HC Deb 15 February 1963 vol 671 cc1713-23

3.32 p.m.

Mr. William Clark (Nottingham, South)

I beg to move, That this House, in view of the fact that economic survival of the nation depends on more investment, urges Her Majesty's Government to introduce, as soon as possible, extra incentives to savers. I trust that I shall not be discourteous if this is a short debate and my speech is necessarily curtailed. This will be an exercise in saving, though I had not thought that we should be saving time.

It will be admitted by the whole House and the country that one of our greatest difficulties today in our economic life is that we have been so weakened by two world wars. This loss of wealth is something which is bedevilling our economy and has bedevilled it since the end of the Second World War. I am concerned about the tendency in some financial circles to say that we have too much saving nowadays. I hope that when my hon. Friend the Economic Secretary to the Treasury replies to this short but important debate he will scotch this rumour that we have too much saving.

In the dictum of N.E.D.C., in October last year, it was clearly pointed out that if we are to achieve a 4 per cent. rate of growth we must have a 12 per cent. rate of personal savings. At the moment, the rate is about 10½ per cent. I hope that the House will agree that one of the troubles with our economy is that it is so essential that we should keep exporting.

It will be seen from HANSARD of 11th December last year, when I tabled a Question to the Chancellor of the Exchequer, that the rate of our gross national investment as a proportion of the gross national product is very low compared with that of our competitors. I should like to quote one or two examples. The rate of investment in the United Kingdom has gone up from 17.4 per cent. of gross national product in 1957 to 19 per cent. in 1961. This definite increase in our investment is very good but in West Germany the rate has gone up from 25 per cent. to 29 per cent., and in Japan from 29 per cent. to 34 per cent. This must be a pointer to the fact that the economic affluence of these overseas countries, which are doing so well in the export market and whose economy is booming so much, must be related to the amount that they put into investment.

I hope that when my hon. Friend the Economic Secretary replies he will make it absolutely plain that it is quite wrong to say that we do not need more and more savings. We shall only survive as an economic nation by saving. The very fact that we have not gone into Europe will mean that competition will be far more intense, and if we are to meet this competition and increase our productivity we shall have to allocate more of our gross national product to savings.

I appreciate that my hon. Friend the Economic Secretary is at the moment, as it were, in purdah; he cannot say what incentives the Government are to give to savings. But we have got to do something for small savings. We have got to fulfil our pledge to help the small saver. The Government have helped the small saver over past years and I do not think that it is necessary, in view of the shortness of time, for me to refer to all the incentives that the Government introduced. There are the £15 allowance in respect of the Post Office Savings Bank and Trustees Savings Bank, the possible abolition of Schedule A, National Savings Certificates and the rest. We have given some incentive to small savers, but the time is overdue when we should give them even more incentives.

The division in the world today is between East and West and it is a question of the way of life of the West and the way of life of the East, whether we should have a capitalist society or a State-controlled society. Our system is working extremely well. But, having said that, I should like to emphasise that there are too few people in this country who are capitalists. If capitalism is a good thing, it should be spread. I am not talking about the very wealthy man. I am advocating savings for the small man.

What are the aims in life of the average man? He saves up to get married. That is the goal and the spur which makes him save his money. He then buys a house or a flat. Then he insures his life. What is his next ideal? It is to get a little bit of money behind him. As for life assurance and property owning, the Government have done a certain amount to help the small saver.

When I say "capital" I am not thinking of millions of pounds. I am thinking of the man who can save £500 or £5,000 in ten or twenty years. This is the man who should be helped. I am a parent and I do as many other fathers do; if my own children save 1s. I save 1s. for them. This is what I ask the Govern-to do over a much wider field. Let the Government be the father of the saver. Let a man have a tax incentive to save money. I do not intend to elaborate on the various kinds of tax incentive that could be introduced. Perhaps some of my hon. Friends will elaborate on them.

I apologise inasmuch as we have not had as much time for this debate as I would have liked. What I want to impress upon the Government is that an increase by the small saver of his investment in this country is absolutely essential for our survival economically as a nation. The Government must, therefore, give more incentives to small savers.

It has been said that we are a nation of small shopkeepers. Perhaps that day has passed. We should aim to be able to say truly that we are a nation of small savers, and, more than that, that the Government are helping us in that purpose.

3.40 p.m.

Mr. Maurice Macmillan (Halifax)

That there is growing interest, at least outside the House, in the matters raised by my hon. Friend the Member for Nottingham, South (Mr. W. Clark) is shown by the growing support for the work of organisations such as the Wider Share Ownership Council, with which I am associated and with which my hon. Friend the Economic Secretary is familiar.

The work of this council has shown that a great deal more effort and imagination is required of all concerned, but, more than that, the various studies which we have initiated—some of which we have completed—make quite clear, that, for such effort and imagination to fructify, an overriding rôle on the part of the Government in liberating the possible action of private individuals is required.

This, in turn, calls for an attitude of imagination on the part of the Treasury and the Department of Inland Revenue which, I regret to say, has not been seen in successive Budgets and Finance Bills over the years.

On the economic side, there is very little doubt that new outlets for savings, for small savings in particular, with increased scope for new investment, are in themselves an incentive to further saving, and that such new outlets do not merely diversify savings but attract new savings additional to, and not merely instead of, what is already being done.

A report made about a year ago by Dr. Mark Abrams' organisation indicated that shareholders in this country, according to a very broad definition, numbered but one in ten of our adult population. What is, perhaps, more significant and more dangerous is that the same reports show that those with long-term savings numbered only about half of our adult population.

Further, the report revealed that the attitude of every income group, of every class and of every type of person towards savings is the same. Generally speaking, people spend what they have decided not to save, rather than save what they have decided not to spend. Thus, additions to income do not by themselves, unless significant enough to alter a man's attitude to himself, increase his savings; they increase his expenditure—unless he takes a new decision about the level of savings appropriate for himself.

Therefore, most of the tax concessions which we are asking for and have asked for in the past are effective where they are most needed. These various reports have shown that it is people of under 40 who have the greatest difficulty in finding savings, but who also tend to put their savings directly into shareholding. In the time available, I cannot go into detail about tax concessions, or savings schemes, particularly for continuous share purchase, which we have been advocating. My right hon. Friend the Member for Sutton Coldfield (Mr. G. Lloyd) has done a great deal of work here.

I can say, however, that our researches show plainly that, both among existing shareholders and among those who do not yet own shares, at least half, on a sample, express the view that they would be attracted by some sort of continuous share purchase scheme, and this applies particularly to those with savings of £500 or less.

This brings me to my last word, on the political aspect. Whatever the differences between our parties in the House, we can all agree on the desirability of spreading the ownership of wealth, A property-owing democracy has long been a Conservative ideal, and I am sure that the Labour Party would prefer that portion of industrial wealth left in private hands to be distributed as widely as possible.

I wish to comment on one point of difference between the parties and one attitude of the Treasury, namely, in both cases the tendency to take a negative view. The hon. Member for Cardiff, South-East (Mr. Callaghan), in his proposed wealth tax, showed that. He wished to encourage earners. I quite agree. But he also apparently wished to discourage owners. It may be arguable that one should try to discourage the gambler, although hon. Members opposite tend to exclude the more popular forms of gambling. But why the owner? Where we can all agree and where we would like to put pressure on the Treasury is by redressing the incidence of taxation, redistributing the burden, as between the owner and the earner, on the one hand, and the trader and the dealer, on the other.

There is no doubt that if a tax on wealth could give a concession, not only to earners but to savers, to help, at the same time as taxing the extremely wealthy, to build up the property of the smaller man, that would be an incentive.

Mr. Douglas Houghton (Sowerby)

I know that we are short of time and I said that I would not seek to catch Mr. Speaker's eye. However, I must say that I do not accept the hon. Gentleman's interpretation of Labour Party policy, and leave it at that for the moment.

Mr. Macmillan

Perhaps we could have got a clearer definition in time. I would not wish to misrepresent what the hon. Member for Cardiff, South-East said.

The hon. Gentleman would probably agree that this is the time for a fiscal policy, put forward by the Government, to accept all the implications of the affluent society. It is not easy. My hon. Friend the Member for Nottingham, South has indicated a first step which is relevant to our present economic situation. I urge his ideas on my hon. Friend the Economic Secretary. If he cannot accept them now, I hope that they will be reflected in the Budget of my right hon. Friend the Chancellor of the Exchequer.

3.47 p.m.

Mr. Geoffrey Lloyd (Sutton Coldfield)

There has long been a powerful movement in the Conservative Party in favour of giving encouragement to small savers with the object of gradually bringing into being a new class of small capitalists. Those of us who are interested in this theme feel that this is a particularly opportune moment to urge it. That is why a number of my right hon. and hon. Friends and myself recently saw the Chancellor of the Exchequer and urged this general policy on him. I would mention my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) and my hon. Friends the Members for Abingdon (Mr. Neave), Halifax (Mr. Maurice Macmillan) and Nottingham, South (Mr. W. Clark).

We know of what is called the affluent society and we know that the standard of living is much higher than in past years. This is all on the basis mostly of current income and spending. The big new social trend that should come is an increase in the capital wealth of the average man. That is in respect of the individual.

As to the economic interest of the community, we hope soon to receive the growth plan from N.E.D.C. involving the big rate of growth of 4 per cent. per annum. This is double anything that we have achieved since the war and would involve a 6 per cent. increase in the rate of capital spending every year. Since the great mass of money in the nation is now in terms of wages and salaries, it is in that sphere that we should seek to encourage ourselves to find it. Therefore, since this involves the acquiring of a new habit by the mass of the population, we should do something special to encourage it.

That really is our main theme today and it is why we consider it particularly apposite to urge upon Her Majesty's Government a policy of encouraging savings and of fulfilling the pledge that we gave in the 1959 Election that we would take measures to enable the average man to have a stake in British industry.

3.50 p.m.

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

I congratulate my hon. Friend the Member for Nottingham, South (Mr. W. Clark) on his good fortune in the Ballot. I am only sorry that the time for this debate is curtailed. I recognise that this puts the whole House, and my hon. Friends in particular, in a difficulty, because I know that there are many other points that they would have liked to develop. By the same token, I hope that I may be forgiven for speaking extremely fast, and for not replying to all the points which have been raised by my hon. Friends. I will certainly see that they are brought to the personal attention of my right hon. Friend the Chancellor of the Exchequer.

I must make the comment that in spite of its public attitudes towards co-partnership, saving and the like, there is not a single representative of the Liberal Party present this afternoon to hear this debate—a shocking thing, one may think.

May I, first, describe the present system of tax incentives for savings, to which my hon. Friend the Member for Nottingham, South has referred. I particularly wish to refer to recent developments in that regard and especially to the part played by my right hon. Friend the Prime Minister, whose personal part in all this development is a great one.

There are tax reliefs on premiums for life insurance, on premiums for super- annuation of various kinds and on compulsory contributions by teachers, the police, and so on. Certain relief is also given in respect of superannuation payments by the self-employed. These latter were introduced by my right hon. Friend the Prime Minister. There is a tax allowance for the taxpayer's own National Insurance contributions. Similarly, there is relief on income for various kinds of saving. Relief from Income Tax, but not Surtax, is given on the first £15 of interest from Post Office Savings Bank or Trustee Savings Bank deposits. This, too, was introduced by my right hon. Friend the Prime Minister.

Interest on National Savings Certificates is free of Income Tax and Surtax. In addition, there are other concessions for national savings media, with payment of rates of interest slightly over the odds, for example, in the case of National Savings Certificates and of Premium Bonds, which also were introduced by my right hon. Friend the Prime Minister, in the savings Budget of 1956.

In Stamp Duties, there have been three sets of relief for house purchase in successive Budgets under a Conservative Administration. When we became the Government in 1951, purchasers of even the smallest houses were not completely exempt from conveyance duty. In addition, there are two matters with which I was myself concerned when I was a back bencher. We reduced the duty on bearer shares for small transactions and we abolished the incidence of Settlement Duty in respect of unit trusts when a double liability was involved. I should like to pay tribute to Lord Amory and to my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) for accepting our arguments in that matter.

I mention that long catalogue to show that a good deal has been done in the past, some of it in the immediate past. I do not argue that more does not require to be done. I say, however, that a great deal has been done and that we should take pleasure and pride in that.

The rate of savings has grown quickly. I should like to examine this in detail, but I do not have sufficient time. I wish, however, to pay tribute—on behalf, I am sure, of the whole House—to the people and the institutions who have done so much valuable work in this regard.

My hon. Friend the Member for Nottingham, South asked particularly about the future of personal savings. Undoubtedly, they will continue to rise, perhaps to the American levels of around 12 per cent. or so. We can expect a substantial increase. This is important in the context of "N E.D.C.". to which my hon. Friend also referred. Total investment must be matched by an equivalent amount of saving from all sources, whether it is achieved by means of Budget surpluses, capital saving or personal saving. Personal savings are, of course, one factor in the situation.

Mr. Laurence Pavitt (Willesden, West)

Will the hon. Gentleman say what encouragement is given to small savers in co-operative societies, who cater for so many millions of people?

Mr. du Cann

I cannot answer that point at the moment; it would take far too long. If the hon. Member would be good enough to refer to the record of some of my earlier speeches in HANSARD, he will see that I have exercised as great an interest in the co-operative savings banks as in any other form of savings institution. In paying tribute to savings institutions, I certainly include them.

Private savings are an important part, but only a part, of total savings. That must be borne in mind. Any increase in size in total savings must be watched from the view-point of monetary policy, and this, too, is important. These two facts should not be forgotten.

I have talked a little about the economic aspects. One must have regard, as my hon. Friends have done, to the social context of saving. This is where the matter has, perhaps, one of its most important aspects, for a man who saves and tries to stand on his own feet is a credit and an asset to the country. I believe fundamentally in thrift, as I hope I may have shown in past years, both with my hon. Friends and in other ways. There has been some discussion about the Labour Party's proposals for taxation. I shall not go into those now, but I would say clearly that, personally, I should oppose most strongly anything done to militate against the principle of thrift.

There are other matters which we must consider in this whole context of savings. One is the question of the protection of savers. I hope that my hon. and right hon. Friends will think it appropriate that the Government should have introduced legislation to protect depositors with building societies and with deposit-taking companies engaged, for example, in the hire-purchase field. Another important aspect of the matter is the modernisation of facilities, and many institutions are paying particular attention to this. For example, joint stock banks have introduced the credit transfer scheme.

My hon. Friend had particularly in mind stocks and shares. I understand that there is a possibility that there will be introduced into another place in the comparatively near future a Bill to simplify transfer procedures. I can assure the House that the Government will watch this development with interest, for this is an important matter. We have the Act relating to the payment of wages, and that is likely to come into full effect in March, and that, again, is helpful in the context of modernisation.

As the House knows, I recently wrote to the Chairman of the Trustee Savings Banks Association to say that the Government would certainly not stand in the way of a Private Member's Bill to allow Trustee Savings banks to have a cheque scheme, provided that there would be no cost upon the Exchequer. It is really a matter for them to make practical arrangements in consultation with the clearing, Scottish and Northern Ireland banks.

It is not merely a question of fiscal incentives, I feel. One must have regard also to protection. If there is to be a new class of savers we must look after them. Of course, they must judge of the relative merits of one savings institution as against another, and must judge for themselves; but they deserve to be protected, and must be protected, as the householder is protected against the burglar, from the cheat. Much can be done by savings institutions themselves.

A number of specific schemes for giving fiscal help to savers has been canvassed. They could not be gone into this afternoon, but one has been referred to in particular, and I would say that any scheme which genuinely encourages savings and does not run the risk of abuse warrants serious consideration. This it will certainly receive from the Government and my right hon. Friend the Chancellor of the Exchequer. The Radcliffe Committee and other similar bodies have recognised, as everyone knows, serious objections of principle to further tax concessions for savings. Those objections are not overriding, but in any consideration full weight must, of course, be given to them.

I cannot say this afternoon that anything can or cannot be done. I do say that the various possibilities will, of course, be looked at most carefully. I have every sympathy with the sentiments and objectives of my hon. and right hon. Friends, and so have the Government, and I can assure them that there is continuing support for the ideal of a property-owning democracy. Apart from the difficulty of time, as my hon. and right hon. Friends will understand—for they indicated as much—as a Treasury Minister I am in some difficulty at this pre-Budget season of the year. By custom I cannot comment on, still less accept, recommendations affecting taxation.

I hope, therefore, that my hon. Friend the Member for Nottingham, South will not press me on this subject and that he will feel very much from what I have said that I am with him in spirit, as, indeed, I am.

Mr. W. Clark

In view of the very satisfactory reply we have heard, and of the very considerable sympathy which my hon. Friend has shown for the Motion, and also of the fact that this is the close season for Treasury Ministers, I beg to ask leave to withdraw the Motion.

Motion, by leave, Withdrawn.