FINANCE BILL

HC Deb 03 July 1964 vol 697 cc1695-714

Order for Third Reading read.

11.5 a.m.

The Chancellor of the Exchequer (Mr. Reginald Maudling)

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

The passage of the Bill in Committee and on Report has been unusually expeditious, but that has not meant that we have failed to give careful attention both to the Bill and to the wide range of new Clauses which have been moved. Certainly the Bill has been improved as a result of its passage. In particular, I draw attention to what is now Clause 8, dealing with the regulator, and to what is now Clause 21, dealing with the distribution of assets of bodies corporate carrying on mutual businesses. In both cases, improvements have been made as a result of our discussions. In the first place, more flexibility has been given to the regulator, and in the second place, in Clause 21—formerly Clause 19—we have so restricted the provisions of the Clause as to deal only with the possibilities of tax avoidance, thereby removing the anxieties which had been felt previously by a number of bodies corporate, who felt that they might come under the mischief of the Clause as originally drafted.

The Bill in its final form, in which it is now presented to the House, is a substantially improved Bill. I should like to express my appreciation to both sides of the House for the way in which the Bill has been passed through its various stages and to thank my Treasury colleagues and the Solicitor-General for once again this year doing all the hard work during the passage of the Bill.

Any Finance Bill contains three different categories of proposal—first, what one might call machinery proposals; secondly, minor proposals for tax changes; and thirdly, major proposals for tax changes. This year the machinery proposals are probably not as numerous as usual, but they are important. There is the provision which I have mentioned for putting more flexibility into the use of the regulator, and there are, once again, one or two anti-avoidance provisions which have been thoroughly discussed both in Committee and to some extent on Report.

The tax changes contained in the Bill fall into two categories. First, there are some changes designed to deal with particular social problems and problems of hardship. There is the new Clause inserted on Report providing for the increase in the limit for age exemption. There is Clause 11, exempting from Excise Duty vehicles modified for use by invalids. I am sure the House agrees that these modest changes in the tax structure will be of benefit to people who fully deserve our attention and care. There is also the change in the Betting Duty which, as I explained in the Budget, was designed to improve the previously existing structure of betting duty, to remove some anomalies and at the same time to protect the revenue, which was to some extent threatened with undermining. Incidentally, as I said at the time, these provisions will also bring in a modest amount of additional revenue.

There are also one or two minor changes designed to help industry—for example, the proposal for a rebate on hydrocarbon oils used in industrial processes, the Clause dealing with sugar, and the Clause dealing with stores carried in aircraft. Altogether I commend these minor tax changes to the House as being useful and justifiable, as indeed they have been accepted to be in the course of the passage of the Bill to date.

I come, finally, to the only two major changes—those concerning the taxation of alcohol and tobacco—which together are likely to bring in the large sum of around £100 million annually. The broad judgment of any Budget comes under three heads—first, the amount that needs to be raised in taxation; secondly, whether it should come predominantly from direct or indirect taxation; and, thirdly, having taken those two decisions, what particular taxes should be selected either for increase or for reduction.

I explained in introducing the Budget that the amount I proposed to collect in additional revenue, around £100 million, was the best calculation I could make of what was needed to help steady the economy and achieve the transition from the 6 per cent. growth rate, which was the rate in the early part of this year, to a 4 per cent. growth rate, which is what we believe can be maintained by the economy in the long run. I think that the comment on the size of the Budget proposals has, on the whole, tended to be that, if anything, they were too modest and that perhaps I should have collected more in additional revenue. I myself do not accept that. I think that to have gone further would have been to put an unnecessary load on the taxpayer and possibly to administer a check to confidence at a time when we wish particularly to avoid that. I have not wavered in my judgment that the total amount of £100 million was about the right figure.

The House is aware that in choosing the sources of revenue I concentrated on indirect rather than direct taxation, because, as I said at the time, our object must be to encourage enterprise and output and to restrain consumption. These seem to be the classic reasons for choosing indirect rather than direct taxation. The Opposition have made it fairly clear that they would have preferred an increase in direct taxation, but in general I do not accept that argument, and neither the House nor the Committee accepted it in the course of the Bill's previous stages.

Finally, on the choice of particular taxes—tobacco and alcohol—there was a certain amount of complaint, naturally, from the consumers of alcohol and tobacco, among whom I number myself; but I think that broadly speaking it would be fair to say that it has been generally accepted that, if I needed £100 million of revenue this year and had decided to raise it from indirect taxes, it was better to do as we did and concentrate on tobacco and alcohol rather than spreading over, for example, into Purchase Tax.

We have discussed the provisions of the Bill thoroughly in Committee and on Report. For the second year running the Opposition have not divided the House against any one of my Budget proposals, which I take as a possibly unintended tribute to the soundness of the proposals themselves. It is against that background that I commend the Bill to the House.

11.13 a.m.

Mr. Douglas Jay (Battersea, North)

In the absence of my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) who is, I understand, visiting his constituents, I think that I should say that I am glad to see the Chancellor here today, because I had heard a report that he was going to Cardiff to shore up the failing fortunes of a certain Mr. Dexter, instead of which, however, he appears to be here with us.

The Chancellor said almost nothing this morning about a Bill which has almost nothing in it. His speech reminded me of these lines: But answer came there none— And this was scarcely odd because They'd eaten every one. We are now parting with a Bill which has made no contribution whatever to greater social justice in this country, which has helped in no way to avert the rather threatening balance of payments deficit which faces us this summer, and which has made no visible step towards tax reform. The Bill does little harm and no good. Indeed, it is rather typical of the complacency of the rather senile Government we now have in office that they are so smugly satisfied with a Measure which arouses no enthusiasm whatever in anybody else.

The Bill really does only one thing, as the Chancellor freely admits. It raises the cost of living by placing an extra £100 million burden on consumer taxes. The immediate effect of that was to raise the cost of living index by one point, which directly and immediately raises a number of wage rates and indirectly raises a very much larger number, in addition. The Government have chosen to do this in the name of regulating the economy at a time when world prices are rising and we are fighting a pretty grim battle for extra exports.

I do not know whether the Chancellor looks at his own retail price figures, but the latest cost of living or retail price figure, that for May, is actually nearly three points up on last December. By the method the Chancellor once used, and used again today, for calculating rises in production, this is a rise of 7 per cent. per year. It is not a method that I would use, but it is the Chancellor's favourite statistical method. The rise in the cost of living between March and May was two points, and the food price index is 5.3 points up even compared with last August. The Minister of Agriculture is blithely engaged in restricting our imports of food and trying to raise prices, still under the impression that we are living in a world of food surpluses and falling prices.

Mr. Maudling

In the case of the food price index, where there is a big seasonal factor, is it not better to compare similar seasons than two years?

Mr. Jay

I am comparing summer with August, and I do not think they are very different seasons. Whichever way one looks at it, the index is undoubtedly rising. Even if I accepted the Chancellor's view, which I do not, that the whole increase in taxation this year should have been on indirect taxes, I doubt whether even then he chose the right method. He might at least have had a look at the vehicle tax on goods vehicles, which the Minister of State was good enough to inform me at Question Time before the Budget has not been raised since as long ago as 1933. If the Chancellor wanted to raise indirect taxes, he could have looked at an example where we might have achieved some secondary benefit at the same time, as for instance balancing a little better the costs of goods transport between the railways and the roads.

However, my main quarrel with the Chancellor this year is that I have never been convinced by his argument that the whole weight of extra taxation this year should go on the consumer rather than on profits. The Chancellor's argument was that a rise in Profits Tax would take too long to operate. I have never thought that that argument was valid, because it has been often proved that the announcement of a higher Profits Tax is itself an immediate deterrent to higher dividends, and that in itself would have given the Chancellor some of the restraint in consumption that he wanted.

Even if the argument about the Profits Tax were accepted, there would have been other alternatives in direct taxation, quite apart from a capital gains tax. The Chancellor could have raised the rate of Income Tax on the higher unearned incomes. That would have been perfectly possible. I myself think that it would be less fair than raising the Profits Tax, because in these years of rising prices I do not think that we should raise equally the tax falling on the unfortunate holders of War Loan, who, as the Economic Secretary will agree, are suffering enough already under this Government, and the tax falling on the holders of equity shares. Nevertheless, whichever of those one prefers, with a capital gains tax it would have been possible to restrain demand this year without raising consumer prices and, therefore, our export costs further.

Despite this, the Government took the other road and the evidence seems already to be accumulating that it was the wrong one. Let us briefly judge the results by the Chancellor's own test, which he mentioned today; the effect on growth, the effect on the economy and on the balance of payments. The figures published by the Chancellor this week tell us that the balance of payments on current account was in deficit as to £62 million in the first quarter of this year and on capital account by another £90 million. Again by the Chancellor's pet method of accounting things on annual rates, that would amount to an annual deficit of about £250 million on current account and about £600 million on the current and capital account taken together.

Those are the worst balance of payment figures we have had for four years, even taking only the first quarter. Only once in the last 12 years, in 1960, have we suffered a balance of payments deficit on current account as great as a rate of £250 million. So, on the evidence of hard facts rather than of the Ministerial verbiage we have had in the last few months, this Bill and this Budget do not seem to have contributed very much to correcting the trend in the balance of payments.

Mr. Maudling

They could not have.

Mr. Jay

The Chancellor says that they could not have done, but he must know that the visible trade figures for the second quarter of the year, since the Budget, have continued the story at almost exactly the same rate as the figures for the previous quarter, and that the cost of living has been rising more steeply since the Budget than it had been in the previous months.

It is rather unfortunate, in these circumstances, that the Prime Minister should go around the country repeatedly misleading the public by telling them that the economic situation is splendid. Whatever else we do about this problem, it is better to tell the public the truth. The Prime Minister tells his various audiences of hand-picked Conservative women—and some others, I suppose—that the economic situation was never better; this at a time when his own Chancellor's figures show that the balance of payments is in a worse deficit now than at any time, except once, in the whole of the past 12 years.

I suppose that the Chancellor may say that the Prime Minister does not understand the subject and, therefore, he must be forgiven for not knowing what he is talking about; that he does his best with some matchsticks but that if the answer comes out wrong we must remember that he is, after all, an amateur. I am not convinced that ignorance of the subject is the best qualification for being the Prime Minister of this country. It used to be said of Neville Chamberlain that he could not be blamed for this blunders because he did not understand foreign affairs. That may have been so, but I do not think that that is a qualification for being the Prime Minister of this country—a job which one does not have to accept but presumably, if one does accept it voluntarily, one knows how to do it.

I hope that the country and the House will notice one further irony in the present economic situation, which the Chancellor did not mention today. That is that despite the defects of this Bill and the Budget we have been saved much worse trouble—and I do not think that the Chancellor will deny this—with our gold reserves and balance of payments this summer by the earnings of the rest of the Commonwealth. Had there not been the present booming dollar earnings of the Commonwealth countries, many of them much poorer than ourselves, the £ would be far weaker than it is at present and I imagine that the Chancellor would have had to announce a higher gold loss for the past month than the £20 million which he announced two or three days ago.

Only two years ago Ministers in the present Government—notably, I agree, the Secretary of State for Industry and Trade rather than the Chancellor—were persistently denigrating and depreciating the Commonwealth, telling the public that it was economically played out and that we must look elsewhere to build up our failing fortunes. Ironically, it is now the earnings; of those very countries—countries which hon. Members and particularly right hon. Members opposite were denigrating—which are now shoring up this country's economic fortunes, our reserves in particular, and are saving us from much more serious economic difficulties than we might otherwise have faced this autumn. Perhaps it is a bitter lesson which will be learned by those on the benches opposite who are still capable of learning from experience.

There is one other point I should like to put to the Front Bench opposite, if they have not lost the power of speech to answer, having lost the power of action. There is a rather curious feature in the economic situation this year. We are told that employment is rising, and I do not doubt that that is true. We are also told that internal money incomes and expenditure are also rising, despite the extra taxation. However, according to the Treasury's official figures, industrial production has stayed absolutely still for the last three or four months.

Can the Economic Secretary say what this means? I trust that he has given some thought to the subject—or are we to suppose that, after all the Government's talk about productivity and all the discussions which have been generated by N.E.D.C., productivity has been falling in this country for the last six or eight months? If not, why is it that we are employing more people and apparently producing the same volume of goods? If it has been falling, is not this a serious matter when in Germany, for example, both production and productivity are, I understand, still rising? How can we expect the expansion in exports which the Chancellor is always asking for if our rival's productivity continues to go up while ours does not? I hope that we can have an explanation of this before the end of the debate in view of the Government's own figures in respect of employment and production.

When one looks at the rather bleak facts of the present situation—rather than the Ministerial whitewash—one finds that the state of play, as we approach the late summer and autumn period, is not very encouraging. It certainly does not suggest a hope of anything better than a draw. This Bill pushes up still further the already rapidly rising cost of living, our balance of payments is more deeply in deficit than at any time in the last four years, production in British industry does not appear to have risen at all in the last six months, on the official figures productivity is apparently falling and we are being saved by our fellow Commonwealth countries, so despised by so many hon. Members opposite, from even worse gold losses than we are now suffering.

In addition to all this, the Government are still losing valuable export orders, notably in the case of Pakistan—about which I asked a Question last week—through their misguided refusal to grant export credits on the same terms as our competitors. I heard an hon. Member used the word "Spain". The Prime Minister is now talking a lot of partisan nonsense about the loss of military export orders to Spain, when those orders, of course, involve scarcely any manufacture or employment in this country. [AN HON. MEMBER: "Nonsense."] Hon. Members opposite may disagree, but hardly any employment in this country is involved.

At the same time, however, the Government have turned down a £6 million equipment contract for Pakistan, which would have been wholly manufactured in this country and which would have created a great deal of work and employment over a large sphere of engineering—but the Government refused to supply the necessary export credits. In case, on this latter point, the Government have not finally made up their mind, I hope that they will think again, and see whether they can find a compromise that will enable this order to go forward, because in those two cases it is the Government, and the Government alone, who are preventing us from getting exports that really would give employment.

I hope, therefore—although I see no evidence of it today—that the Chancellor knows what he means to do if his present optimistic attitude proves unfounded over the next few months, but I must say, looking further ahead, that I do not believe that either our growth targets or our balance-of-payments problems will be successfully tackled until we have a Government who have a real sense of priorities—who have, incidentally, a wholly new attitude towards this question of export credits which is more and more vital to our export trade with the developing countries—above all, a Government who have a tax policy that is designed to keep living costs, and therefore, export costs, down, and a Government visibly founded on some sort of principles of social justice, without which the opportunity of any sort of incomes restraint is, I am quite convinced, wholly an illusion.

11.32 a.m.

Sir Stephen McAdden (Southend, East)

I suppose it is a little difficult for the right hon. Gentleman the Member for Battersea, North (Mr. Jay) to be very cheerful when he is talking with his tongue so firmly lodged in his cheek—it is rather an uncomfortable position in which to make a speech and sound cheerful at the same time. Nevertheless, I thought that he was unnecessarily depressing. He started off on a wrong note by referring to the senile character of the occupants of the Government Front Bench. He should have looked a little closer home. It is quite true that the average age on the other side there has been brought down with a rush by the advent of the hon. Lady the Member for Leeds, South-East (Miss Bacon), but I should have thought that any senility there might be was firmly on that side of the Chamber.

This debate has been worth while because it has given us an opportunity to see that the right hon. Gentleman has not changed at all. He is still full of woe and depression. Everything is black. Nothing is good about this Government. He will find that position difficult to sustain in the country, though I do not doubt that he will go on with it.

We have also been given the opportunity to discover that the right hon. Gentleman has still not lost his fertility of thinking up new forms of taxation—it is nice to see that the leopard has not changed his spots. He is anxious still to pursue the path of previous Socialist Governments in whacking up taxation as far as possible for the most abstruse reasons. His bright idea this morning was that the Chancellor should have increased the duty payable by commercial road users. He thinks it would be a good idea—not in itself, perhaps, but to make those road services less effective competitors of the railways.

He says that he is a chap who is interested in bringing down prices and costs, but does he not realise what would happen if we whacked up taxation on the goods vehicles that are taking goods throughout the country? Most of the goods produced here, from the raw materials to the finished article, incur transport charges four times, so that if we increase transportation charges we increase the cost of living—

Mr. Jay

Is not the hon. Gentleman aware that this valuable suggestion came from one of his hon. Friends a few weeks ago; who, in fact, sits on the same side of the Gangway as he does?

Sir S. McAdden

That may be so, but the monopoly in inanity is not confined to one side.

When the right hon. Gentleman talks of the taxation to which goods vehicles are subject, and says that it has not been changed for a very long time and should be increased, does he forget that these vehicles also pay a substantial sum of money in fuel tax? I should have thought that he would take all those factors into account and say, "Here is an industry that does a useful job that is appreciated by those using its services, and we should not make it more difficult for them to compete for merely doctrinaire reasons".

For all these reasons, the right hon. Gentleman has had a pretty rough time today. He has been trying to find some grounds on which to attack my right hon. Friend's Budget, suggesting all sorts of things that will be disastrous, and how, though the country is facing a very big future, the best we can hope for is a draw. Some of us are a little more optimistic. We have been listening to prophecies of doom from hon. Members opposite for so long, and we know that none of their prophecies has been fulfilled.

Hon. Members should remember that it is easy to be a prophet as long as one does not live too long. They have been here too long and have not seen their prophecies fulfilled. We remember their forecasts of eggs at 1s. each and three million people out of work—none of these things has come about.

I hope that the next time the right hon. Gentleman has an opportunity of speak-for the Opposition on a Budget from this side—and I think that that will come about in 12 months' time—he will be a little more cheerful and will realise that the country is not going to the dogs, that people are living in conditions of full employment, that the standard of living is pretty high, and that if he is miserable the rest of us are not.

11.36 a.m.

Mr. John Biffen (Oswestry)

I congratulate my right hon. Friend on the Finance Bill, and I particularly agree that the balance of taxation in Clauses 1 to 4, which has been proved right by the events of the past few months. It is extraordinary to find this morning that the right hon. Member for Battersea, North (Mr. Jay) is still remarkably reluctant to say whether or not he thinks the £100 million was, on balance, the right kind of figure to choose as the additional amount of taxation to meet the situation.

The only real indication we have had from hon. Members opposite about this figure seem to have been contained in their frustrated attempts to reduce Purchase Tax. If anything, one can only conclude that their reading of the economic position against which this Finance Bill was formulated was that it was a situation in which more purchasing power should be pumped into the economy rather than taken from it. That is rather an extraordinary position for hon. Members opposite to adopt and can only be explained, I imagine, from the fact that they realised that there was an election in the autumn and that they might get some advantage from advocating such a dangerous policy.

The fact is that two-thirds of our total expenditure is on consumer spending, and, therefore, any policy designed to act as a gentle brake on the economy had to be applied to consumer expenditure rather than in the sphere of direct taxation, which would have taken a good deal longer to implement. The proposals of hon. Members opposite— which, fortunately, were not incorporated in the Bill—would have had a very damaging effect on the economy—

Mr. H. Hynd (Accrington)

Perhaps when the hon. Member is criticising the Opposition for not suggesting fresh taxation he is not aware that it would be out of order for us to do so. We can only suggest reductions.

Mr. Biffen

I am grateful to the hon. Member for the gentle guidance he seeks to give me. I also appreciate the sensitiveness there is on the benches opposite to this kind of criticism.

The right hon. Member for Battersea, North talked of a real sense of priorities. This is the heavy language of the Socialism of the 'forties. It really is quite delightful to hear hon. Members opposite talk of senile Government when they are so firmly anchored to that time and show such a complete lack of constructive reaction to Clauses 1 to 4.

Hon. Members opposite seem to have been remarkably unconstructive in their reactions to these Clauses. Confronted with them, the reaction of the right hon. Gentleman was to suggest that one should increase taxation on prime costs by increasing taxation on road transport. That is completely out of court with the realities of the situation. Everything that has happened since April has justified the initial proposals of the Finance Bill, as they are now before us—

Mr. H. Hynd

What about the by-elections?

Mr. Biffen

The hon. Gentleman really is feeling very sensitive about these things this morning. I do not imagine that the by-elections can reasonably be discussed on Third Reading of the Finance Bill, so I will not follow the hon. Member in that. I am sure that he will get more than enough of an answer in the electoral consequences in the autumn, but we cannot anticipate that now.

The Chancellor was confronted with a situation in which the balance of investment and consumer expenditure could easily have conspired to provide a difficult and inflationary situation for this country next year. All the events which have occurred since April confirm that he was right in his judgment to choose to increase consumer taxation by some £100 million. Those pundits who accused him of being far too modest in his taxation proposals are having second thoughts, and the economy as it stands today certainly offers every bit as good a prospect of a steady growth without the kind of inflation which would follow from the proposals made by the Opposition.

I believe that this Third Reading debate is a clear demonstration of the fact that the Opposition still are not able to make any constructive comments on alternative taxation proposals, other than the comment that somehow or other, even if the amateurs on this side of the House produce better economic policies than the professionals on the benches opposite, there is something disgraceful about being a successful amateur.

11.41 a.m.

Mr. G. R. Mitchison (Kettering)

This is a poor little Budget. I should like to congratulate the Chancellor of the Exchequer on one thing. He succeeded in talking about it for 10 minutes, which was really rather creditable. He has described, perhaps with a bit of repetition, what it is all about.

What does it all come to? The Tory Party is faced with a General Election and it has produced this baby. It might have been a baby intended to make a serious contribution to the solution of some very real difficulties that the country is in. One of those difficulties—I say no more than this—is the threat of an exchange crisis this autumn. The other is to preserve the right balance between road and rail in order to get a proper transport system. I hope we can all agree—except, perhaps, the hon. Member for Southend, East (Sir S. McAdden)—that that must be a matter very largely of the tax that road, on the one hand, and rail, on the other, have to bear.

The Chancellor could have made another contribution. I should have thought that we could all be prepared to accept that if the economy at present is relatively affluent, even without going into exactly how affluent it is, there is one large class of people who need more help—those in receipt of pensions, small fixed incomes and so on, the people who are at the bottom of the scale. One contribution—a very small one—was made at the last moment by the Chancellor. By and large, the form of indirect taxation that he has selected is the kind of thing that hits those people with undue hardness because they have got so little or no margin to live on.

I will not go into it in detail—I would not be in order if I were to do so—but a Finance Bill which at this moment makes no contribution to the solution of any of those problems, which makes no contribution to the solution of the further problem of what we are going to do about the maintenance of trade in the world, and shows no sign at all of recognising the need for the measures about the Commonwealth which my right hon. Friend the Member for Battersea, North (Mr. Jay) adumbrated, seems to me to be making singularly little contribution to the real point.

This is a baby of a Budget. The Government could have produced something which just tided them over for the moment, regardless of what they were going to pass on to their successors, not at all relucant to leave them to carry what may be a somewhat uncomfortable baby. They could have done that, and that is exactly what the Chancellor has done. He has provided just enough to carry his party and the Government forward to the time of the General Election without very much regard to what the country will require in succeeding years. This is, of course, an election Budget. It is exactly what one would expect from—I repeat—a senile Government.

I cannot emulate the Chancellor in this. I hope I have not taken 10 minutes. If I have, it has been a pretty good but rather excessive effort. I should, however, like to say one thing more. We usually keep a friendly atmosphere on personal matters, especially on this occasion, and I must say, speaking for myself, that one could not have had a more courteous Chancellor, whatever his electoral or political merits may be, or one who has been more patient and tactful in dealing with us. That goes for the Treasury Ministers and the Solicitor-General, too.

We have not had to fight very hard. One cannot hit little babies on the head; it is not done nowadays—not even little financial babies. Our trouble is that we think this is a silly little Budget, inadequate for the needs of the nation and only just adequate for the electoral considerations, which has obviously been the Chancellor's principal motive in bringing it forward.

11.46 a.m.

The Economic Secretary to the Treasury (Mr. Maurice Macmillan)

While thanking the hon. and learned Member for Kettering (Mr. Mitchison) for his courtesy, may I say that I wish I could emulate his ingenuity. I admire enormously his effort to describe as an electioneering Budget one which increases taxation by £100 million, putting up the prices of drink and cigarettes. I thought it was a noble but not altogether successful effort. I can assure the hon. and learned Gentleman that my right hon. Friend the Chancellor will be very much concerned with the consequences of this Budget and its effect on the country's economy next year and thereafter.

Despite the noble efforts of the hon. and learned Gentleman and of his right hon. Friend the Member for Battersea, North (Mr. Jay) to dream up a crisis before the General Election, I think that my hon. Friend the Member for Oswestry (Mr. Biffen) was quite right when he said that the validity of the Budget in the context of this year's economic conditions has been shown by what has happened since it was introduced. My right hon. Friend will, I hope, forgive me if I compare his Budget to an advertisement for shaving cream—"Not too little, not too much." Last year he was criticised for doing too little, and the same criticism has been made again this year. In both cases the events have proved him right.

The right hon. Member for Battersea, North said that there is nothing in the Bill. Really, £100 million extra taxation cannot be regarded as nothing. I think that the right hon. Gentleman in his electioneering efforts exaggerates greatly the effect of a one point rise in the cost of living on our wage bill and on our competitive position overseas.

Mr. Mitchison

Is not the sum of £100 million about the habitual amount of error in the Treasury estimates?

Mr. Macmillan

I think the hon. and learned Gentleman is paying a tribute to my right hon. Friend's skill in that the marginal amounts of extra taxation which are critical in these circumstances tend to fall within the margin of error. This makes budgeting very difficult for any Chancellor. It is not a criticism. Indeed, last year and this year he has been successful.

The right hon. Gentleman has exaggerated the effect of this Budget on our economic position. Whatever the price rises in this country are, the inflationary spiral in the countries of our main competitors in the European Economic Community is rising alarmingly. I thought that perhaps the right hon. Gentleman would not have been quite so bold in referring to the position of small savers and those whose income is derived from 3½ per cent. War Loan and Daltons had my hon. Friend the Member for Tyne-mouth (Dame Irene Ward) been here. She upbraided me the other day for not reminding hon. Members opposite of their share in this when their party was in power, and I do so now.

I would point out to the House that the cost of living has gone up 2 per cent., not since last December but since last April, and a further 1 per cent., as the right hon. Gentleman correctly pointed out, due to the Budget increases, but I would say to the House that I do not regard, and I think it is an exaggeration to regard, this 1 per cent. as being critical in our export competitiveness. I am sure that my hon. Friend the Member for Southend, East (Sir S. McAdden) is right when he suggests that any rise in vehicle licence duty is likely also to put up industrial costs.

Mr. Jay

The hon. Gentleman mentioned Daltons. Has he not noticed that, whether it is a question of War Loan or of Daltons, it is during the last ten years of the present Government that holders have suffered heavily both in terms of capital value and, of course, in the real value of the interest they get under the policies of the present Government?

Mr. Macmillan

The right hon. Gentleman cannot elude responsibility, not the least part of which can be attributed to an attempt artificially to maintain a lower interest rate which I was horrified to see that he and his right hon. Friends appears still to favour despite the disastrous evidence of their attempts to do this in previous Governments.

The right hon. Gentleman referred to the Prime Minister's speeches as painting an unduly rosy picture. In return, he tried to paint one almost entirely in black colours. Certainly, my right hon. Friend the Prime Minister, in speaking not to a hand-picked audience of Tory women, as the right hon. Gentleman said, but to the work people and others in my constituency, painted a picture which would far more easily be recognised in the country than that painted today by the right hon. Gentleman.

I must say one word about the balance of payments. This really is the only point that hon. and right hon. Members opposite have been able to raise in criticism of my right hon. Friend's Budget. As he himself said, they have not divided against any of the Budget proposals this year or last year. As my hon. Friend the Member for Oswestry said, the success of the Budgetary measures has been confirmed by events. The balance of payments difficulties, as my right hon. Friend has repeatedly said, are those which were foreseen and must be expected in the earlier stages of expansion. I think that success has been shown by other indicators. There is no check to confidence, production is rising, and there is evidence that a more efficient use is being made of our manpower and that the employment figures are getting more nearly the same in the different regions of the country.

The right hon. Gentleman used one side of each equation only. In referring to the balances with the overseas sterling area he quite correctly said that these have been increased. Indeed, the United Kingdom basic balance with the non-sterling area has worsened by some 41 million from the previous quarter, but the overseas sterling area balances with the rest of the world have improved by some £94 million. He must also see that this is not a question rescuing the United Kingdom from the disaster into which it would otherwise have fallen. Because the circumstances which produce those figures also affect our own balance of payment figures which appear in the record.

The differences are that the overall balance shows that our own position with the non-sterling area is healthier than it was in the fourth quarter of last year. I think, therefore, that it is fair to say that the evidence shows that the importing and stock building is flattening out, production is continuing to rise; so it is not a crisis that we can look forward to in the autumn but the sort of situation which one must accept in the country or, indeed, in any business at a time of expansion, and my right hon. Friend's Budget and other measures that he has taken show every sign of controlling the situation.

Mr. Jay

Can the hon. Gentleman explain why the official figures show a rise in employment but no rise in industrial production this year?

Mr. Macmillan

The right hon. Gentleman is making very much out of figures over a very short period. The figures show that production is continuing to rise and there is no particular evidence yet of where and why employment is rising as well as unemployment falling. I personally—this is no more than a personal comment—think this is due to the increase in the number of people employed in the Service industries, among other things.

Turning to the Bill itself, I should like to mention one or two points. I think that my right hon. Friend has covered the more serious and important elements of the Bill. Perhaps I may refer to two minor matters not mentioned since the Second Reading and which have disappeared, if not from the Bill, at least from HANSARD. One is the transfer and so on of Government stocks entered on the Dublin Register and the other is the inclusion of black beer in Purchase Tax instead of Duty. If it were not quite so late one could make some short remarks about the evidence that this gives of changes in political organisations and social habits.

I should like to thank the House and others for the help we have had, particularly myself, on the difficult new tax which the Chancellor referred to—the Pool Betting Duty—which was designed to safeguard the existing duty and to make the incidence fairer. I would not expect those on whom it would fall to welcome it, but I am glad that on a minor matter we were able to meet their difficulties, and I should like to pay tribute to the hard work, skill and patience of her Majesty's Customs and Excise in dealing with what was really a very tricky little problem.

From last year we still had the provision to exempt from Excise Duty vehicles modified for invalids. I should like to mention, as this has been raised several times, that although we have retained in the Bill the word "invalid", the licence, whatever form it may take, will follow the disc that is used for local authority parking schemes in using the words "disabled driver", since there were those who felt that "invalid" was perhaps making the driver appear a little decrepit.

We have had interesting and useful debates some of which have ranged fairly wide. On one occasion I thought that I should be answering a debate on the oil duty, but we had an interesting discussion on transport and fuel policy generally.

It may be unusual, but I hope that it is not inappropriate in winding up to express my personal thanks to my hon. Friend the Financial Secretary and the Solicitor-General who with my right hon. Friend the Chief Secretary has taken rather more of the burden than I have of the Committee stage of the Bill.

I feel that the House will commend the Bill as a contribution to the stability of our economic system and, despite strictures from right hon. and hon. Gentlemen opposite, an adjustment of our tax system which is both effective and just.

Question put and agreed to.

Bill accordingly read the Third time and passed.