give some long-term contracts for Commonwealth primary products, if in return the developed Commonwealth countries would lower their tariffs on manufactured goods?

That would not be contrary even to G.A.T.T. and it would, incidentally, fit in with the Kennedy Round. Why not try it, rather than sit around doing almost nothing at all? Have the Government considered this? Why not propose some changes in G.A.T.T. to enable trade to be freer—for instance, allowing a widening of preferences if the change consisted of a cut in tariffs rather than an increase? This is something which we could press on other members of G.A.T.T. I know that someone will raise objections to any suggestion of this kind which may be made. But we are more likely to get somewhere with negotiations nowadays when we are not negotiating with General de Gaulle.

I gladly grant that the present Chancellor of the Exchequer has two great advantages over his predecessors. He understands the subject and he is not really a Conservative. Perhaps there is some connection between the two. I know that the right hon. Gentleman halved the stamp duty on share purchases, to try to prove that he is some sort of Conservative—he could not possibly have had any other reason for doing that. But I do not believe that these virtues, which I gladly concede to the right hon. Gentleman, will be enough to save either him or the country. Despite all this, we still have no plan, no real planning, not more than a sort of nodding acquaintance with the N.E.D.C. targets, no drive or inspiration in our economic policy.

This timid Budget, I believe, is not enough to give us real steady expansion instead of the stop-go of recent years. Nor do I think that it will save the right hon. Gentleman from the fate of his predecessors. If it leads us into rising unemployment again this autumn, I warn the right hon. Gentleman, judging by past form, that it is the right hon. Gentleman himself who will go and the Prime Minister who will stop. That certainly will not satisfy the country. What the country wants, as every by-election has shown, is to see the whole Government, including the Prime Minister and all this atmosphere of complacency, inertia and confusion, go together—and go now.

9.31 p.m.

The Chancellor of the Exchequer (Mr. Reginald Maudling)

I did not want to take up too much of the time of the Committee this evening, because I am well aware of the fact that I made an exceptionally long statement to the Committee last week, which was quite a heavy burden for me and probably also for the Committee. I am also well aware of the fact that so many hon. Members who wished to speak were unable to do so. In answering the debate on this occasion, it is fair to point out that the criticisms of my Budget proposals which have come from the other side of the Committee have been, on the whole, on a fairly muted note. They have been answered by my hon. and right hon. Friends in the main on substantial points, leaving a number of minor points which certainly will be dealt with thoroughly in the course of our discussions on the Finance Bill.

What I should like to do in winding up this debate is to deal with the broad impact that the Budget has had and the general reactions which one has received from many quarters, some more unexpected perhaps than others. Before turning to the points raised in our debate, perhaps I could say something about the external reactions. For any Chancellor introducing a Budget, particularly introducing one for the first time, there are obviously moments of considerable strain, the responsibility devolving upon him is considerable; the impact of the appearance of the Committee, from the delightful hats on one side and the delightful waistcoats on the other. The general atmosphere on the occasion is one which inspires a certain amount of awe.

One can never forget as Chancellor of the Exchequer that the effects of the Budget from the national point of view must be considered not only in this Committee and in this country but also overseas. I am happy to be able to tell the Committee that the effect of the Budget so far overseas appears to have been a favourable one. The effect on sterling has been good. Sterling has strengthened in the market. I think overseas people who deal in currencies and deal in business, who therefore are in the habit of forming estimates of the likely course of the United Kingdom economy, have shown by their actions in the markets since my Budget Statement that they have confidence in our determination to achieve a target, a programme of expansion in this country without inflation.

I turn to the attitude of the Opposition, which I think is a little ambiguous, towards the Budget. They seem to be very willing to wound but rather afraid to strike, and their position is still rather ambivalent on quite a number of points. We had the first reaction from the right hon. Member for Huyton (Mr. H. Wilson). I am sorry that he is not here, but I want to comment on what he said. He produced a considerable tour de force, as he often does. He is the memory man of politics. I sometimes feel a little sympathy for him. He has forgotten nothing. To him nothing is new. To him nothing is fresh. All has been said before. All can be quoted, with the date for it. He reminds me of the famous description of the Mona Lisa—"This is the face upon which the ends of the world have come, and the eyelids are a little weary".

The right hon. Gentleman pointed out with some justice that many of the proposals in the Budget have been supported in the past from the benches opposite. That is fair enough. They supported a very large number of proposals in the last ten years, some good, some bad. But if someone backs every horse in the race he is certain to get the winner. That seems to be the principle upon which the Opposition have been operating. If they were charged 16 per cent. on turnover, it would be disastrous!

The hon. Member for Cardiff, South-East (Mr. Callaghan) was, I thought, also a little self-contradictory. He said that this was an election bribe. He talked about bribes and bogies. This was an election bribe, he said, but he also said that it was not big enough. That was rather a strange contradiction. He would have done much more—much more bribing, much more money. This is very interesting.

Mr. James Callaghan (Cardiff, South-East)

Lots of bribes are not big enough.

Mr. Maudling

The hon. Gentleman says that lots of bribes are not big enough. Bigger and better bribes—this is the new line! Then the hon. Member for Sowerby (Mr. Houghton), who spoke earlier today, said that this was a Labour Budget, and this is the line which has been taken. It is rather odd. Sometimes the Opposition say that this is a dull Budget. Then they say that it is a Labour Budget. Perhaps they are right. I am not sure that this line of saying that it is a Labour Budget will be very effective. I think that I should warn the Labour Party that stealing somebody else's clothes is very difficult if he is already wearing them.

Apart from the criticism that it is an election bribe—an inadequate election bribe; it is a strange criticism—the main line has been the criticism of the Budget, not of this year, but of that of 1962, a criticism which was very firmly and conclusively answered by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in his speech yesterday. [Interruption.] I think that when the hon. Member reads HANSARD he will realise exactly what I mean—both firm and effective.

I turn to the general judgment which has been made of the Budget. One must look at two things—first, the judgment on the purpose of the Budget and, secondly, the judgment on the measures it contains. As to the purpose, expansion without inflation, as I said, has been accepted on all sides. The basis of the N.E.D.C. target I explicitly accepted, and in accepting the long-term 4 per cent. target I equally accept the export estimate in the long term. This is perfectly true. It is all of a pattern.

The point is that one should be careful about trying to make too precise estimates for a twelve months period. The Party opposite learned a certain amount about that. The right hon. Gentleman complained about our estimates being out by the odd 1 per cent. or 2 per cent. He said that we have abandoned our estimates of the future. The Labour Party abandoned its estimates of the past, for a very good reason. In 1948 the Labour Government produced a document showing how far their 1947 targets were out—9 per cent. on imports and 93 per cent. on the balance of payments. It is sensible in looking at these matters to fix a target over a period of years, but, in the shifting situation that a trading nation has to meet, I do not think that to try to fix precise targets for twelve months is a very profitable occupation, as experience has shown.

Mr. Jay

As the Chancellor of the Exchequer has so much time, would he not at least say that we ought to do more than 4 per cent. this year starting from where we are now?

Mr. Maudling

I not only think that, but I have said it already. To try to make precise to a percentage point how much it should be more than 4 per cent. in the coming year would be unwise. I want the maximum, without a return to inflation.

I turn to the details of the measures, and I think that two points should be considered; firstly, the total impact and, secondly, the details. Are they right in either case? Some commentators have said that I have gone to the limits of prudence in the amount—"given away" is not a good phrase—by which I have reduced taxation. I do not think anyone has suggested that I have been excessively generous in the amount by which I have reduced taxation. This is rather surprising in view of the fact that it is the first peace-time deficit above the line, as far as I recall. Certainly, with a deficit overall of nearly £700 million, it is rather surprising and encouraging—and shows understanding of our present economic system—that people do not feel that I have gone too far in the amount of relaxation I have introduced.

Some people say that I have not done enough, although I notice that those who in the past have been most eloquent in their criticism of stop-go policies are now urging me to go as fast as possible. This seems a little inconsistent. The hon. Member for Cardiff, South-East said that I should do more. He did not say how much more, and I would be interested to know his views on this. My hon. Friend the Member for Kidderminster (Sir G. Nabarro) mentioned the figure of £400 million—a strange coincidence, for it was the same figure as that mentioned by the National Institute of Economic Research. It may have been a coincidence. The hon. Member for Cardiff, South-East said that I was in danger of doing too much—

Mr. Callaghan

Too late.

Mr. Maudling

—but now, apparently, he thinks that I am in danger of doing too little. If he wants to make clear his view as to whether I am doing too much or too little he should make precise how much extra he would have done at present and would have added to the overall Budget deficit, because unless he does that it is difficult to follow his judgment.

I think that there has been little criticism in opposition to the particular measures in this Budget and, if I may, I will run through those measures. Schedule A, I think, is widely accepted. The hon. Member for Sowerby did a certain amount of grumbling and reminisced about his previous experiences in a different occupation. But, on the whole, I think that my proposals for Schedule A are broadly accepted as a right and proper measure.

On Schedule B, my noble Friend the Member for Edinburgh, North (The Earl of Dalkeith) raised the question of woodlands. I can assure him that I am well aware of the problems involved here and am studying them. Stamp Duty, surprisingly enough, did not attract much criticism from hon. Members opposite. The hon. Member for Grimsby (Mr. Crosland) said it was a concession to my Riviera friends, whoever they may be; and I hope that there is no harm in having a few friends. I do not think that the hon. Member for Grimsby need worry on that point. Anyone living in France can already buy leading British equities free of duty in Paris. The whole point of my action is to bring this business from Paris to London. I am sure that hon. Members with experience of economics realise the importance of invisible earnings to this country.

Equally, one of the other points of the Stamp Duty reduction was to encourage investment through savings, particularly small savings, in British industry. I am grateful to the hon. Member for Halifax (Mr. Maurice Macmillan) for his comments on this matter. So, apparently, the Stamp Duty is accepted.

We come, next, to capital allowances. These, too, have been accepted by hon. Members opposite. One or two hon. Members have complained that they do not have much effect on the Revenue in this current year. That is the way taxation works. But it is the effect on business decisions that will, it is hoped, precede the actual effects shown in the tax accounts. That is important. I am grateful to the hon. Member for Sowerby for describing it as a "massive aid to industry". I am also grateful to him for the good wishes he gave to industry and to us—or to these changes—and his hope that they would produce firm expansion.

Regarding the Income Tax changes, I was convinced that the changes in the allowances and the reduced rates were this year better than a reduction in the standard rate, although I certainly would not go as far as was implied by the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) who rather gave the impression that a change in the standard rate at any time was mistaken. I do not accept that, and against the background of this year I think that I was right to concentrate these reliefs in the way I have. Perhaps "concentrate" is not the best word in this context. To spread them as evenly as possible through the use of the allowances and the reduced rates is a better way of putting it.

I was rather surprised that the hon. Member for Sowerby should have said that the effects of these changes would be almost negligible in relation to my purpose. Well, £186 million this year, and £240 million in a full year—is that negligible? If it is, I must say that the hon. Gentleman's idea of something effective must be pretty ambitious—

Mr. Houghton

Not negligible in total, but negligible in the hands of the beneficiaries.

Mr. Maudling

If is negligible in the hands of the beneficiaries, into what other hands would he prefer me to put it?

The hon. Gentleman also said, I thought rather surprisingly, that these benefits were too thinly spread. I agree that the actual amount of tax involved for individuals is not spectacular, but when one is reducing taxation for millions of people and spending £186 million or £240 million the individual sums do not look spectacular, but they are very useful. If the hon. Member looks at the amount involved for the £800 a year, £1,000 a year or £1,500 a year man, particularly those with families on whom I was concentrating, he will find the effect considerable.

I am a little surprised that an official spokesman for the party opposite should say that what I am doing is too thinly spread. Hon. Members opposite usually say that the benefits are too concentrated on the people with the bigger incomes; now that we spread them as evenly as possible we are told that we are spreading them too thinly. Hon. Members opposite must make up their minds one way or the other—they cannot have it both ways.

I can assure my hon. Friend the Member for Tynemouth (Dame Irene Ward) that nobody will be worse oft by these changes in Income Tax allowances and alterations in the reduced rates. Under my system, nobody can possibly be worse off by those changes.

The other major system of changes that I introduced in the Budget concerned the areas of high unemployment, and I wonder whether members of the party opposite have fully appreciated the importance and the significance of these changes. They are designed as a coherent system, partly to increase grants of various kinds for public expenditure, partly to increase grants to private industry, and partly as a new tax depreciation system. For example, increasing the grant to local authorities for the clearing of derelict sites, by 85 or 90 per cent. is a very substantial increase indeed.

I think that the hon. Member for Hamilton (Mr. T. Fraser) said that we should do 100 per cent., but I disagree entirely. I do not like 100 per cent. grants or cost-plus. I believe that there should be an element of contribution by the people concerned if the system is to be healthy and satisfactory—

Mr. Thomas Fraser (Hamilton)

As the right hon. Gentleman provided in the Local Employment Act for the Board of Trade to clear the sites, can he say why the Board of Trade is not clearing the derelict sites? If the Board of Trade did it, the grant would be 100 per cent.

Mr. Maudling

The Board of Trade is doing much in its own areas, but my belief is that when it comes to clearing derelict sites as part of a scheme for improving the general amenities of an area, the local authority should take the lead, and the local authority should understand better than anyone else the local requirements.

Then there are the improvement grants, and the new standard grants which will, I believe, be a considerable improvement on the present system. At present, the rate of grant available on new buildings varies widely. It averages about 17 per cent., but in many cases it is less than that. In future, the rate will be fixed at 25 per cent. The new 10 per cent. grants on plant and machinery are entirely new and, in answer to the hon. Gentleman, there is no power in the existing Act to make them.

Representations had been made to us over a long period that certainty in these matters—the example of Northern Ireland is quoted, and I can see that my hon. Friend the Member for Belfast, West (Mrs. McLaughlin) is here—that certainty of minimum grant is very important when trying to sell to potential industrial visitors the advantages of the particular area. Therefore, the introduction of this new standard system of 25 per cent. grants on buildings and 10 per cent. on plant represents a big improvement on what we now have.

Then there is the new system of free depreciation, to which I attach very great importance. I think this is in a sense experimental. I think that it can claim to be fairly bold, and we shall be interested to see how it works out.

The hon. Member for Hamilton was, I think, a little confused about the effects. He asked whether we could be certain that a firm could write off in the first year the whole of the cost of its new investment. That, of course, will depend on the circumstances of the particular firm. In some cases firms will be able to write off the whole of their investment in plant and machinery in the first year. Others will have to take longer. It depends on their level of profits and activities in other parts of the country. But the real problem is a slightly different one.

The real point is that anyone who invests in plant or machinery which qualifies in these areas will be able to say that he need not pay any tax whatever until he has written off 100 per cent. of his investment, plus the 30 per cent. investment allowance. This is the basic point. He can write all this off before he pays any tax. It may take him a longer or it may take him a shorter time to do that, but he can do so in every case. I think that this is—and that it is recognised by the Committee—a pretty substantial additional incentive. Of course, it brings with it the difficulty, which was mentioned by many hon. Members, of distinguishing, and this is inevitable.

The more that we do to improve the circumstances of certain areas, the more we increase the differentiation. It is bound to be so, whichever way we do it, whether by higher grants, tax discrimination, whatever it is; the more we do to help the North-East, Scotland and Merseyside, the more the advantages of being inside and the disadvantage of being outside. I appreciate what has been said about the particular boundaries that have been drawn, and my right hon. Friend the President of the Board of Trade is always willing to consider a particular problem. But I must in this ask for the help of the Committee. If we are to make this work—and I believe that it can work very effectively—it can only be done on the basis of drawing quite clear lines and defending discrimination between people inside and people outside. If we are not prepared to face up to that, the system will not work. If we are prepared to face up to it, I think it will be of very great benefit to those areas, which, I am sure, the Committee is determined to help.

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

If art area is drawn too small it means that a firm may be compelled to go into an unsatisfactory part of the area in order to get the benefit of this, instead of going into the best industrial area where it might draw its employees from the area we want to benefit.

Mr. Maudling

That is a fair argument. On the other hand, if we draw them too widely, it dissipates the benefits and we do not get what we want. This has to be thought out very carefully, but I think that if the principle is accepted by the Committee this will be a valuable addition to our aid to development districts. The details are less important than the principles. It is on the principle that we should concentrate.

I have dealt with some of the proposals in the Budget, and I have been criticised by some of my hon. Friends and others for some of the omissions. I think that the most difficult problem of all was the fuel oil duty. I would very much have liked to reduce the duty on fuel oil. It would have been a definite help to several industries, particularly the steel industry, but I had to look at fuel policy as a whole, and the importance of coal costs and coal prices is quite basic to British industry. Steel, for example, buys £23 million worth of oil and £156 million worth of coal and coke. At the moment, the National Coal Board is doing well: productivity rising, costs under control, prospects of some export coming along, I am glad to say, and it is meeting its financial target.

Coal is steadily getting more competitive and thus able to bring down prices. The streamlining of the industry, which has been and is a very large operation, is, in my view, proceeding well. I studied this with very great care and it gave me great anxiety. I was convinced that the effect at this moment of a reduction in the fuel oil tax would be a very serious blow to the prospects of the coal industry, just at the stage when it is reaching its financial target and confidence is being restored in the industry. I thought that if at this moment we thrust them back into deficit it would produce serious results for its confidence and morale. Also, which is very important, the chances of reduction in coal costs to industry, which in the long run may be more important than reduction of oil costs, would be seriously diminished. I say to my hon. Friends who are concerned about this that I share their great regret that I could not make a reduction. Looking at the whole prospects of fuel costs to British industry, I thought that the decision which I reached was the right one, that this was not yet the time, in present circumstances, to make a reduction in this particular duty.

The other point on which I have been criticised is my failure to introduce a tax on gambling. This is not as easy as it looks. I say to my hon. Friend the Member for Kidderminster that, if he will discuss the question with some of our mutual friends in this Committee who know a good deal more than he or I do about the business of gambling, he will find that the idea of a 16 per cent. tax on the turnover in betting is really in cloud-cuckoo land.

I want to tax betting as a whole fairly, including gambling, including gaming, chemin de fer and all the rest. If I were to introduce a duty of a penal or punitive kind on betting, it might well drive betting back on to the streets. There is, I suggest, a serious social problem here of considerable magnitude, and I had very much in mind in doing nothing about betting in this Budget the danger of rekindling some of the abuses which were general or widespread before the recent change: in our betting legislation.

I have been dealing with the criticisms of the Budget, its inclusions and its omissions. I turn for a few moments to my basic approach. I have endeavoured to produce a radical approach to the problems of more rapid growth. It is essential that we should tackle our problems here. We must tackle, first of all, the capacity of our economy to produce, and the capacity of our economy to produce is limited basically by our skilled manpower. Whatever anyone may say, we are likely to run into a shortage of manpower, particularly skilled manpower, long before we run into a shortage of plant capacity. Therefore, retraining, redundancy schemes and education—all these things—are part of the growth programme.

Equally, part of the growth programme is a Budget designed to put into the economy as much extra demand as will produce a substantial increase of production, more, I agree, than 4 per cent., but not so much as to start costs rising again, because, if our costs and prices rise again, we shall undermine all our prospects for sound expansion.

Exports have been mentioned very often. Exports and an export target are, I agree, fundamental to our basic problem, and, of course, the problem of exporting is one of getting our costs and prices in this country in line with, or, indeed, better than, those of our competitors. I think that there has been a sign recently that particularly in Europe prices and labour costs per unit of output are rising faster than they are here. We must hold on to this. In this country we face a considerable opportunity. Thanks to the policies of my predecessor, we have a situation in which British costs are more competitive than they have been for many years.

We have an opportunity which we can seize if people are willing to seize it. In this Budget, I have aimed at developing the country's economy, developing our production here, putting more pur- chasing power into circulation, but I have deliberately avoided, as far as I can, going so far as to bring us back once again to a situation in which incomes, costs and prices rise too fast for our balance of payments. This is our perennial problem in this country. This is the circle from which we must break out and from which we can break out if we all do it together.

Question put and agreed to.

Resolution to be reported.

Report to be received Tomorrow; Committee to sit again Tomorrow.